Agenda of Regional Council Meeting

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

Subject: Report and Recommendations from the Corporate and Strategic Committee

Reason for Report

1. The following matters were considered by the Corporate and Strategic Committee meeting on 6 March 2019 and the recommendations agreed are now presented for Council’s consideration.

Reports Received

2. Report and Recommendations from the Finance Audit and Risk Sub-committee –provided the Committee with an overview of the matters considered at the meeting held on 12 February, and the opportunity to discuss the recommendations from the sub-committee.

3. 2019 Local Governance Statement Update – this item, which was taken as read, sought agreement to an updated Local Governance Statement (LGS) for recommendation to Council for adoption and publication to the HBRC website. In response to a query to clarify the information about the establishment of Māori constituencies for the region, the related statement in the LGS has been updated to read:

3.1. “At an Extraordinary meeting on 15 November 2017, Hawke’s Bay Regional Council resolved to not establish Māori constituencies in the Hawke’s Bay region for the 2019 and 2022 elections, and publicly notified the electors’ rights to demand a poll on this issue. This issue can be re-examined by Council at any time, either as part of the 2023 Representation Review or earlier if it so chooses.”

4. Financial Delegations – this item provided the Corporate and Strategic Committee with the opportunity to discuss the current and proposed financial delegations for the Chief Executive (CE) and Group Managers and sought feedback for recommendation to Council for decision. Feedback provided at the meeting has been incorporated into the recommendations and is summarised following.

4.1. Amounts delegated each to be clearly stated as per annum or per transaction

4.2. Delegations for spending from Contingency funds to be removed

4.3. Request for Staff to develop a reporting framework to inform Council of significant transactions, contracts and financial commitments, which will be presented to the next Corporate and Strategic Committee meeting.

5. HB Tourism Update – the Chairman, George Hickton, and General Manager, Annie Dundas provided the Committee with an update on the Hawke’s Bay Tourism funding review, including what’s happening nationally, and on some key visitor statistics for the region.

6. Matters Arising from Audit NZ 2018-28 Long Term Plan Audits – provided the opportunity for the Committee to consider and discuss the Auditor General’s report “Matters arising from our audits of the 2018-28 long-term plans”, produced by Audit NZ after considering the Audits carried out on all the LTP’s across the local government sector, along with staff’s 2018-2018 Long Term Plan project review.

7. Organisational Performance Update for the Period 1 July 2018 to 31 January 2019 – this item presented the first Organisational Performance Report to the Committee, a summary of organisational performance for the first seven months of the financial year. Overall comments from the Committee were that the report is a positive step forward for Council and feedback including:

7.1. General consensus to have the detailed Organisational Performance update report on a quarterly basis with more focus on any underperforming areas and those areas where performance is significantly exceeding planned targets

7.2. The Committee would like the opportunity to have a questions forum to post queries about the report ahead of the Corporate and Strategic Committee meeting

7.3. Include a breakdown of the Regulation activities including any significant enforcement actions, major application processes in the pipeline and categorised Pollution hotline calls

7.4. A request to include performance indicators for tangata whenua engagement and capacity building

7.5. Brief summary of progress against LTP metrics to be included in the monthly Significant Activities report to Council, and make this more forward-looking

7.6. Future quarterly reports to C&S to include more detail on:

7.6.1. Strategic Planning Group activities

7.6.2. Marketing and Communications (Marcoms)

7.6.3. Roadsafe

7.6.4. Works Group

7.6.5. Council’s progress toward becoming carbon neutral.

8. The feedback provided will be incorporated into future reports, including:

8.1. Future focussed Significant Activities report including summary performance against key metrics to Council each month

8.2. Quarterly detailed Organisational Performance report to the Corporate and Strategic quarterly meetings.

9. Health and Safety Work Programme – this item presented an update on the activities under way in response to the Health and Safety internal audit, including:

9.1. A draft Health and Safety Governance Charter for councillors to consider and recommend to Council for adoption (attached as amended from feedback received at the meeting)

9.2. Presentation of the draft Strategic Plan and draft Implementation Plan for councillors’ information.

Decision Making Process

10. These items were specifically considered by the Committee.

Recommendations

The Corporate and Strategic Committee recommends 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 decisions on these matters without conferring directly with the community and persons likely to be affected by or to have an interest in the decisions.

2019 Local Governance Statement Update

2. Accepts the “2019 Local Governance Statement” for publication to the Hawke’s Bay Regional Council website.

Financial Delegations

3. Adopts the Staff Financial Delegations following, as amended to incorporate the feedback received at the 6 March 2019 Corporate and Strategic Committee meeting.

Financial Delegations – where provision is made in the LTP / Annual Plan (Operating & Capital)
CE	Authority to implement the LTP / Annual Plan as approved by Council
Group Manager – Office of the Chair and Chief Executive	Up to $200,000 for any one commitment
All Other Group Managers	Up to $150,000 for any one commitment
Emergency Management – Group and Local Controllers	Up to $100,000 for any one commitment
All Other Staff	Delegations provided by their Group Manager up to a level of $100,000 for any one commitment

Financial Delegations – where no provision is made in the LTP / Annual Plan

Operating Expenditure

Any material operating expenditure that is outside the provisions of the LTP / Annual Plan should be raised with Council as soon as practical to obtain their agreement to proceed with the expenditure and to confirm how this will be funded. If it is agreed to fund through reductions in other budgets this will be reported on to Council through the quarterly operations report. Other options may include loan borrowing or letting the cost hit the bottom line.

The Regional Council contingency budget will only be used once confirmed by the Council. This will usually occur in the 9 month reforecast exercise each year

Capital Expenditure
CE	Up to $50,000 for any one commitment if funded via the asset replacement reserve.
Group Managers	Up to $20,000 for any one commitment if funded via the asset replacement reserve.
Council	Any capital expenditure outside of these delegations must go to Council for approval.

Health and Safety Work Programme

4. Adopts the proposed Health and Safety Governance Charter including agreed amendments.

Reports Received

5. Notes that the following reports were provided to the Corporate and Strategic Committee

5.1. Report and Recommendations from the Finance Audit and Risk Sub-committee

5.2. HB Tourism Update

5.3. Matters Arising from Audit NZ 2018-28 Long Term Plan Audits

5.4. Organisational Performance Update for the Period 1 July 2018 to 31 January 2019

5.5. Health and Safety Work Programme.

Authored by:

Manton Collings

Chief Financial Officer

Leeanne Hooper

Principal Advisor Governance

Viv Moule

Human Resources Manager

Peter Wallwork

Principal Advisor - Organisational Performance

Approved by:

Jessica Ellerm

Group Manager Corporate Services

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

Attachment/s

⇩1	Council Policy - Financial Delegations
⇩2	Health and Safety Governance Charter

Health and Safety Governance Charter

Attachment 2

HEALTH AND SAFETY GOVERNANCE CHARTER

1. Purpose

The Health and Safety Governance Charter outlines governance responsibilities and provides a high level overview of health and safety leadership at Hawkes Bay Regional Council (Council).

This Governance Charter is Council’s highest level statement regarding health and safety and is supported by a Health and Safety Implementation Plan.

The Councillors (the Council) has a priority responsibility as governors, which requires leadership and oversight on all matters relating to health and safety. The Council will ensure that it complies with its health and safety duties and will constantly require a continuous improvement approach.

2. Commitment Statement

Council will establish and maintain an effective governance framework in accordance with the Health and Safety at Work Act (HSWA) 2015, other relevant legislative requirements, and established principles to ensure a thorough oversight of health and safety across the full scope of Council’s activities.

This framework will be implemented and regularly reviewed to ensure that Council is continuously acting in accordance with best practice for the governance of health and safety, and in order to manage Council’s health and safety risks.

3. Vision

Our vision for Hawkes Bay Regional Council is, to ensure that everyone feels safe in the work environment, goes home safe every day and, to be a business where others aspire to reach our standards.

4. Scope

The requirements of Council’s Health and Safety Governance Charter apply to all Council controlled activities. This includes all Council workplaces and workers (employees, contractors or volunteers) where Council acts as principal to the contract or has significant influence or control over the workers in the workplace.

5. Responsibilities

As officers under the Health and Safety at Work Act 2015 (HSWA), Councillors are required to exercise due diligence, and in doing so take all reasonably practicable steps to manage health and safety risk. Councilors are responsible for:

· A personal commitment to attaining a thorough understanding of the day to day risks faced by employees and contractors doing work for and on behalf of the Council

· Ensuring health and safety is integrated into business strategies, processes and included in performance measures

· Ensuring that the Council has processes that aim to exceed its health and safety duties under relevant legislation and regulations.

· Ensuring that the council leadership manage health and safety risks through the implementation and review of effective risk identification and management strategies

· Ensuring continuous improvement of health and safety practices within Council by establishing measurable and reporting on, appropriate health and safety lead and lag indicators

· Reviewing any serious incidents in consideration of the adequacy of the management response and provision of any support required

· Attending to other health and safety matters that the Council considers prudent from time to time

6. Monitor and Review

· Council will receive quarterly health and safety reports regarding progress against the health and safety implementation plan, including lead and lag indicators.

· The Council will review the objectives and responsibilities set out in this charter regularly to ensure it adequately sets out the Council’s governance role.

7. Key Health and Safety Documents

· Progressive Implementation Plan 2019 (Based on Crowe Horwath report dated September 2018)

· Health and Safety Strategic Plan 2019/2021

· Health and Safety Policy

· Health and Safety Manual

· Codes of Practice

HBRC Chair Rex Graham

HBRC Finance, Audit & Risk Sub-committee Chair Neil Kirton

Date: ________________________________________

Next review January 2020

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

Subject: Freshwater Security Scheme

Reason for Report

1. A draft Freshwater Security Scheme (the Scheme) policy was considered by Council at a workshop on 30 January 2019. A revised version is now presented for Council’s consideration and adoption.

Background

2. Hawke’s Bay is a region that is and wants to continue growing. Much of the region’s prosperity can be afforded to our favourable climate, high-quality land, innovative and resilient communities and, in particular, an abundant access to freshwater. The Long Term Plan 2018-2028 sets aside $5 million for technical investigation and feasibility studies of water augmentation to ensure continued investment confidence in the context of Hawke’s Bay’s freshwater security challenges:

2.1. There is pressure on existing water resources, particularly during summer low flow periods, and demand for irrigation and urban water is expected to continue increasing. Demand estimates made in 2012 are likely to underestimate actual growth and more recent forecasts.

2.2. Climate change is expected to alter the way we interact with and utilise our surface and ground water resources. Alongside sea-level and temperature rises, climate change is expected to change the amount, distribution, frequency and timing of rainfall for Hawkes Bay. There is considerable uncertainty in models available regarding the extent of these changes.

2.3. Allocation and access to freshwater needs to be community mandated, providing for community wellbeing, particularly for our Maori communities.

3. The attached Scheme policy provides administrative guidance for the LTP funding.

Scheme overview

4. Two parallel work streams advance a multi-layered approach which looks strategically into the future as well as responding to urgent needs of our communities:

4.1. Regional Freshwater Assessment (Freshwater Assessment), $500,000 – A region-wide, long-term view of where and how to future-proof security and reliability of the region’s freshwater. It will consider and recommend potential water management solutions, particularly water efficiency and conservation options, for further investigation. This assessment will not be a prerequisite for all projects under the second stream.

4.2. Ready Reaction Fund (RRF), $4.5 million – Builds upon knowledge and feedback arising from the TANK and Tukituki plan change development processes to further develop solutions and feasibility studies for specific projects. Following completion of the Freshwater Assessment, those recommended projects will be further developed. The first two projects for further development are:

4.2.3 Heretaunga Flow Enhancement Project

4.2.4 Tukituki Water Security Project.

5. The Scheme takes a principled approach that does not compromise environmental standards, enables vibrant and resilient communities, supports the cultural, spiritual and recreational values of our waterbodies, and enables economic productivity.

Council workshop feedback

6. A draft of the Scheme policy was considered at a Council workshop on 30 January 2019. According to Councillor feedback, the policy has been revised to:

6.1. better emphasise conservation and efficiency measures as key strategic activities in achieving regional water security, particularly through the Freshwater Assessment

6.2. clarify that enabling high value land use does not necessarily equate to grandfathering current land use. Rather, it enables opportunities to develop new and innovative high value land uses

6.3. clarify clauses relating to conflicts of interest and governance to align with the Council’s Code of Conduct and staff policies, and wider water security work programme.

Financial and reporting overview

7. Funding has been allocated evenly over three years as per the table below, however, the multi-year appropriation may be adjusted between years and extended out according to uptake.

2018-19	2019-20	2020-21
$1,666,000	$1,666,000	$1,666,000

8. Each project will have appropriate governance structures with reporting through the Environmental and Services Committee.

Strategic Fit

9. The purpose and objectives of the Scheme are consistent with the Council’s strategic priorities for water quality, safety and certainty. In particular the Scheme contributes to the Council’s commitment to understand water demand and use, investigate alternative sources, ensure efficient use of water and work with stakeholders to design viable solutions.

10. Indications from central government environmental policy agendas and programmes suggest that water reliability is a key area of focus to support regional prosperity. Early indications are that the Provincial Growth Fund (PGF) is developing funding criteria that support both strategic regional assessments of water storage, use and management needs as well as the technical investigation of specific small-scale community projects.

11. The Scheme contributes to wider Council freshwater security objectives by providing an evidence-based platform for community engagement, solutions development and prioritisation and enabling leverage of opportunities such as co-funding with other territorial authorities and the PGF.

Considerations of Tangata Whenua

12. Criteria of the Scheme will require any initiatives investigated through the fund to maintain or enhance community values, remedy or offset negative effects to tikanga Māori, and enable economic opportunities for tangata whenua including allocation for Māori development, including opportunities for under-utilised Māori land.

13. As part of the Freshwater Assessment, the Regional Council will work with communities, including Tangata Whenua to identify and prioritise strategic actions and initiatives to ensure security of supply through conservation, efficiency, storage and innovation.

Financial and Resource Implications

14. Funding is accounted for in the Long Term Plan 2018-2028. The Scheme has also been developed to enable leverage additional and matched funding opportunities such as the Provincial Growth Fund.

Decision Making Process

15. 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:

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

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

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

15.4. The persons affected by this decision are all users of water for cultural, community and economic purposes, particularly in the Heretaunga and Ruataniwha Plains.

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

Recommendations

That Hawke’s Bay Regional Council:

1. Receives and notes the “Freshwater Security Scheme” staff report.

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 matter without conferring directly with the community and persons likely to be affected by or to have an interest in the decision.

3. Adopts the Freshwater Security Scheme as proposed.

Authored by:

Ellen Humphries

Policy Planner

Approved by:

Tom Skerman

Group Manager Strategic Planning

Attachment/s

⇩1

Freshwater Security Scheme

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

Subject: Affixing of 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 153

DP 10775

CT B2/1137

- Agreement for Sale and Purchase

- Transfer

1.1.2 Lot 150

DP 12780

CT E1/751

- Transfer

1.1.3 Lot 80

DP 11780

CT C3/510

- Agreement for Sale and Purchase

1.1.4 Lot 3

DP 4578

CT 56/142

- Agreement for Sale and Purchase

1.1.5 Lot 2

DP 1182

CT C4/669

- Agreement for Sale and Purchase

4303

4308

4304

4305

4306

4307

5 March 2019

18 March 2019

6 March 2019

18 March 2019

1.2

Staff Warrants

1.2.1 L. Dragovich

(Delegations under Biosecurity Act 1993; Civil Defence Act 1983 (s.60-64); Civil Defence Emergency Management Act 2002 (s.86-91)and Local Government Act 2002 (s.174))

1.2.4 N. Rakei

(Delegations under the Civil Defence Emergency Management Act 2002 (s.86-92 inclusive) and Clause 32B Schedule 7 of the Local Government Act 2002)

4302

4301

26 February 2019

2. The Common Seal is used twice during a Leasehold Land Sale, once on the Sale and Purchase Agreement and once on the Land Transfer document. More often than not, there is a delay between the second issue (Land Transfer document) of the Common Seal per property. This delay could result in the second issue of the Seal not appearing until the following month.

3. When reporting each month, it may appear there are more Common Seals issued than properties sold. This month shows the Common Seal being used 3 times, but only one property sale. This is due to the timing issue noted above, as one Common Seal was for a Land Transfer from last month. The listed sales in the table reflect the true movement of leasehold properties.

4. As a result of sales, the current numbers of Leasehold properties owned by Council are:

4.1. 0 cross lease properties were sold, with 74 remaining on Council’s books

4.2. 4 single leasehold property was sold, with 102 remaining on Council’s books.

Decision Making Process

5. 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 decisions to be made are not significant under the criteria contained in Council’s adopted Significance and Engagement Policy that Council can exercise its discretion under Sections 79(1)(a) and 82(3) of the Local Government Act 2002 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.

2. Confirms the action to affix the Common Seal.

Authored by:

Trudy Kilkolly

Principal Accountant Rates and Revenue

Diane Wisely

Executive Assistant

Approved by:

Jessica Ellerm

Group Manager Corporate Services

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

Subject: Officers’ Analysis of Submissions Received on the Establishment of a New Council Controlled Organisation

Reason for Report

1. This report provides the Regional Council with a summary of the feedback received from the community and other interested and affected parties on the proposal to create a new Council Controlled Organisation (CCO) to provide an efficient and effective structure to facilitate a potential minority IPO of Napier Port.

2. The report also provides officers’ analysis and responses to that feedback to assist Council to make a decision on whether or not to establish a new CCO if a decision is made to proceed with a minority listing of Napier Port.

3. This paper and the accompanying decision paper should be read in conjunction with the Shareholder Protections paper which is also being considered by Council at the 27 March 2019 meeting. Much of the commentary from submissions focuses on questions of governance, control and Council influence of the potential listed company which are addressed through provisions in the Shareholder Protections decision paper.

Consultation Overview

4. Consultation on establishing an additional Council Controlled Organisation to support a potential minority IPO transaction of Napier Port began on Friday 15 February 2019 and closed at 5.00pm on Monday 11 March 2019.

5. There are no provisions under the Local Government Act 2002 expressly setting out the duration of a consultation period when establishing a CCO. The Regional Council originally intended to consult until 28 February 2019, but, after discussion with Port Union representatives, agreed to extend the consultation period out to 11 March 2019.

6. The channels used to inform the public of this consultation included a release to media, newspaper advertising (in Hawke’s Bay Today - five, CHB Mail - three and Wairoa Star - three), and through the Regional Council’s Facebook social media channel. Three individual Facebook posts reached 17,386 screens, achieved 1,195 Post Clicks, and attracted 170 Likes, Reactions, Comments and Shares.

7. All information related to this consultation, including a consultation proposal, was available online at hbrc.govt.nz from 15 February 2019 and at Regional Council offices in Napier, Taradale, Waipawa and Wairoa. Five submission forms were mailed out on request and 200 submission forms with self-addressed envelopes were printed and provided to Napier Port staff upon their request.

8. Submitters were asked via the submission form to address two questions: ‘What do you support about this proposal and why’ and ‘What don’t you support about this proposal and why’. The Statement of Proposal including the submission form is attached to this paper.

9. A total of 84 submissions were received, of which five submitters indicated they wished to present their submission in person. Of the 84 submissions received, a total of 60 were hard copy, 19 online and five via email.

10. Submission Hearings were held at 3.00pm on 20 March 2019. Verbal submissions were heard from three submitters, one was from the perspective of a Ahuriri resident who wanted representation for those living near the Port on the Board of Directors, a Napier Port employee who spoke about the impact of this process on Port staff and another member of the community who was fundamentally against privatisation of publically owned assets.

Community views and preferences

11. For the purposes of this analysis submissions received have been grouped into four broad categories:

11.1. Those that generally support the proposal to create a CCO – 7

11.2. Those that generally oppose the proposal to create a CCO and stated reasons as to why – 17

11.3. Those that stated opposition to the proposal to create a CCO but did not provide reasons, other than expressing a position against a potential minority IPO of Napier Port – 57

11.4. Those that were irrelevant or did not express any opinion or preference – 3.

Substantive analysis of submissions

12. As per the four groups of submissions outlined above, this section looks into the recurring themes for each group. Quotes are in italics.

Those that generally support the proposal to create a CCO

13. These included submissions from affected parties – HBRIC and Napier Port - in support of the proposal. Both noted that the proposed structure would provide simplicity and the optimal structure for anybody considering buying shares in Napier Port. (Submissions #18 and #51)

14. Main themes from this group of submissions are:

Governance

14.1. There was general feedback from submitters, including those in opposition to the proposal, that the Regional Council should ensure strong Council representation on the new CCO and the Napier Port Board. Retaining Council control of the Port was the primary reason for this feedback.

14.2. “The directors of Holdco shouldn’t be the directors of the port of napier, rather made up on councillors. WHY, so they have some control over the ports future.” (Submission #28)

14.3. “It will be important that there is a clear concise Corporate Intent document at a high level, not detail, agreed to with HBRC to ensure that local investors have a degree of priority.” (Submission #3)

Accountability

14.4. Submitters in support of the proposal liked the clear accountability for the Port’s performance that the CCO provides.

14.5. “The proposal is supported as it provides clear accountability back to the Port directors.” (Submission #3)

14.6. “Creating a new CCO limits the liability for HBRIC directors and ensures liability rests appropriately with the directors of Napier Port.” (Submission #18)

Simplicity and efficiency

14.7. Several submitters also supported the proposal as it would ensure a simple, streamlined structure for the potential offer of shares to the public.

14.8. “… creating a new CCO is the most logical, simple and cost-effective approach available to the Regional Council”. (Submission #18)

14.9. “Seems simple and straightforward.” (Submission #1)

14.10. “We have taken advice on the proposal and believe Holdco is an efficient and effective mechanism for selling shares.” (Submission #51)

The future of Hawke’s Bay Regional Investment Company (HBRIC)

14.11. Ten submitters who both supported and opposed the proposal to establish a CCO mentioned Council’s current CCO, HBRIC. Some raised questions around the future of HBRIC.

14.12. “Makes me wonder about the purpose and reason for the continued existence of HBRIC post the IPO? What would be the reason for not liquidating HBRIC afterwards? Perhaps the Council could explain this a bit better to ratepayers.” (Submission #1)

Those that generally opposed the creation of a CCO and stated reasons as to why

15. A number of these submissions stated a clear opposition to any sale of shares in Napier Port. Commentary around the proposal to create a new CCO focused broadly on the following two themes.

Governance and control

15.1. The majority of the 17 submissions in this group cited concerns around future governance – particularly in relation to the concern that the governance bodies of the new CCO and Napier Port would have no direct Regional Council-affiliated representation on it.

15.2. “It makes best sense for council to have direct representation on Holdco’s board simply to maintain a careful and prudent overview of proceedings, so as to properly advise council of the detail of any matters the Board may be considering of which Council may otherwise be unaware.

15.3. “I suggest that at the least council should consider appointing senior representatives, such as its Chairman and CEO, to the Holdco Board for such purposes.” (Submission #32)

15.4. “My wife and I are very concerned that Port directors are going to be directors and in control of the Holdco. To us it is essential that we the ratepayers have good representation in Holdco to ensure our interests are served.” (Submission #75)

15.5. “I do not like the fact that the HBRC will be giving all directorships of Holdco to individuals who have no responsibility to Council. Thereby Council loses control of the entity despite it being named a CCO.” (Submission #26)

15.6. “I urge HBRC to stack Holdco’s Board with councillors and NOT port directors.” (Submission #25)

15.7. “Moreover once Holdco’s board settles into whatever ongoing configuration its shareholders elect, operating under standard commercial law for listed companies council will find it difficult at best to replace any director appointed ostensibly to protect its interests…” (Submission #32)

15.8. “The ratepayers are loosing control HBRC councillors need to have more directors in Holdco.” (Submission #27)

15.9. “As I understand it Holdco would have no councillors as directors; I do not find that is acceptable.” (Submission 88)

The future and role of HBRIC

15.10. Submitters generally opposing the proposal also raised questions around the role of HBRIC.

15.11. “Were the Port sale to go ahead, I'd prefer HBRIC to handle the sale.” (Submission #22)

15.12. “I would like HBRIC to be the CCO if the Port sale were to go ahead.” (Submission #24)

15.13. “It is my preference that HBRIC Limited retains its majority shareholding and directorships of the Port.” (Submission #26)

15.14. “I think the Port of Napier Limited should buy back the shares from HBRIC which HBRIC has decided to sell. Then Port of Napier Limited can conduct the IPO…” (Submission #4)

15.15. “A CCO should only be setup if HBRIC is closed. Council already has one semi-redundant CCO and it doesn’t need two.” (Submission #2).

16. In addition to the two main themes above, another reason given in opposition (#53) was the prospect of a potential future liability around Westshore coastal erosion.

16.1. “The new shareholders have to be made aware and be prepared for an ongoing expense caused by a regularly deepened channel that provides vital harbour access.” (Submission #53)

Those that stated opposition to the proposal to create a CCO but did not provide reasons, other than expressing a position against a potential minority IPO of Napier Port

17. The vast majority of submissions received in opposition to the proposal did not address the proposed CCO (56 out of 84). A number stated support for investment in the Port but noted opposition to any share sale. The majority of the submissions in this group simply read ‘I DO NOT SUPPORT THE PROPOSAL. NAPIER PORT NOT FOR SALE’ or a slight variation on that.

Those that were irrelevant or did not express any opinion or preference

18. Three submissions received were not relevant: one seeming to express opposition to the use of 1080 and two making no comments and failing to indicate support or opposition.

Officers’ response

Governance

19. The substantive issues raised in submissions are primarily being addressed through further enhancements the Regional Council’s is considering, particularly around additional post IPO shareholder protections.

20. Of particular note, there was clear feedback around ensuring strong Regional Council representation on the Board of a new CCO, and through that, the Board of Napier Port. Council will be asked to make a decision (Shareholder Protections decision paper) on whether or not to proceed with the appointment of two Council-affiliated directors at the 27 March Council meeting.

21. It is worth highlighting that the Regional Council, by merit of its majority ownership position of Napier Port post any minority IPO and the mirroring of the CCO and Napier Port boards, will retain the ability to control the composition of the entire board of the COO and Napier Port. The boards can include the appointment of the maximum of two Council-affiliated directors (a maximum restriction imposed by the Port Companies Act) if Napier Port’s constitution is amendment to allow for this.

The future of HBRIC

22. The other substantive feedback in submissions focused around the role of HBRIC, should an additional CCO be created for the purpose of a minority Napier Port IPO. Again, this is aligned with Council’s current considerations.

23. It is noted that a review regarding the future role of HBRIC is underway. Should the Regional Council vote to proceed both with creating a new CCO and with a minority IPO of Napier Port, the review will be finalised following the completion of the IPO transaction.

24. Irrespective of a decision to proceed with a potential IPO transaction the review of HBRIC under way will still be completed. Therefore this does not affect the decision to establish a CCO.

Fees for a new CCO

25. During the consultation, feedback was received directly from Port staff questioning whether any directors of a new CCO would be effectively paid twice through creating a second entity. There will be no duplication of directors’ fees if a new CCO is created.

Recommendations

That Hawke’s Bay Regional Council:

1. Receives and notes the “Officers’ Analysis of Submissions Received on the Establishment of a new Council Controlled Organisation” staff report.

2. Considers this feedback alongside its other considerations for the 27 March 2019 Regional Council meeting – particularly the Shareholder Rights decision paper and the CCO decision paper.

Authored by:

Desiree Cull

Strategy and Projects Leader

Jessica Ellerm

Group Manager Corporate Services

Approved by:

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

Subject: Establishment of a Council Controlled Organisation to Facilitate a Potential Minority IPO of Napier Port

Reason for Report

1. This report provides Council with recommendations on the establishment of a new Council Controlled Organisation (CCO) to provide an efficient and effective structure to facilitate a potential minority IPO of Napier Port.

2. It asks Council to make a decision on whether or not to create a new CCO as outlined in the consultation proposal and whether to name the new CCO Napier Port Holdings Limited, if Council decides to proceed with a minority listing of Napier Port.

3. This report should be read – and decisions taken – in conjunction with the following separate but related Council reports:

3.1. Officers’ Analysis of Submissions Received on Establishing a new CCO

3.2. Shareholder Protections.

Scope of the decision

4. This report seeks a decision by Council on whether to establish a new CCO, as outlined in the consultation proposal ‘Consultation on establishing an additional Council Controlled Organisation’ dated February 2019.

5. The one reasonably practicable alternative to using a new CCO to facilitate a potential minority share issue of Napier Port, which was included in the consultation proposal, was the status quo option, under which both Hawke’s Bay Regional Investment Company Ltd (HBRIC) and Napier Port would separately offer shares to investors and Napier Port would be the listed company on the NZX.

6. Following consideration of feedback received during the consultation, the Council may decide to go ahead with its proposal to establish the new CCO or instead decide to retain the status quo option. Any variation away from these two options may require further consultation.

7. If Council decides to proceed with the new CCO structure, the purpose of this decision is to also authorise timing and approval requirements for the establishment of the new CCO. This decision will enable Council officers, HBRIC and Napier Port to proceed with more detailed planning and to prepare for the establishment of the new CCO, with the new CCO only being established if a final decision to proceed with the IPO option is made.

8. This report is not seeking a decision whether or not to proceed with a minority IPO. This was extensively canvassed in a separate consultation with an ‘in-principle’ decision made on 19 December 2018. This report is also not seeking a decision to proceed to implement the IPO Transaction (i.e. it is not seeking a decision that shares in Napier Port may be sold). The decision to proceed with and implement the IPO Transaction will the subject of a future Council report later in 2019.

Background

9. On 19 December 2018, the Council made an ‘in principle’ decision to proceed with work towards offering shares on the New Zealand stock exchange through an Initial Public Offering (IPO) in a stake of Napier Port of up to 49% (the IPO Transaction). Part of designing an IPO transaction is to determine the optimal corporate structure to enable the most efficient offering of shares and the ongoing operation of a publicly-listed company.

10. The Council has taken professional advice which clearly states that the establishment of a new CCO is the most appropriate structure through which to potentially offer shares associated with Napier Port.

11. Advice to the Council states that creation of a CCO would provide the simplest and most efficient structure through which to offer shares to the public. It would ensure liability for Port performance and compliance was correctly apportioned to the listed entity (being the CCO which would own 100% of Napier Port) and its directors and would ensure any offer of shares was easily understood by all investors.

12. The Council consulted on this proposal, as required under section 56 of the Local Government Act 2002. Consultation ran from 15 February 2019 to 11 March 2019. There is a comprehensive breakdown of consultation activities and communications, as well as analysis of submissions received, in the separate report titled “Officers’ Analysis of Submissions Received on Establishing a new CCO”.

Key obligations of Council in making its decision

13. Under the Local Government Act 2002, every decision of Council must be made in accordance with such of the provisions of sections 77, 78, 80, 81, and 82 as are applicable. Amongst other things, these include:

13.1. identifying all reasonably practicable options for the achievement of the objective of the decision

13.2. assessing the advantages and disadvantages of the reasonably practicable options, and

13.3. considering the views and preferences of all persons likely to be interested in or affected by the matter (such views and preferences having been summarised in a separate report to Council). This means:

13.3.1. giving due consideration and having regard to all views and preferences, and

13.3.2. giving due consideration and having regard to such views and preferences with an open mind (i.e. not having a predetermined view).

Advantages and disadvantages of options considered and discounted

14. Council’s preferred option going into consultation was to establish a new CCO. Other options were considered and ultimately rejected based on assessment of liability risk, complexity, the potential to confuse potential investors and on the advice of professional advisors.

15. The status quo option was considered and rejected by councillors in favour of consulting on establishing a new CCO was using the Council’s current CCO, HBRIC to jointly offer shares alongside Napier Port.

16. The status quo was not the Council’s preferred option. This option would require two offerors of shares and would be more complex and potentially confusing for investors than creating a new CCO to act as the listed entity. Under the status quo option, the directors of HBRIC and Napier Port would have the same level of shared involvement and liability in the offer of shares, including in relation to the Product Disclosure Statement (PDS).

17. The Council considered that this potential liability and responsibility should rightly sit with the listed company board and its directors (i.e. the Napier Port directors who would also be directors of the new CCO) as they are in the best position to ensure that the PDS is accurate and to manage post listing compliance.

Views and preferences

18. An analysis of the feedback received during consultation is covered in the separate report titled “Officers’ Analysis of Submissions Received on Establishing a new CCO”. By way of short summary of the submissions the primary themes related to governance and control, accountability, simplicity and efficiency and the future role of HBRIC.

19. Both HBRIC and Napier Port, as the two most affected parties of the proposal to create a new CCO for the purpose of a minority share float in Napier Port, have submitted in clear support of the Council’s preferred option of establishing a new CCO to offer shares.

20. Both HBRIC and the Board of Napier Port agree that creating a new CCO is the appropriate structure to potentially offer shares in Napier Port.

Other considerations for Council to factor into its decision-making

21. If the Council votes to proceed with establishing a new CCO, the Council will then be asked to decide whether it would want to have the ability to appoint two Council-affiliated directors to the new CCO (included in the Shareholders Protections report) addressing many of the substantive submissions received. Establishment of the new CCO and appointment of directors would only occur following a decision to proceed with the minority listing of Napier Port (a decision to be taken in the next few weeks by Council).

22. There are a number of additional matters that would need to be attended to in order to establish the new CCO and to ensure it is in a position to comply with its legal obligations moving forward. These include deciding on a name for the CCO (Napier Port Holdings Limited is proposed), preparing a constitution, registering the company and appointing directors.

23. A review of the role of the Council’s current CCO, HBRIC, will be undertaken this year regardless of decisions taken around whether to proceed with a minority IPO of Napier Port. Therefore this does not affect the decision to establish a CCO. If a decision is taken to proceed with a minority IPO, the review of HBRIC will be completed post IPO.

24. These considerations were also points raised in public feedback during the consultation around the proposal to create a new CCO.

Recommendations

That Hawke’s Bay Regional Council:

1. Receives and notes the “Establishment of a Council Controlled Organisation to Facilitate a Potential Minority Initial Public Offering of Napier Port” staff report.

2. Notes that a consultation process has been carried out by Council, in accordance with the Local Government Act 2002, covering the proposal to establish a new Council Controlled Organisation.

3. Notes the receipt of submissions and findings from the consultation process that has been undertaken in respect of the proposed establishment of a new company (being a 100% subsidiary of Hawke’s Bay Regional Investment Company (HBRIC) pre-listing and a majority owned subsidiary of HBRIC post-listing), which will result in the establishment of a new Council Controlled Organisation under the Local Government Act 2002.

4. Notes the separate but related Council report titled “Officers’ Analysis of Submissions Received on Establishing a new CCO”.

5. Notes that the decision that Council is tasked with making on whether to approve the establishment of a new CCO is part of a sequence of decisions. Once the decision to approve the establishment of a new CCO is made, an amendment to the Long Term plan will provide for the CCO pending a final decision to proceed with the IPO transaction.

6. Agrees that the most appropriate corporate structure for the listed entity is the new Council Controlled Organisation as consulted on in the consultation proposal.

7. Agrees that a new Council Controlled Organisation should be established, following any decision by Council to proceed with a minority listing of shares in Napier Port.

8. Delegates the authority to HBRIC to establish the new Council Controlled Organisation for the purposes of offering a minority stake in Napier Port, subject to Council making a final decision to proceed with the minority Initial Public Offering of Napier Port.

9. Requests the newly established Council Controlled Organisation be named Napier Port Holdings Limited.

10. Notes that as part of the amendments to the Council’s 2018-28 Long Term Plan, amendments will be made to reflect the intended establishment of the new Council Controlled Organisation.

11. Instructs that Council staff advise submitters on the proposal to establish a new Council Controlled Organisation (CCO) of the resolutions made by Council at this meeting in relation to the establishment of the new CCO and shareholder protections.

Authored by:

Desiree Cull

Strategy and Projects Leader

Jessica Ellerm

Group Manager Corporate Services

Approved by:

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

Subject: Shareholder Protections - Napier Port Holdings Limited and Port of Napier Limited

Reasons for Report

1. If the Hawke’s Bay Regional Council (HBRC or Council) decides to proceed with establishing a new Council Controlled Organisation (CCO) to provide an efficient and effective structure to facilitate a potential minority Initial Public Offering (IPO) of Napier Port, consideration now needs to be given to its optimal governance structure.

2. This decision paper recommends a package of additional protections for the Council to consider to ensure it maintains appropriate levels of influence over, and confidence in, Napier Port's future. Additional protections are particularly important given Napier Port is a significant strategic asset for the Hawke’s Bay region and the Council’s stated outcomes for the IPO Transaction.

3. The report sets out the protections and rights that Hawke's Bay Regional Investment Company Limited (HBRIC) and Council (HBRC, together with HBRIC, hereafter referred to as the Council Parties) would have under relevant New Zealand law as the majority shareholder in Napier Port Holdings Limited (NPH, previously described as Holdco). It also sets out further enhancements to these rights and protections that the Council should consider to be included as part of the establishment of NPH – on the basis that the Regional Council both votes to establish NPH and proceeds with a minority IPO of Napier Port.

4. In considering these additional measures, consideration has been given to striking the right balance between, on the one hand, protecting the Council Parties' in matters which are of particular importance to the Council Parties (for the good of the Hawke's Bay community), and, on the other hand, having regard to:

4.1. the Council Parties' desire, as set out in Council Resolution 10.7 adopted on 19 December 2018, to ensure that any final IPO transaction design is consistent with proven and established good commercial practice

4.2. maximising the value of the investment in Napier Port by potential investors while at the same time establishing future arrangements for oversight and influence by the Council Parties which protect Council’s interests as the majority owner

4.3. avoiding complexity or limiting the ability of the Napier Port Board / senior management to operate the business efficiently and effectively without constant recourse to its shareholders, and

4.4. ensuring the additional measures can endure and remain fit-for-purpose over time, noting Napier Port's status as a strategic infrastructure asset for the Hawke's Bay region.

Background and context

5. The Regional Council has elected to proceed with preparation for a potential initial public offer (IPO) of a minority share of Port of Napier Limited (Napier Port). It is intended that the IPO would be carried out by way of an offer of new shares in NPH, with HBRIC holding a majority stake in NPH immediately following listing. Should the listing of NPH on the NZX Stock Exchange proceed, it is appropriate to consider how the Regional Council maintains appropriate levels of influence over, and confidence in, Napier Port’s future.

6. Specifically, Regional Council resolution 10.8 from the Council meeting on 19 December 2018 stated the commitment to:

‘An appropriate corporate and governance structure be established for the listed entity’.

7. The establishment of NPH as the new CCO provides an appropriate corporate structure and the package of protections recommended in this paper seek to provide the appropriate shareholder protections. Concerns around governance and control has been a recurring theme during both the substantive consultation on options to fund the Port and the proposal to establish a new CCO.

8. The Regional Council has requested and received independent advice around the shareholder protections provided under the laws governing listed companies, and also on additional protection measures that could be introduced in connection with the minority IPO. The Regional Council discussed the possibility of additional shareholder protections in a Council Workshop on 13 March. This paper reflects the content of the advice received at the Council Workshop and seeks formal endorsement of those protections.

Considerations for Council

Existing protections

9. As a majority owner of NPH, the Council Parties will have a large degree of influence over the governance and operations of Napier Port, including via majority vote:

9.1. determining the composition of the Board of NPH, as all Board appointments will require shareholder approval at the Annual General Meeting

9.2. determining the outcome of shareholder ordinary resolutions. Most decisions requiring shareholder approval will be ordinary resolutions which require a 50 per cent majority vote to be passed

9.3. influencing the outcome of shareholder special resolutions and, given its significant shareholding, have a reasonable degree of confidence that special resolutions the Council Parties support will be passed. Limited matters such as changing the NPH constitution, changing the rights attaching to shares, putting a company into liquidation or changing the domicile of a company require special resolutions (being a 75% majority to pass).

10. In addition, the Council Parties will, under current law, have the benefit of a number of protections for shareholders, including under:

10.1. Takeovers Code: restriction on any other person or company (together with their associates) holding or controlling more than 20 per cent of the voting rights

10.2. Overseas Investment Act 2005: restriction on any person or company (together with their associates) owning or controlling 25 per cent or more of the shares

10.3. Commerce Act 1986: restriction on any competitor (being another port company or service provider, which is seen as providing substitutable services to those of Napier Port) from holding a significant stake (potentially as little as 5-10 per cent)

10.4. NZX Listing Rules: requirement for shareholder approval to authorise certain material corporate actions, including material transactions or significant changes to the nature of the business, and

10.5. Companies Act 1993: requirement for shareholder approval to authorise certain material corporate actions, including major transactions, changes to a constitution and changes to the place of incorporation.

Additional protections

11. Feedback from the Hawke’s Bay community over the special consultation process around a potential minority IPO of Napier Port indicated a preference for majority community (Regional Council) ownership and councillors have expressed support for additional measures, protections and controls to support Council Parties, local community and all other shareholders interests.

12. Feedback received from the recent consultation on establishing a CCO, ended 11 March 2019, around governance structures for Napier Port have also been reflected in these recommendations (see the “Officers’ Analysis of Submissions Received on Establishing a new CCO” paper for more detail on feedback).

13. The “Recommendations” for Council’s consideration present a range of additional protections above and beyond the considerable controls that automatically rest with the Council Parties by virtue of its majority ownership position.

Decision Making Process

14. 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:

14.1. This decision affects a strategic asset and is in direct response to feedback relating to governance and control received through the “Our Port – Have your say” special consultative procedure and the consultation on the establishment of a new CCO.

Recommendations

That Hawke’s Bay Regional Council:

1. Receives and notes the “Shareholder Protections - Napier Port Holdings Limited and Port of Napier Limited” staff report.

2. Approves, subject to a decision on whether to proceed with a minority Initial Public Offering of Napier Port Holdings Limited (NPH), the following protections to be established in the formation of NPH and, as necessary, within the constitution of NPH and Port of Napier Limited (as appropriate):

2.1. Protections to prevent Council Parties' share in NPH being diluted to less than a majority of 51 per cent.

2.2. All and any future share issues by NPH must be offered to ALL shareholders on a pro rata basis (as a further protection for all shareholders and to give the Council Parties the ability to ensure its ownership position is not eroded by subsequent share issues).

2.3. The boards of NPH and Napier Port shall be the same, such that they operate as one company in the eyes of all shareholders.

2.4. Two appropriately qualified non-independent directors should be appointed to the NPH and Napier Port Boards as Majority Shareholder-Appointed Directors to provide direct insight into NPH and Napier Port board matters (noting that the directors appointed to the board of NPH must operate in the best interests of NPH, rather than any one group of shareholders, as required by the Companies Act). Such appointments will need to be made in accordance with Council's director appointment policy.

2.5. Information sharing protocols and a confidentiality agreement are to be established between NPH, Napier Port and Council Parties to provide a framework for Regional Council having access to information about Napier Port. The categories of information that could be passed to the Council Parties would need to be agreed to by the independent directors of both NPH and Napier Port and also fall within the permitted parameters of the NZX Listing Rules and the Companies Act. The categories of information could include information that the Council Parties require to comply with their own legal, financial report and tax obligations and other non-price sensitive information. The negotiation and finalisation of the Information sharing protocols and Confidentiality Agreement would be delegated by the Council Parties to the Hawke’s Bay Regional Council Chief Executive.

3. To add the following as additional items that must be approved by Napier Port Holdings Limited's (NPH) shareholders (beyond those provided by existing law as matters requiring shareholder approval and subject to those applicable laws, including the NZX Listing Rules) if any of the following matters were proposed by NPH or Port of Napier Ltd. These items are recommended for the benefit of all shareholders.

3.1. A "major transaction" (as defined in the Companies Act), being a transaction such as the acquisition or disposal of assets or incurring liabilities or obligations with a value of more than 30 per cent of the value of NPH's or Napier Port’s gross assets (i.e., with no deduction for liabilities). This is a reduction from the Companies Act threshold which requires a vote on a transaction at the threshold of more than 50 per cent of a company’s gross assets. This reduction in the threshold provides greater oversight, influence and visibility of major transactions to all shareholders

3.2. Any future amendment of the constitution of Napier Port (noting that protection already exists for any amendments to the constitution of NPH)

3.3. Any transfer or issue of shares in Napier Port, other than to a directly or indirectly wholly-owned subsidiary of NPH. This ensures that Napier Port remains 100% controlled by NPH unless the required shareholder approval is obtained, and maintains the premise of NPH and Napier Port operating as one company and investment for all shareholders.

3.4. A restrictive covenant or encumbrance will be registered in favour of the Council Parties restricting the use of land at Napier Port’s main site to activities associated with operating a Port. This covenant or encumbrance will also restrict any future sales of the main site to transfers where the Council Parties have consented to such transfer

3.5. Notes that Napier Port will continue to be required to prepare and publish a Statement of Corporate Intent and that the Regional Council will convey its desires through its affiliated directors on the NPH board and Napier Port board, or through a more formal letter of expectations to NPH.

3.6. Notes, that in respect of any of the above rights to be entrenched in the constitutions as part of these recommendations, Ministerial approval will be required.

3.7. The finalisation and detailed implementation of the recommendations outlined are delegated to the Hawke’s Bay Regional Council Chief Executive, working with HBRIC Ltd and NPH, and subject to a Council decision on whether to proceed with the IPO transaction.

Authored by:

Jessica Ellerm

Group Manager Corporate Services

Blair O'Keeffe

HBRIC Ltd Chief Executive

Approved by:

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

Subject: Amendment to HBRC’s 2018-2028 Long Term Plan to Provide for the Napier Port Initial Public Offering

Reason for Report

1. This report:

1.1. provides an overview of the background that has led to the decision that Hawke’s Bay Regional Council (Council) is being asked to make;

1.2. outlines other considerations that Council should be aware of and take into account in making its decision; and

1.3. presents an amendment to the 2018-28 Long Term Plan (LTP) for adoption by Council in accordance with the Local Government Act 2002 (LGA).

2. Due to Napier Port being a strategic asset, an amendment to the LTP must first be made to enable Council to make a final decision to transfer the ownership or control of Napier Port. The amendment explicitly provides the authority for Council to make a decision to proceed with a minority Initial Public Offering (IPO) of Napier Port.

Background

3. Under the LGA, a decision by Council to transfer the ownership or control of a strategic asset (such as Napier Port) from Council cannot be made unless (a) the decision is explicitly provided for in the LTP; and (b) the proposal to provide for the decision was included in a consultation document that was consulted on in accordance with the special consultative procedure (with additional content to be included in the consultation document as required by section 93E of the LGA).

4. On 19 December 2018, the Council resolved to proceed with work towards offering shares on the New Zealand stock exchange through an IPO of a stake of up to 49% in Napier Port (the IPO Transaction). This in-principle decision was made after completion of a comprehensive special consultative procedure on four options, of which the IPO Transaction, modelled on a share offering of 45%, was Council’s preferred option. Extensive analysis was undertaken by Council in relation to the four options in the preceding two years.

5. An amendment to the LTP is necessary to enable Council to subsequently make a decision to proceed with the transfer of ownership of Napier Port from the Council. The consultation document entitled “Our Port – Have your Say” included a section on which areas of the LTP would require amending if the Council was to move ahead with its preferred option. These included:

5.1. Financial Strategy (Part 3 of the LTP)

5.2. Statement of Financial Position and Funding Impact Statement (Part 6)

5.3. Treasury Policy (Part 7)

5.4. Revenue and Financing Policy (Part 7)

5.5. Statement on Council Controlled Organisations (Part 7)

5.6. Significant Forecasting Assumptions (Part 7).

6. Extracts from the 2018-28 Long Term Plan that were proposed to change as a result of the decision to proceed with the Council’s preferred option were included as part of the supporting information for the consultation document.

7. Audit New Zealand reviewed the content and process for the proposed amendment and provided a report. The report confirmed that, in its opinion, the information in the consultation document about the proposed amendment to the LTP provided an effective basis for public participation in the Council’s proposed amendment. The report also confirmed that the information and assumptions underlying the content of the consultation document related to the proposed amendment were reasonable.

Final Amendment

8. Since Council made its in-principle decision in December 2018, further work has been undertaken to progress the design and details of the proposed IPO Transaction. During this time, Council staff have recommended further minor amendments to the LTP. The nature of these amendments are to:

8.1. better align the LTP with the structural outcomes that Council would want the IPO to achieve, and against which Council’s decision to give final approval to proceeding with the IPO Transaction will be determined

8.2. build in some flexibility and discretion as to the ultimate details of the sell-down (which actually reflect what was presented in the consultation but which were drafted too rigidly in the draft proposed LTP amendments), and

8.3. provide detail on the new CCO likely to be established to act as the listed entity and facilitate the potential IPO (subject to a decision by Council to establish a new CCO for this purpose).

9. The proposed amendments to the LTP have been provided to Audit New Zealand for final audit review and clearance.

10. As Council’s in-principle decision on 19 December 2018 and the additional changes to the LTP do not vary materially from the proposed LTP amendment that accompanied the ‘Our Port – Have Your Say’ consultation document, the final LTP amendment is now able to be adopted by Council.

11. Attached to this report are the proposed amended pages from the LTP that have been reviewed and are pending clearance by Audit NZ (at the time this report was written). Council officials will provide a verbal update to confirm that Audit NZ’s final clearance has been provided at the meeting (and provide a copy of Audit NZ’s report).

Scope of decision

12. This report seeks a decision by Council on whether to adopt proposed amendments to the LTP which would enable Council to make a future decision to transfer the ownership of Napier Port from the Council.

13. This report is not seeking a decision to proceed to implement the IPO Transaction (i.e. it is not seeking a decision that shares in Napier Port may be sold). Rather it is explicitly providing the ability for Council to subsequently make a decision to transfer the ownership or control of Napier Port, should the Council wish to proceed with such a decision at a future date. This amendment, once adopted, would mean that any future decision by Council to proceed with a minority listing of Napier Port (and therefore transfer the ownership or control of a strategic asset) is not inconsistent with its primary planning and accountability document i.e. Council’s LTP.

Decision making process

14. Council is required to make every decision in accordance with the requirements of the LGA. Staff have assessed the requirements in relation to this item and have concluded:

14.1. the decision to transfer the ownership or control of Napier Port (as a strategic asset) must be expressly provided for in the Council’s LTP, and

14.2. the proposal to provide for the decision in the LTP must be consulted on in accordance with the special consultative procedure under the LGA.

15. The required consultative procedure was undertaken late in 2018 and Council was presented with and considered a comprehensive set of papers before making its in-principle decision in December 2018 to proceed with further work on its preferred option. This included consideration of reasonably practicable options and consultation feedback received in relation to the four reasonably practicable options, one such option (being that preferred by Council and the majority of submitters) which related to the LTP amendments Council is being asked to adopt today.

16. In making its decision, Council is required by the LGA to:

16.1. identify and consider the advantages and disadvantages of the reasonably practicable options for the achievement of the objective of the decision

16.2. consider the views and preferences of all persons likely to be interested in or affected by the matter. This means:

16.2.1. giving due consideration and having regard to all views and preferences, and

16.2.2. giving due consideration and having regard to such views and preferences with an open mind (i.e. not having a predetermined view)

16.3. take into account the relationship of Māori and their culture and traditions with their ancestral land, water sites, waahi tapu, valued flora and fauna and other taonga in relation to the land or body of water the subject of the decision

16.4. take account of:

16.4.1. the diversity of the community, and the community’s interests within the Hawke’s Bay region

16.4.2. the interests of future as well as current communities, and

16.4.3. the likely impact of any decision on the interests referred to in 16.4.1 and 16.4.2

16.5. consider that Council is required to ensure prudent stewardship and the efficient and effective use of its resources in the interests of its region, including by planning effectively for the future management of its assets

16.6. be cognisant that any commercial transaction to be undertaken is in undertaken in accordance with sound business practices, and

17. In light of these decision-making considerations, Councillors should ensure that they refresh and reflect upon the papers that they previously considered for Council’s December 2018 meeting, in making their decision today on the adoption of the proposed LTP amendments. The papers from the December meeting are available on the Councillor portal and online in addition to hard copies councillors may have kept.

.Recommendations

That Hawke’s Bay Regional Council:

1. Receives and notes the “Amendment to HBRC’s 2018-2028 Long Term Plan to provide for the Napier Port Initial Public Offering” staff report and the proposed amended pages to Council’s 2018-2028 Long Term Plan.

2. Receives the Audit New Zealand audit opinion on the amendments to the Council’s 2018-2028 Long Term Plan.

3. Notes that a proposed 2018-2028 Long Term Plan amendment was consulted on as part of the special consultative procedure on the four options to fund the growth of Napier Port entitled ‘Our Port – Have your Say’.

4. Notes that Council has previously received and considered an option selection decision report which outlined the advantages and disadvantages of the reasonably practicable options before making its in-principle decision to proceed with further work to refine its preferred option.

5. Notes that Council has previously received and considered submissions and findings from the special consultative procedure in December 2018, before making its in-principle decision to proceed with further work on the Initial Public Offering Transaction.

6. Agrees that the further changes to the 2018-2028 Long Term Plan (LTP) amendment do not vary materially from the proposed LTP amendment that accompanied the ‘Our Port – Have Your Say’ consultation document.

7. Notes that the adoption of the attached amendment to the 2018-2028 Long Term Plan does not constitute a decision to proceed with a minority Initial Public Offering.

8. Adopts the attached amendment to the 2018-2028 Long Term Plan as presented, with any minor editorial corrections as necessary, to explicitly provide for any final decision to transfer the ownership or control of a minority stake in Napier Port through the appropriate listing structure.

9. Instructs staff to publish the amended 2018-2028 Long Term Plan in its final form.

10. Instructs staff to advise submitters on the ‘Our Port – Have your Say’ consultation of the resolutions made by Council at this meeting in relation to the amendment to the 2018-28 Long Term Plan.

Authored by:

Manton Collings

Chief Financial Officer

Desiree Cull

Strategy and Projects Leader

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

⇨1

2018-28 Long Term Plan Amended to provide for the Napier Port IPO

Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 27 March 2019

SUBJECT: Significant HBRC Activities through April 2019

Reason for Report

1. The following commentary is provided for Councillors’ information, to inform them of significant issues and activities coming up over the next couple of months.

2. This March report is the first version that incorporates Councillors 6 March 2019 feedback in response to the first organisational performance report at the Corporate and Strategic Committee. At that meeting Councillors requested the Significant Activities update to be more future focussed. In addition the report on the 1 May Regional Council agenda will include a summary report of key LTP metrics as also requested.

Significant Work Streams

TANK Plan Change		Project description	Activity Status Update
Group/Section	Team(s)	Project description	Activity Status Update
Strategic Planning	Policy	Progressing plan change to notification	1. Pre-notification targeted consultation feedback is being collated for reporting to the RPC 15 May meeting
Integrated Catchment Management	Hydrogeology	Heretaunga groundwater modelling	2. The report on stream depletion zone development will be published in April or May 2019
	Water Quality & Ecology (WQE)	WQE options report	3. TANK water quality report is being finalized for intended publication. Changes have been incorporated following external peer review and discussing final changes with policy.

New Initiatives (LTP)		Project description	Activity Status Update
Workstream	Group/Team(s)	Project description	Activity Status Update
Erosion Control Scheme	Integrated Catchment Management and Client Services		4. With 29 applications being processed (a total value of approx. $1.9M), staff will continue to engage with landowners and establish erosion control plans, and also connect with suppliers to deliver on these plans. 5. Hill country erosion scheme contract with Te Uru Rakau is expected to be signed in April. The total project is $8.2 Million of that $2.84M is Regional Council $1.1M will be land owners and $4.27M will be Te Uru Rakau
More Whitebait	Water Quality & Ecology (WQE)	Identify partnership opportunities to enhance whitebait populations	6. Some compromise to balance trees for bank stabilisation versus grass for spawning under negotiation at Tukituki site.

Ngaruroro River & Clive River Water Conservation Order (WCO) application

Project description

Activity Status Update

Group/Section

Team(s)

Strategic Planning

Policy

Ngaruroro Water Conservation Order application- Special Tribunal proceedings

7. Stage 2 of the hearing closed 8 March 2019. The Applicants will submit a comprehensive, written closing submission on 29 March 2019.

8. Special Tribunal’s next procedural steps are yet to be confirmed.

9. An update on proceedings will be provided to 10 April Environment & Services Committee meeting.

CHB Water		Project description	Activity Status Update
Group/Section	Team(s)	Project description	Activity Status Update
Integrated Catchment Management	Groundwater Science	Science to inform CHB Tukituki Water Taskforce Group	10. A draft technical Pre-feasibility report on Groundwater Replenishment Scheme for the Ruataniwha Basin intended to be reviewed and finalised by June 2019 11. A request for tender notice is being prepared, seeking proposals for development of a suite of groundwater models at appropriate spatial and temporal scales to evaluate water management options in the Ruataniwha Basin
Integrated Catchment Management	Water quality & Ecology	Sub catchment summaries	12. Finalising a contract between HBRC and Fonterra to scope potential constructed wetland sites to help with DIN reductions in the Tukipo catchment.
Strategic Planning	Policy	Scoping potential for plan change to amend dates for minimum flows	13. 17 April RPC meeting is expected to decide whether or not staff proceed with a limited plan change to delay implementation of new minimum flows in Tukituki catchment based on recommendations from staff based on findings from “fast fail” engagement with the CHB community undertaken.

Hawke’s Bay Drinking Water		Project description	Activity Status Update
Group/Section	Team(s)	Project description	Activity Status Update
Regulation	Consents and Compliance	Joint Working Group	14. A Working Group meeting was held on 12 March. Primary discussion around the groundwater modeling to establish Source Protection Zones for Hastings and Napier to include in TANK Plan Change. 15. Following meeting a communications workshop was held to confirm agreed communications protocols between agencies.
Office of CE & Chair	Governance	HB DW Governance Joint Committee	16. 2019 meetings are scheduled 12 June, 4 September and 11 December (1^st meeting of 2019-22 triennium).

Significant Team Activities

Integrated Catchment Management Group		Project description	Activity Status Update
Section	Team	Project description	Activity Status Update
Environmental Science	All teams	LiDAR Data Project	17. The LiDAR data capture project should hear from LINZ in early April about the proportion of funding they propose to allocate to the project – expected to be between 50% and 60% of total costs. The tendering process will then start, with the assistance of LINZ. 18. Preparation and scheduling for the 2019-20 SkyTEM survey is progressing, with logistics and planning being undertaken by GNS Science. Commencement of the survey is provisionally timetabled for February 2020.
		LiDAR Data Project

	Climate	19. A workshop is being facilitated between NIWA and regional stakeholders who rely on seasonal forecasts with the aim of improving the forecasts produced by NIWA, provide them at finer spatial scales and tailor them to stakeholders’ needs.
		Land Science	20. Annual soil quality monitoring round of approx 15 orchards and vineyard sites begins end of March. 21. Winter forage cropping map for the region will be available April.
		Water quality and ecology	22. Trend analyses on water quality in Lake Opouahi shows an ongoing deterioration. The simplest explanation is that reduce water clarity and increased chlorophyll a levels relate to the Hydrilla eradication programme, with the removal of aquatic vegetation by grass carp favouring a more algal dominated state.
		Marine and Coast	23. The Pandora Pond ColiMinder study is ongoing. The aim of this study is to determine whether novel technology can assist in more timely information to Pond users. 24. Faecal Source Tracking results have been obtained for the Pandora Pond for the late November/early December event. This showed that avian sources dominated the samples, and ruminant sources made up approximately 1-10%. 25. An autonomous Glider ’Betty’ is into week 2 of its 4 week voyage. Data coming back in is increasing our understanding of Hawke Bay oceanography.

Asset Management Group		Project description	Activity Status Update
Section	Team(s)	Project description	Activity Status Update
Regional Assets	Engineering	Northern	26. Nuhaka River Road – river realignment –design is under review and memo being finalized to capture design changes.
		Central	27. Bridge and gauging structure for forestry road at Tutira is in modelling and design phase. 28. Awanui Stopbank – planning and discussion for last portion – right bank. 29. Tutaekuri Stopbank Extension – upstream of Puketapu. Private funding, HBRC design and construction. Stopbank eventually to become part of HPFCS - initial modelling completed. 30. Clive Dredging – Channel survey underway and expect to receive data in April. Channel Design will be progressed in April and consents planner to be engaged following completion of design. Early contractor engagement in April. 31. Tutira Sediment Plan – Re-Design underway. Estimated date of completion 26th April 2019.
		Southern	32. Upper Tukituki Scheme analysis of options for changes to rating system report to be presented to for Council’s consideration when completed. Estimated date for completion of report is mid-May.
	Open Spaces	Te Mata Park	33. Working with the Te Mata Peak Trust and two committees regarding operational matters within the Park. HBRC Works Group staff providing a good service to the Trust.
	Open Spaces	Hawea Park / Karamu Stream Diversion	34. Draft park management plan prepared and under review. Management committee to be formed and representatives put forward at next stakeholder meeting. 35. Trust Deed lodged with Māori Land Court – hearing held on December 5. Decision from court due in May.
		Waitangi Regional Park	36. Waitangi Regional Park Stage 2 – draft plan complete. Consultation underway with Atea a Rangi Educational Trust and a heritage landscape consultant regarding William Colenso history referencing. 37. Lower Tūtaekurī Floodplain Wetland (funded by NKII/Port/Te Wai Maori Fund/HBRC) earthworks complete. Successful site visit with stake holders held 20/02/2019 and visit arranged with Councillors for 29/03/2019 at 10:30am.
	Cycle Networks	NZCT Priority Project Waimarama Road Safety Project	38. MBIE decision on new plan and funding expected by end of March, including addition of HDC section. Project plan is now to complete safer off-road section between existing off-road sections parallel to road, for trail users. Awaiting on HDC before proceeding.
		New Zealand Cycle Trail Business Case Hawke’s Bay Trails 2018-2023	39. Decision expected by end of March 2019.
		NZCT Priority Project Ahuriri Underpass Flooding Safety Issues	40. Working with NZTA around solutions. Meeting with NZTA in April.
		Hawke’s Bay Regional Cycle Plan 2015 - Review	41. Review had taken place and document is being drafted for review.

Regulation Group		Project description	Activity Status Update
Section	Team(s)	Project description	Activity Status Update
Compliance		PanPac Outfall leak	42. Pan Pac is currently completing repairs on the leak. There have been minor delays in repair as additional damage to the outside of the pipe was discovered [presumed to have been caused during earlier repair works]. The liner and couplers have arrived and the installation engineer from Switzerland arrived on site on 16 March. A verbal update will be provided to Council as to whether or not the work has been completed.
Consents	Consents	Large/ significant application Processes	43. Te Mata Mushrooms Application for related consents from HDC has been notified and is out for submission. 44. The applications lodged with HBRC & CHBDC for mushroom composting on a Mt Herbert Road Waipukurau site are subject to a s92 request for more information.
			45. HBRC gravel extraction Ngaruroro Tukituki, Waipawa and Tutaekuri. Submission period closed on 4 March. The process is on hold at the applicants request. A hearing may be required but there are no submissions opposing so matters may be able to be resolved by prehearing discussions.
			46. The four resource consent applications (Landcorp & NCC) for discharging stormwater and drainage water into the Ahuriri Estuary are on hold.
			47. Ruataniwha Tranche 2 groundwater take (8) applications are on hold.
			48. Wairoa District Council waste water discharge replacement consent application in process. Consent planner is preparing a s 92 further information request following meeting with applicants consultant.
			49. Takes from the Heretaunga Plains unconfined aquifer (approx. 200 lodged) expire 31 May and will be processed as a group, as requested by applicants,
			50. CHB Wastewater working party reference group due to provide its recommendation on improved options to CHBDC by May for the Council to determine its options and to advise the Environment Court (by June 30 2019).
	Consents	Appeals/ Environment Court	51. PanPac Environment Court hearing scheduled for 8 April.

Strategic Planning Group	Project description	Activity Status Update
Section / Team(s)	Project description	Activity Status Update
Policy & Planning	Statutory Advocacy	52. Towards mid-2019, policy planning staff are anticipating a variety of Bills, draft NPSs/NESs and discussion documents to be released for sector and/or public comment. These include: (a) Bill for Stage 1 of RMA amendments (b) Freshwater NPS amendments and NESs (c) National biodiversity strategy review (d) NPS re indigenous biodiversity (e) NPS re productive soils (f) NES for outdoor storage of tyres (g) 12 month review of NES for plantation forestry implementation (h) ‘Urban Growth Agenda’ urban planning pillar (i) Zero Emissions Bill Select Committee process (j) Emissions Trading Scheme regulation changes.
Policy & Planning	Heretaunga Plains Urban Development Strategy & NPS for Urban Development Capacity	53. HPUDS Implementation Working Group (IWG) meeting anticipated ~April/May 2019. 54. Quarterly reporting on urban development metrics as required by the NPS for Urban Development Capacity is ongoing.
Transport	Public Transport Regional Land Transport Planning	55. The Draft Regional Public Transport Plan will be released for public consultation during April. 56. The development of a new national road safety strategy is underway and will replace the current Safer Journeys strategy, which ends in 2020. The Ministry of Transport is investigating a Vision Zero approach, which has been successful in Scandinavia and some major cities. 57. The Ministry of Transport is commencing its review of the Government Policy Statement on Land Transport and a workshop on transport policy development is scheduled in Napier on Monday 8 April.

Decision Making Process

2. 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 the Hawke’s Bay Regional Council receives and notes the Significant HBRC Activities through April 2019 report.

Authored by:

Genevieve Bennett

Project Manager
HB Biodiversity Strategy

David Carruth

Manager Regional Assets

Desiree Cull

Strategy and Projects Leader

Peter Davis

Manager Environmental Information

Ceri Edmonds

Manager Policy and Planning

Dean Evans

Catchment Manager Tukituki/Southern Coasts

Craig Goodier

Team Leader Engineering

Keiko Hashiba

Terrestrial Ecologist

Nathan Heath

Catchment Manager (Wairoa/Mohaka)

Dr Andy Hicks

Team Leader/Principal Scientist Water Quality and Ecology

Dr Kathleen Kozyniak

Principal Scientist (Air)

Campbell Leckie

Manager Catchment Services

Dr Barry Lynch

Team Leader/Principal Scientist (Land Science)

Anna Madarasz-Smith

Team Leader/Principal Scientist Marine and Coast

Malcolm Miller

Manager Consents

Mark Mitchell

Team Leader/Principal Advisor, Biosecurity/Biodiversity

Brendan Powell

Catchment Manager (Central)

Anne Redgrave

Transport Manager

Dr Jeff Smith

Team Leader/Principal Scientist – Hydrology/Hydrogeology

Wayne Wright

Manager Compliance

Approved by:

Chris Dolley

Group Manager Asset Management

Liz Lambert

Group Manager Regulation

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

Iain Maxwell

Group Manager Integrated Catchment Management

Tom Skerman

Group Manager Strategic Planning

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
Nominations for Certificates of Appreciation	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.

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED	REASON FOR PASSING THIS RESOLUTION	GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION
2019-20 Annual Plan Communications Plan	7(2)(i) 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 enable the local authority holding the information to carry out, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.

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