Agenda of Corporate and Strategic Committee

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 05 June 2019

Subject: Report and Recommendations from the Finance Audit and Risk Sub-committee

Reason for Report

1. The following matters were considered by the Finance Audit and Risk Sub-committee meeting on 22 May 2019 and are now presented for the Committee’s consideration.

Rating Invoice – Proposed Issue, Due and Penalty Date Changes

2. This item proposed a change to the date Hawke’s Bay Regional Council’s rate invoices are sent out and the date payment is due with the objective of improving Council’s cash flow as well as lessen payment pressures on ratepayers over the Christmas period.

3. During discussions on the item concerns were raised in relation to bringing forward the payment due date by six months potentially adding to the financial burden for some ratepayers. To add context to the discussion, staff provide the attached table that provides a picture of the rates paid across the region.

4. The sub-committee resolved:

4.1. That the Finance, Audit and Risk Sub-committee receives and considers the “Rating Invoice – Proposed Issue, Due and Penalty Date Changes” staff report.

4.2. The Finance, Audit and Risk Sub-committee recommends that the Corporate and Strategic Committee:

4.2.1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, and that the Committee can exercise its discretion and make decisions on this issue without conferring directly with the community.

4.2.2. Recommends that Hawke’s Bay Regional Council approves the proposed rates issue, due and penalty dates following, for implementation 1 July 2020.

4.2.2.1 Invoices sent out – early to mid-August

4.2.2.2 Rate assessment/invoice date – 20 September

4.2.2.3 Payment due date – 20 September

4.2.2.4 Penalty date – 21 September.

Proposed schedule of 2019-20 internal audits

5. This item provided the sub-committee with a proposed internal audit programme for the 2019-20 financial year. Discussions of this item included a suggestion that Council staff consider options and opportunities for monitoring operational achievements against sustainability targets, and reporting these through to Council. Agreeing the schedule of internal audits, the sub-committee resolved:

5.1. Agrees to the 2019-20 schedule of Internal Audits, including associated budget allocations, being:

5.1.1. IT Security (subject to inclusion of an assessment of vendors cyber security in the scope)

5.1.2. Data Analytics

5.1.3. Risk Management

5.1.4. Asset Management.

5.2. The Finance, Audit and Risk Sub-committee recommends that the Corporate and Strategic Committee takes note of the agreed 2019-20 schedule of Internal Audits within associated budget allocations.

Water management follow-up internal audit report

6. This item provided the Crowe Horwath report on the results of the follow-up Water Management internal audit undertaken. The discussions at the meeting covered the matters identified as Partially Implemented and there was a request for a further audit in six months to determine further progress towards implementation, with the sub-committee resolving:

6.1. That the Finance, Audit and Risk Sub-committee receives and notes the “Water Management Follow-up Internal Audit Report” staff report and that Crowe Horwath be engaged for a further follow-up audit to be undertaken within 6 months”.

Draft 2019-20 Annual Plan for feedback

7. The Annual Plan for 2019-20 was presented for review and feedback and will be presented to the 5 June Corporate and Strategic Committee meeting for final adoption by Council on 26 June 2019.

Living wage update

8. This item provided the Sub-committee with an update on developments with living wage provisions including feedback from a survey conducted with suppliers providing direct services to Council for review and consideration. The sub-committee resolved:

8.1. That the Finance, Audit and Risk Sub-committee:

8.1.1. Receives and notes the “Living Wage Update” staff report

8.1.2. Notes that considerations of living wage related procurement policy decisions are addressed in a separate “Procurement and Contract Management” item.

8.1.3. Continues to await the feedback of the Public Transport Operating Model report.

8.2. The Finance, Audit and Risk Sub-committee recommends that the Corporate and Strategic Committee recommends that Hawke’s Bay Regional Council:

8.2.1. Considers the addition of a statement in the Procurement Policy that “Council gives preference to suppliers who pay employees the Living Wage”

8.2.2. If the inclusion of a weighting for payment of the Living Wage in a contract decision is to be considered, that the decision will be determined based on the type and value of the contract, and should also weigh up other best business practices.

8.2.3. If the inclusion of a weighting for payment of the Living Wage in a contract decision is to be considered, that the decision will be determined based on the type and value of the contract, and should also weigh up other best business practices.

Procurement and Contract Management Update

9. This item provided the sub-committee with an update on progress made in response to recommendations from the 2018 internal audit to review and amend the Regional Council’s Procurement Policy and Procurement Manual, with discussions including the release of new guidelines from the Office of the Auditor General and the Ministry of Business, Innovation and Employment in late 2018, HBRC has reviewed and amended the current procurement policy and manual to reflect current best practice.

10. Staff presented to the committee the policy and manual which cover the procurement life cycle, from planning, to selection and contract delivery. National templates for selection of suppliers and contracting have been adopted and recommendations for improvement included following and external audit of our processes and procedures by Crowe Horwath in 2018. The changes also reflect HBRC being supportive of sustainable purchasing, local buying and the living wage being included in selection criteria.

11. The sub-committee resolved:

11.1. That the Finance, Audit and Risk Sub-committee Receives and considers the “Procurement and Contract Management Update” staff report and provides feedback to staff on the Procurement Policy and Procurement Manual documents.

11.2. The Finance Audit and Risk Sub-committee recommends that the Corporate and Strategic Committee:

11.2.1. Agrees support for the proposed Hawke’s Bay Regional Council Procurement Policy May 2019 and Procurement Manual as revised to reflect the feedback provided by FARS.

11.2.2. Recommends that Hawke’s Bay Regional Council agrees support for the Hawke’s Bay Regional Council Procurement Policy May 2019 and Procurement Manual as revised, including that Policy 5.9 is amended to read “HBRC will give preference to suppliers who have adopted the living wage and will consider this as part of the procurement evaluation process”.

May 2019 Sub-committee Work Programme Update

12. This standing item provided an overall update on the Sub-committee’s work programme.

Treasury Report

13. This “Late Item” was received too late for proper consideration, and so is provided to today’s Committee meeting.

Proposed 2019-20 Council Insurance Programme

14. This item provided the Sub-committee with details covering the annual renewal of Council’s current insurance policies and terms and conditions of renewal.

Decision Making Process

15. These matters have all been specifically considered at the Committee level except where specifically noted.

Recommendations

The Finance, Audit and Risk Sub-committee recommends that the Corporate and Strategic Committee:

1. Receives and notes the “Report and Recommendations from the 22 May 2019 Finance, Audit and Risk Sub-committee Meeting”

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 or persons likely to be affected by or have an interest in the decision.

Rating Invoice – Proposed Issue, Due and Penalty Date Changes

3. Recommends that Hawke’s Bay Regional Council approves the proposed rates issue, due and penalty dates following, for implementation 1 July 2020.

3.1. Invoices sent out – early to mid-August

3.2. Rate assessment/invoice date – 20 September

3.3. Payment due date – 20 September

3.4. Penalty date – 21 September.

Proposed schedule of 2019-20 internal audits

4. Takes note of the agreed 2019-20 schedule of Internal Audits within associated budget allocations, being:

4.1. IT Security

4.2. Data Analytics

4.3. Risk Management

4.4. Asset Management

4.5. Water Management follow-up.

Living wage update

5. Considers the addition of a statement in the Procurement Policy that “Council gives preference to suppliers who pay employees the Living Wage”

6. If the inclusion of a weighting for payment of the Living Wage in a contract decision is to be considered, that the decision will be determined based on the type and value of the contract, and should also weigh up other best business practices.

7. If the inclusion of a weighting for payment of the Living Wage in a contract decision is to be considered, that the decision will be determined based on the type and value of the contract, and should also weigh up other best business practices.

Procurement and Contract Management Update

8. Agrees support for the proposed Hawke’s Bay Regional Council Procurement Policy May 2019 and Procurement Manual as revised to reflect the feedback provided by FARS.

9. Recommends that Hawke’s Bay Regional Council agrees support for the Hawke’s Bay Regional Council Procurement Policy May 2019 and Procurement Manual as revised, including that Policy 5.9 is amended to read “HBRC will give preference to suppliers who have adopted the living wage and will consider this as part of the procurement evaluation process”.

Reports Received

10. Notes that the following reports were provided to the Finance Audit and Risk Sub-committee.

10.1. Water Management Follow-up Internal Audit Report

10.2. Living wage update

10.3. Draft 2019-20 Annual Plan for review and feedback

10.4. May 2019 Sub-committee Work Programme Update.

Authored by:

Leeanne Hooper

Principal Advisor Governance

Jessica Ellerm

Group Manager
Corporate Services

Approved by:

James Palmer

Chief Executive

Attachment/s

⇩1

Summary of Rates 2018-19

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 05 June 2019

Subject: HBRC 2019-20 Annual Plan

Reason for Report

1. The Annual Plan full document for 2019-20 is attached (in hard copy for Committee members only) for review, feedback and recommendation for Council to adopt on 26 June 2019. It has been through the Financial Audit & Risk Sub-Committee for their feedback which will be incorporated together with any feedback from the Corporate and Strategic Committee to a final version presented to Council for adoption on 26 June 2019.

2. As Council agreed to a no consultation approach due to no material or significant differences to what was forecast in year 2 of the Long Term Plan (LTP), and the forecasted average rates increase of 7.9% has not changed, a detailed two page spread of key highlights will be published (through newspapers and social media) after the Corporate and Strategic Committee meeting to inform the community.

3. Feedback from the Finance Audit & Risk Sub-Committee has been incorporated into this two pager and the updated version is attached. The narrative used in this two pager will be incorporated into the final version of the Annual Plan 2019-20 document for consistency and presented to Council on 26 June 2019.

4. Requests to carry forward a number of 2018-19 budgeted operating and capital expenditure items are detailed for approval to be included in the Annual Plan 2019-20. A summary is provided in this paper and full details are in the attached document. The Annual Plan document will be updated to reflect these figures and a summary of key variations to year 2 of the 2018-28 Long Term Plan presented to Council on 26 June 2019.

Notes

5. Any feedback received from the Finance Audit and Risk Sub-Committee on the full Annual Plan document has not yet been implemented as further changes will need to be made subject to carry forward approvals and any feedback/changes from the Corporate and Strategic Committee meeting. A final updated version will be available for adoption by Council on 26 June 2019.

6. However – the two page spread which will be published on 06 June to inform the community of key highlights has been updated and is attached for reference. The information from this two page spread will also be incorporated into the final Annual Plan document when presented for adoption on 26 June 2019.

7. There are four attachments to this paper:

7.1. The draft Annual Plan 2019-20 document

7.2. The two page spread for public information

7.3. The carry forwards information for Capital and Operating expenditure

7.4. A copy of the letter sent out to all commercial entities informing the change in allocation of the Economic Development rate.

Background

8. The Annual Plan document has three sections:

8.1. Section 1: Introduction

8.2. Section 2: Highlights

8.3. Section 3: Financial information

9. A draft of sections 1 and 2 were presented to Council in a workshop early March. A media release on 18 April 2019 signified our non-consultation approach and provided a high level overview to the public. The full Annual Plan document was presented to Finance Audit & Risk Sub-Committee on 22 May for review and feedback.

10. A timeline of events for the Annual Plan is below.

Rates and Rating Differentials

11. Note that the forecast average rate increase of 7.9% as forecast from year 2 of the Long Term Plan has not changed. There are some minor variances as to the spread across various rating types e.g. the Uniform Annual General Charge (UAGC) has increased by 5%/$136k, however this is balanced out by a decrease in targeted rates of 5% including biosecurity schemes by $99k, sustainable land management by $27k and economic development by $23k.

12. As per the Long Term Plan consultation, in 2019-20 a larger percentage of the Economic Development rate ratio shifts to commercial ratepayers; those who benefit the most from this activity. The ratio shifts from 50:50 commercial:urban to a 70:30 split. A letter was sent out 28 May to all commercial entities informing of this change and is attached to this paper.

13. Below is a sample of property values showing the likely effect on commercial rate-payers, from 1 July 2019.

	CV $210,000	CV $560,000	CV $850,000	CV $1,010,000	CV $3,300,000	CV $5,650,000
2018-19	$55.26	$147.74	$188.36	$223.82	$731.28	$1,440.19
2019-20	$59.45	$198.74	$272.34	$323.60	$1,057.32	$2,005.19

Carry Forward of Expenditure and Revenue from 2018-19 to 2019-20

14. Operating and capital expenditure carry forwards from 2018-19 to 2019-20 are detailed in full in the attachment and a summary in the table below.

15. When considering whether to approve the carry forwards to expenditure consideration has been taken to factors such as resourcing, delays in funding approvals etc, with the understanding that planned work can now take place in the 2019-20 year.

16. Summary of Effects of Operating expenditure carry forwards on the 2019-20 Annual Plan.

Proposed Carry Forwards OPERATING	Expenditure
Erosion Control Scheme	($600,000)
Hot Spot Tutira	($245,000)
Hot Spot Lake Whatuma	($180,000)
Regional Land Transport Strategy	($146,000)
Future Farming Initiative	($130,000)
Heretaunga Plains Flood Control Scheme	($89,000)
Karamu Drainage	($45,000)
Upper Tuki Tuki	($44,000)
Asset Management – Minor Items	($40,000)
Heretaunga Plains Special Projects	($34,000)
Napier, Meannee, Puketapu Drainage	($33,500)
Muddy Creek	($12,000)
Karamu Enhancement	($11,000)
Central Southern Rivers	($10,000)
TOTAL OPERATING	(1,619,500)

17. Summary of Effects of Capital expenditure carry forwards on the 2019-20 Annual Plan.

Proposed Carry Forwards CAPITAL	Expenditure
Ngaruroro Water Investment (Regional Freshwater Security)	($1,420,000)
IT Infrastructure Refresh	($610,000)
IRIS Resource Management System Phase 2	($520,000)
Regional Groundwater Research	($430,000)
Executive Performance Management Tool	($330,000)
Heretaunga Plains Flood and River Control	($183,000)
Environmental Data Management System	($175,000)
Bus Service Ticketing System	($154,000)
Customer Relationship Management (CRM)	($75,000)
Data Warehousing	($70,000)
Regional Cycling Project	($60,000)
TOTAL CAPITAL	($4,027,000)

Decision Making Process

18. 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:

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

18.2. The persons affected by this decision are the region’s ratepayers.

18.3. 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

1. That the Corporate and Strategic Committee:

1.1. Receives and notes the “HBRC 2019-20 Annual Plan” staff report.

1.2. Receives and notes the two page public notice informing the community of key highlights of the 2019-20 Annual Plan included in this staff report.

1.3. Receives and notes the 2019-20 Annual Plan Carry Forward Budget Considerations included in this staff report.

2. The Corporate and Strategic Committee recommends that Hawke’s Bay Regional Council:

2.1. Adopts the 2019-20 Annual Plan, incorporating amendments agreed at today’s meeting, in accordance with Section 95 and Section 82(A)(3) of the Local Government Act 2002.

Authored by:

Karina Campbell

Senior Project Manager

Melissa des Landes

Acting Chief Financial Officer

Trudy Kilkolly

Principal Accountant Rates and Revenue

Approved by:

Jessica Ellerm

Group Manager Corporate Services

James Palmer

Chief Executive

Attachment/s

⇨1	Draft 2019-20 Annual Plan *(for committee members only)*	Under Separate Cover
⇨2	Annual Plan Two Page Spread for public information *(for committee members only)*	Under Separate Cover
⇨3	Carry forwards detail for Capital and Operating Expenditure	Under Separate Cover
⇨4	Letter to all commercial ratepayers explaining the change in ratio	Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 05 June 2019

Subject: HB Tourism Funding Review and Organisational Updates

Reason for Report

1. This item provides the Corporate and Strategic Committee with an update on the Hawkes’ Bay Tourism (HBT) funding review, national industry developments, and seeks feedback on identified options for capturing the peer-to-peer sector.

2. This item also provides the Committee with the Hawke’s Bay Tourism fourth quarter organisational report and proposed Key Performance Indicators (KPIs) as attached.

Executive Summary

3. Nationally and locally, conversations are continuing around tourism funding, and multiple initiatives are under active consideration and review. These include:

3.1. Tourism Industry Aotearoa (TIA) recommendation that local government receive a 20% share of GST from international visitors

3.2. The recently released New Zealand-Aotearoa Government Tourism Strategy

3.3. The judicial review of Auckland Council’s Accommodation Provider Targeted Rate (APTR) that commenced May 27

3.4. Queenstown Lakes District Council’s referendum on a proposed visitor levy, with the last day of voting being 5 June

3.5. A remit to LGNZ proposed by Christchurch City Council to require registration of short-term accommodation providers is on the agenda for consideration at the LGNZ Annual General Meeting

3.6. Development of Hawke’s Bay Visitor Strategy & Destination Management Plan.

4. Notwithstanding these initiatives, staff are continuing to look into HBT’s current funding mechanism which is via the Economic Development (ED) rate to ensure those that benefit commercially from tourism (directly or indirectly) contribute appropriately to the promotion and marketing of the region.

Background

5. Following consultation on the 2018-28 Long Term Plan (LTP) Council decided to support HBT at a rate of $1.52 million (M) per annum, for three years, with subsequent funding levels to be reviewed through the 2021 - 2031 LTP process. HBRC also agreed to adjust the economic development rating allocation (where funding for HBT comes from) to become more weighted to the commercial sector, as consulted on.

6. As per the LTP Council also requested that:

6.1. Hawke’s Bay Tourism examine levels of accommodation in private homes achieved through hosting websites to recommend to HBRC possible differentiated rating levels for accommodation providers based on occupancy rates.

6.2. HBRC staff work with Hawke’s Bay Tourism to investigate the possibility of introducing a bed tax via enabling legislation to support the activities of Hawke’s Bay Tourism.

7. The objectives of the funding review are:

7.1. To develop a long-term sustainable funding model for Hawke’s Bay Tourism that ensures those who benefit commercially from tourism contribute to the promotion and marketing of the region

7.2. To lessen the burden on the Hawke’s Bay ratepayer.

Hawke’s Bay Visitor Strategy & Destination Management Plan

8. HBT is driving the development of this plan and has the support of the region’s Mayors and Chairs for an all-of-region approach. HBT Acting General Manager Hamish Saxton will be at the Corporate and Strategic meeting and will be available to answer any questions in regards to this.

Funding Review Developments

Economic Development Rate Split

9. As the sole local government funder of HBT, HBRC collects funding through a targeted Economic Development rate on behalf of the region’s territorial authorities; Napier, Hastings, Central Hawke’s Bay and Wairoa councils.

10. Of the approximate $2.1M collected through this rate $1.52M is allocated to HBT as agreed to in the HBRC’s 2018-28 Long Term Plan. This funding level was committed to for three years and will be reviewed through the 2021-31 LTP.

11. The Economic Development rate is charged out using two differentials; residential ratepayers pay a Uniform Annual Charge (UAC) and organisations classified as commercial/industrial pay rates based on Capital Value (CV) – the market value of their land and improvements. In previous years Wairoa ratepayers have been capped to 5% of the total ED rates collected.

12. As per HBRC’s Long Term Plan the rating allocation between residential and commercial/industrial sectors has been adjusted over three years to become more weighted to the commercial/industrial sector as it is considered this sector benefits more directly from tourism than urban rated properties.

13. The rating allocation has moved from 30% commercial/industrial: 70% residential (2017-18), to a 50:50 split in 2018-19, to, 70% commercial/industrial: 30% residential for 2019-20, effective from 1 July. Please see the table below for how this has impacted the Economic Development rate collection.

Table 1 – Effects of Rating Split Implementation

Sector Economic Development Rate collected from	2017-18 (30:70)	2018-19 (50:50)	2019-20 (70:30)
Commercial/Industrial	$796,830.00	$1,063,792.00	$1,506,306.00
Residential	$1,859,270.00	$1,063,792.00	$645,560.00
Total Economic Development Rates collected	$2,656,100.00*	$2,127,584.00	$2,151,866.00

*This total amount is higher than the other years as it includes the higher HBT funding allocation before it was reduced.

14. As part of this funding review and given the change to the rating allocation, it is sensible to further analyse this rate to help ensure those that benefit commercially from tourism contribute more to the promotion and marketing of the region as a tourism destination.

Capturing the Peer-to-Peer Sector

15. Councils around the country, and internationally, are grappling with the issue of how to capture the peer-to-peer sector.

16. HBT says the peer-to-peer accommodation market has a long standing presence in Hawke’s Bay through domestic websites. However, like much of New Zealand, the growth of the sector in the region has seen a meteoric rise with the arrival of global player AirBnB.

17. It is difficult to get an accurate understanding of the total number of properties that offer peer-to-peer accommodation in the region, however HBT report the number of entire properties available for rent peaked in February this year at 1,190. This figure comes from AirDNA - a subscription service that “scrapes” AirBnB for data and more recently also HomeAway (another international platform). Total listings in March 2019 show there were 1,060 entire places to rent.

18. HBT reports that the revenue the peer-to-peer sector collects has also significantly increased. In the 12 months to April 2019, revenue more than doubled from $13.0M to $26.4M.

19. It does not appear any research has been done on the wider impact on Hawke’s Bay of the peer-to-peer sector, which is potentially taking long-term rentals off the market for more lucrative short-term stays. It is reported the region is in a housing crisis with a lack of affordable housing.

20. In a paper to Christchurch City Council’s Regulatory Performance Committee (13 June 2018) Council staff say there are potential benefits and adverse impacts from a significantly increased use of residential houses for short-term accommodation. This is particularly the case where units are predominantly used for accommodation and where the owner is not resident on site. These impacts can include:

20.1. Reduced availability and increased cost of long-term rentals

20.2. House prices may be higher than if all units used for short-term accommodation were returned to either the long-term rental market of the pool of houses for sale

20.3. Potential reduced amenity and sense of community for neighbouring properties due to transience of occupants particularly in neighborhoods where this activity tends to cluster; and

20.4. Reduced demand for traditional accommodation types and any subsequent impact on investment.

21. If peer-to-peer providers are operating at a commercial level and benefiting from tourists coming into the region it is fair they contribute through a commercial differential rather than the smaller residential differential ($9.76 for each household) to the promotion and marketing of the region.

22. The challenges however are firstly identifying the providers and secondly deciding how to treat them – when are they considered to be operating on a commercial basis and how can this be identified and confirmed?

23. Christchurch City Council has proposed a remit to LGNZ to give local authorities the ability to require registration of short-term accommodation providers. The remit is on the agenda for consideration at its Annual General Meeting in July.

24. The table below looks at some options available to HBRC in seeking a contribution from the peer-to-peer sector to tourism.

Option 1: Creating a voluntary subscription/membership group or join HBT’s membership group

Peer-to-peer providers could be written to (or flyers dropped in all homes in the region) and asked to pay a voluntary annual subscription fee to contribute to tourism promotion as part of a membership group. A new accommodation providers group could be formed or it may be that providers could join HBT’s existing membership group.

Pros

· Providers may contribute to tourism promotion.

· Providers may want to belong to membership group.

· Benefits may be achieved for providers and the sector though having or being part of a membership group.

· This could be managed externally.

· Would not see a rate increase.

Cons

· People may choose not to join unless they perceive a benefit/s for belonging to such a group.

· Wouldn’t expect to raise significant contribution towards tourism promotion. It was reported to the Corporate and Strategic Committee in December last year it had at that time 386 paying members and expected to collect about $120,000 though membership and support partners for the year.

Considerations

· Resource to administer/manage a new membership group if one was formed.

· Would need to incentivize providers to join e.g. What’s in it for me?

Option 2: HBRC invoices a charge or fee to contribute towards Economic Development/tourism promotion

Pros

· Provides a mechanism for providers to contribute.

· Invoiced separate to rates therefore no rate increase.

Cons

· Need to identify providers.

· Resource to manage the issue of invoices and record payment.

· Resource to maintain the peer-to-peer database.

· The charge or fee may not reflect the amount of business they do or commercial benefit they receive from promotion and marketing of the region.

· Not as easy to enforce payment of a charge or fee, compared to a rates invoice.

Considerations

· This is a fluctuating sector and providers may withdraw their property at the time a database is updated and re-offer/re-register their property at a later date. A way around this could be invoicing more than once a year. Again, this requires resource.

· Does potential revenue secured this way justify the costs to set up and operate this option?

· Would need to publicly consult, needs Council resolution and policy, and amendments to Council plan as required.

Option 3: Charge a peer-to-peer targeted rate

Pros

· Those that benefit from tourism promotion contribute.

· Rates could be reduced for the indirect beneficiaries of tourism.

· A new rate can be established if the need for more expenditure through the ED rate has been identified.

· Ability to charge penalties.

Cons

· The contribution would not reflect the level of business they do or the benefit they receive.

· What basis is the rate charged? I.e. is it a flat fixed rate or is it based on nights (actual, intended or capacity).

· Need to identify providers.

· Need to determine an appropriate fixed rate.

· Resource to manage the issue of invoices and record payment.

· Resource to maintain the peer-to-peer database.

Considerations

· Would need to publicly consult, needs Council resolution and policy, and amendments to Council plan as required.

Option 4: Treat peer-to-peer providers as commercial entities using the current Economic Development Rate

Pros

· Existing ED rate is based on CV so would be consistent with what is currently applied.

· Assuming whole house is to be rented, CV would generate more income and reduce the total amount residential ratepayers would be required to pay.

Cons

· Need to identify providers.

· Resource to manage enquiries if implemented.

· Resource to maintain the peer-to-peer database.

· ED rate is based on capital value for commercial entities, so this would see a significant rise in rates. For example, a Napier south home with a CV of $375,000 currently pays $9.76 towards ED. If this home was classified as commercial, the rates would be $120.15. (Napier commercial rate of $32.04 per $100,000.)

· If the above house was only occasionally rented out, or part of the house rented out, it could be deemed disproportionate.

· At what point do homes become commercial?

· Doesn’t reflect proportion of property being used for accommodation.

Considerations

· Need to determine when a house changes form residential to commercial. Is it number of nights – is so, need to decide what measurement to use i.e. available nights, intended booked nights or actual booked nights.

· Would need to publicly consult, needs Council resolution and policy, and amendments to Council plan as required.

Option 5: Treat peer-to-peer providers as commercial entities using a different differential. i.e. Land value (LV), Improvement Value, fixed charge per SUIP (Separately Used Inhabited Parts)

For the options discussed below HBRC would need to publicly consult, they need Council resolution and policy, and amendments to Council plan as required.

Land value

Pros

· Provides a mechanism for providers to contribute.

· Reflects the value of the location.

· Value is irrespective of whether building is being used or not.

· Existing ED Rate is based on LV so would be consistent with what is currently applied.

Cons

· Compared to CV, HBRC would receive less in rates.

· It doesn’t reflect the use of the property.

Considerations

· Rural peer-to-peer providers have large land value, but the property for rent may be a small cottage, but they will be charged on the LV not the income they receive from renting the place out.

Improvement value

Pros

· It reflects the income that is available – the bigger the house, the more income it is able to generate.

Cons

· It doesn’t reflect income earned.

· It doesn’t reflect location.

· It doesn’t reflect the value of the land that the improvement is sitting on.

Fixed Charge per SUIP (Separate used or inhabited part of a rating unit)

Pros

· Provides a mechanism for providers to contribute.

· It is simple to rate based on UACS.

· It reflects the number of units to rent.

· Ratepayers must register one or more SUIPS.

· Can apply a penalty for non-payment.

Cons

· Doesn’t reflect use so ratepayer would be charged regardless of use.

· Need to establish the number of units.

· Only accurate as at July 1 (start of financial year).

· Resource required to keep register up to date.

Considerations

· Need to identify appropriate fixed rate.

25. As illustrated above, there is no clear answer and this is something Councils are grappling to find an appropriate solution for.

National Tourism Developments

26. Eyes are on the judicial review of Auckland Council’s Accommodation Provider Targeted Rate (APTR). A group have come together, Commercial Accommodation Rate Payers (CARP), and are challenging the legality of the targeted rate.

27. It was reported the group are seeking to rescind the rate “due to its unfairness and the lack of consultation by Auckland Council” (NZ Herald 25 May 2018). High Court action started on 27 May (scheduled to last a week), with Auckland Council expecting the judgement to be released around August or September.

28. The last day of voting for Queenstown Lakes District Council’s non-binding referendum on a proposed visitor levy is 5 June. The Council has proposed a 5% charge to the costs of accommodation payable by visitors. A Government legislation change is required for the levy to be put in place. If the Government is supportive, the levy would not be introduced until July 1, 2021.

28.1. Tourism Minister Kelvin Davis has said any levy would be for Queenstown alone.

29. Tourism Industry Aotearoa (TIA) has recently advocated that central government give local government a 20% share of the GST paid annually by international visitors to help fund regional tourism activities and infrastructure. This recommendation was made to the Productivity Commission’s Local Government Funding and Financing Inquiry (please see Attachment 2), with the draft release of this report due in June.

29.1. TIA recommends the money is redistributed to local government in accordance with the tourism burden borne by each Territorial Local Authority (TLA).

29.2. It says the distribution could be via a trust, with funds allocated in direct proportion to visitor impact.

29.3. The table below shows what each TA in Hawke Bay would receive in annual funding based on the funding model, using 2018 data. The measure of visitor impact is based on total visitor nights per region (TA) - (Guest nights data source – Accommodation Survey/Commercial Accommodation Monitor Year End March 2018)

Territorial Authority	Proportion of International Visitor GST attributed
Wairoa District	$407,315
Hastings District	$3,351,751
Napier City	$6,339,198
Central Hawke’s Bay District	$162,800
Total	$10,261,064

30. A national tourism strategy has been released – New Zealand-Aotearoa Government Tourism Strategy. One of the top priorities for 2019/20 is long-term sustainable funding mechanisms, but the strategy does not provide strong direction in regards to that – it does however include an action to implement any tourism-related actions arising from the Productivity Commission’s inquiry.

30.1. Destination management and planning is another top priority – to work with regions to take a strategic, coherent approach when deciding how they want to pan, manage market and develop their destinations.

30.2. It has actions points around the minimum wage and building capacity in Maori tourism operators.

31. The tourism industry released its updated growth framework Tourism 2025 & Beyond. A Sustainable Growth Framework Kaupapa Whakapakari Tāpoi. Managing destinations (“All of New Zealand needs to be covered by Regional Destination Management Plans”) and investing in infrastructure and amenities are among the top 10 actions.

32. The International Visitor Conservation and Tourism levy (IVL) will be implemented from July 1 2019. The IVL costs $35 and is expected to raise over $450M over five years.

Next Steps

33. Based on feedback today on whether or not to progress a specific solution for Hawke’s Bay to capture peer-to-peer providers (or wait for a coordinated approach across local government), HBRC staff will further develop the Committee’s preferred option/s for capturing the peer-to-peer sector and methods of identification.

34. HBRC staff continue to progress analysis of changes to HBT’s targeted rate formula.

35. HBRC staff continue to closely track industry developments and report back to the Corporate and Strategic Committee when new information comes to light.

36. HBRC staff continue to provide support to Hawke’s Bay Tourism in its development of the Hawke’s Bay Visitor Strategy & Destination Management Plan.

Decision Making Process

37. Council and its committees are 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:

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

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

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

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

Recommendation

1. That the Corporate and Strategic Committee receives and notes the “HB Tourism Funding Review” staff report.

2. The Corporate and Strategic Committee recommends that Hawke’s Bay Regional Council:

2.1 Adopts the Key Performance Indicators proposed, subject to the Hawke’s Bay Tourism Board of Directors ratifying them, and incorporating any amendments agreed by the Committee today.

Authored by:

Mandy Sharpe

Project Manager

Trudy Kilkolly

Principal Accountant Rates and Revenue

Approved by:

Tom Skerman

Group Manager Strategic Planning

Attachment/s

⇩1	Hawke's Bay Tourism Quarterly Report April - June 2019
⇩2	Tourism Industry Aotearoa Submission

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 05 June 2019

Subject: Strategic Plan Implementation

Reason for Report

1. This information paper updates the Committee on progress with the implementation of Council’s 2017-21 Strategic Plan.

2. This paper also satisfies a new level of service measure in the 2018-28 Long Term Plan for “Annual reporting to Council on the development and/or implementation of the Strategic Plan to maintain its currency and relevance”.

Background

3. Hawke’s Bay Regional Council adopted a new 5-year Strategic Plan in August 2017. It embodies the ambition and aspirations of the new Council and our new Chief Executive and signalled a significant change in direction for the organisation. Major differences between the new Strategic Plan and the old one adopted in 2011 include:

3.1. Our Mission Statement

3.2. Our Purpose

3.3. Our Focus areas

3.4. Strategic Goals for each of the four focus areas.

4. The new mission reinforces HBRC’s core role in environmental management and deliberately takes a more proactive, forward looking and aspirational approach. These along with “working together” are common themes throughout the Strategic Plan. The new purpose statement signals a greater focus on managing for outcomes (versus a functional approach) and puts the environment at the centre of everything we do.

5. The introduction of goals with targets for each of the four focus areas further demonstrates a desire to shift from managing and reporting on activity to reporting quantifiable outcomes. The intention was for council to be less granular on activity and more flexible on delivery.

Implementation to date

6. In response to the strategic direction set in the Strategic Plan the Council has:

6.1. Accelerated and scaled-up activity through the 2018-28 Long Term Plan via

6.1.1. more staff including a greater presence in Wairoa and CHB

6.1.2. increased operating and capital expenditure

6.1.3. increased incentives and regulation to influence behavior change

6.1.4. increased debt funding for long term projects with intergenerational benefits

6.1.5. leveraged all funding sources (fees and charges, investment income, external grant funding, debt and rates) to fund its new strategic agenda

6.2. Re-organised to better align the organisation to deliver on strategic outcomes, and

6.3. Referenced the four focus areas and values from the Strategic Plan in the new Personal Performance and Development Charters and required all staff to say how their work contributes.

Further implementation planned

7. Work is underway to monitor and report on the 23 long-term goals in the Strategic Plan. This will involve defining in detail how the goals will be measured (what, where, how and when), determining a baseline for each and setting short to medium term targets to enable us to track progress. This will tell us if our strategic goals are being achieved.

8. Parallel work is underway to quantify and map our approximately 126 existing budget (or workstream) codes directly to our 60 Level of Service Measures (LOSM’s) and, ultimately, the twenty three 2017-21 Strategic Plan goals. This will enable us to better assess over time if what we are doing (council’s interventions or workstreams and projects) is contributing to the achievement of our strategic goals. Noting that the council does not not have full control over whether these outcomes are achieved, but has a clear statutory role in achieving them, along with others.

Strategic Snapshot

9. In the interim, the attached Strategy Snapshot has been produced to give an holistic view of council “activity” at a point in time (i.e. May 2019). The four colored columns represent the four focus areas from the 2017-2021 Strategic Plan.

10. The Y axis uses the policy cycle as an indicator of time for strategic work (i.e. where in the cycle is a plan, strategy or policy) and the method (e.g. non/regulatory) to display operational work. Across the bottom are a range of initiatives that underpin all four focus areas categorized “People, Processes, Customer and Results”.

11. Together these constitute the programme of work for council at this point in time. It attempts to be exhaustive (i.e. cover everything we do) with the caveat that it focuses on big outputs or services (e.g. plan changes vs stat advocacy).

12. It is designed to demonstrate how all the pieces contribute to achieving the 23 strategic goals from the Strategic Plan (listed at the bottom of the page) and to aid in a discussion about resourcing and future pressure points for the organisation.

13. The Chief Executive will take Councillors through the snapshot as part of this meeting.

Decision Making Process

14. 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 Corporate and Strategic Committee receives and notes the “Strategic Plan Implementation” staff report.

Authored by:

Desiree Cull

Strategy and Projects Leader

Approved by:

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

Tom Skerman

Group Manager Strategic Planning

Attachment/s

⇩1