Late Agenda of Extraordinary Regional Council Meeting

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 22 April 2020

Subject: May 2020 Meetings

Reason for Report

1. This item seeks Council’s decision, by way of resolution, to extend the suspension of committee delegations and meetings during the Covid-19 pandemic through to the end of May, and to confirm the meeting schedule for May 2020

Officers’ Recommendation(s)

2. Council officers recommend that Council reviews the period of suspension of the delegations to and meetings of Council’s committees as previously resolved on 25 March 2020, and extends those suspensions to the end of May.

3. Further, staff also recommend that Council confirms the proposed schedule of Council meetings through to the end of May.

Background

4. Consistent with Central Government advice and the restrictions imposed by the Covid-19 Alert Levels 3 and 4, Council resolved to suspend committee meetings for the period during which restrictions would be in place, and that the resolution would reviewed on 22 April.

5. In order for the business of Council to carry on through the period of the pandemic and while Committee meetings were suspended, it was proposed that any business normally considered at committee meetings be dealt with by the Council meetings.

6. At a subsequent Council meeting it was further resolved that any decisions normally made by a Committee would be subject to confirmation at the following Council meeting to allow for a period of reflection and the opportunity for double debate.

Discussion

7. With staff continuing to work from home and gatherings of more than 10 persons restricted under Covid Alert Level 3, Council officers anticipate the need for Council to continue meeting virtually. The meetings will continue to be streamed and recordings put onto the website as usual, and in order to retain the conduit to Māori Committee and RPC, tangata whenua representatives will be invited to attend.

8. The continuation of regular Council meetings is intended to enable staff to proceed with work to develop the Annual and Long Term plans and other essential Council business as well as keep councillors up to date with the latest developments in the Covid-19 pandemic response and recovery.

Decision Making Process

9. 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:

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

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

9.3. The decision is not significant under the criteria contained in Council’s adopted Significance and Engagement Policy.

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

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

Recommendations

That Hawke’s Bay Regional Council:

1. Receives and considers the “May 2020 Meetings” 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 issue without conferring directly with the community or persons likely to an interest in the decision.

3. Suspends delegations to the Corporate & Strategic and Environment & Integrated Catchments committees and the Finance, Audit & Risk Sub-committee

4. Meets virtually as a full Council in lieu of the Corporate & Strategic, Environment & Integrated Catchments and Finance, Audit & Risk committees until 20 May 2020, or such time as Covid-19 restrictions are lifted.

5. Confirms the May 2020 meetings schedule as proposed, being:

5.1. 6 May 2020 Māori Committee meeting to proceed as previously scheduled

5.2. 13 May 2020 Extraordinary Regional Council meeting in lieu of Finance, Audit & Risk Sub-committee (FARS)

5.3. 20 May 2020 additional Extraordinary Regional Council meeting (including confirmation of 13 May decisions normally made by FARS)

5.4. 27 May 2020 Regional Council meeting to proceed as previously scheduled.

Authored by:

Leeanne Hooper

Governance Lead

Approved by:

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 22 April 2020

Subject: Annual Plan Update

Reason for Report

1. This report provides an update to Hawke’s Bay Regional Council (Council), and high-level timeline, on progression of the 2020-/21 Annual Plan, following the Notice of Motion on the 25 March 2020.

2. The objective of this work is to ensure Council is responding to, and acknowledging, the economic impact of recent events on the community and the uncertainty and stress that ratepayers will be under.

3. This report provides a public summary of the information presented to Council for the 8 April workshop, and subsequent discussion that took place.

Background

4. On 25 March 2020 Council resolved for the Chief Executive to provide Council with urgent advice on how the Council can deliver the 2020-21 Annual Plan with zero rates increase.

5. This was in response to a Notice of Motion introduced by Cr Rex Graham. The rationale being a need to recognise the current pressures on the community in the context of the Drought, TB outbreak and Covid-19.

6. Prior to the motion, officers had begun looking at how to best incorporate and respond to the potential impact to the region following the escalation of COVID-19 to a pandemic status by the World Health Organisation on 11 March 2020 and the subsequent announcement of the Four Stage Alert System on 21 March 2020 by the Government.

7. Legal advice was sought to establish the options available to Council within the bounds of the Local Government Act 2002, and its requirements for consultation for any significant or material differences from the 2018-28 Long Term Plan (LTP).

8. On 8 April 2020, Officers workshopped the options available to Council and sought guidance from Council on which options it would prefer to investigate.

9. Officers recommended an approach which involves an overall assessment of the current circumstances and updating of known and significant changes to assumptions, but largely maintains the current proposed levels of service. This is on the basis that any budget should be constructed using the best information available at the time. Officers therefore requested time to incorporate the most up to date information such as known significant changes to investment income expectations including portfolio returns and Napier Port dividend.

10. Once the impact of the above is known or better predicted staff recommend utilising the Rates Remission and Postponement Policies in conjunction with the intent to debt fund, as required, an unbalanced budget. It is possible to adopt an unbalanced budget when deemed prudent and in exceptional circumstances.

Discussion

Legislation requirements and Consultation

11. This cautionary note originates from the obligation in section 101(1) of the Local Government Act 2002 (LGA) for councils to manage their finances prudently and in a manner that promotes the current and future interests of the community. Section 14(1)(g) also sets out a principle in similar terms that councils must act in accordance with in performing their roles.

12. A decision to rework and set an annual plan based on an overall 0% rates increase would very likely require consultation before the decision is made. This is because the proposed change in rates impact for 2020-21 (7.3% decrease) is certainly a significant and/or material change from what the LTP set out for the 2020-21 year (section 95(2) and (2A) of the LGA). In this regard, section 95 applies regardless of whether the change is a proposed increase or decrease in rates.

13. The finance team is continuing to analyse what the impacts of a 0% increase would change in terms of service delivery. We note that in certain circumstances, section 97(1)(a) and 97(2) of the LGA might be triggered – decisions to alter significantly the intended level of service provision for any significant activity undertaken by or on behalf of the Council, or a decision to cease (or commence) such activity can only be made if the decision is explicitly provided for in a long term plan and the proposal was consulted on in a LTP consultation document. Given 2020-21 is an annual plan year, this means if section 97 is engaged that the Council would need to undertake an LTP amendment, which includes consultation.

14. Council could set an unbalanced budget for 2020-21 if it considers it financially prudent to do so after considering:

14.1. section 101(1) and (2) of the LGA 02, and

14.2. the matters stated in section 100(2)(a) to (d) of the LGA 02.

Debt Levels and Debt Covenants

15. Current external debt is $35 million. In the 2018-28 LTP debt was forecast to peak at $38.1m in 2027-28. Part of the reason for that is that a conservative approach was applied to loan terms which means significant amounts were budgeted to be repaid.

16. The current draft AP revenue for 2020-21 (based on the 7.3% rates increase) is budgeted to be $64.5m. This puts the current debt ceiling at around the $100m mark. So there is no concern with the amount Council can borrow or the 150% ceiling.

17. The following are the debt covenants of Council.

	HBRC	LGFA
Net external debt as a percentage of total revenue	<150%	<175%
Net interest on external debt as a percentage of annual rates revenue	<20%	<25%
Net interest on external debt as a percentage of total revenue	<15%	<20%
Liquidity buffer amount comprising liquid assets and available committed debt facility amounts relative to existing total external debt	>10%	n/a

18. The debt limit is something each council sets based on its risk appetite and the requirements of the council as part of the LTP. Some councils take a more conservative stance than others. The LGFA limit gives an upper limit where, if you exceed that limit you will not be able to access further funding from LGFA (and cost of borrowing may increase).

19. The ability for HBRC to borrow is not the issue to consider. The issue is the ability, with a relatively small revenue base that is substantially comprised of rates, to service debt. Further, consideration should be made to the magnitude of future rate increases as Council rebalances its finances over the coming years.

20. As HBRC’s LTP shows, there is an incremental impact from increasing the level of Council’s borrowings. Debt servicing becomes an increasing proportion of the cost structure to be funded each year. Local Government debt, in general, does not generate a commercial return so the total cost of servicing falls on ratepayers.

21. Council needs to focus on what Council, and the community, would be comfortable servicing (and paying for through rates). In addition to HBRC rates, ratepayers have been facing significant increases from the territorial councils (HDC, NCC, etc) as they grapple with the increased costs of infrastructure (water, etc). Council must also be mindful of the issue of intergenerational equity. Considering how much is reasonable to ask future generations to pay. If Council takes on extra debt now, how quickly should this be repaid?

Rating Information

22. The following table shows the breakdown of the rating revenue (GST incl) from the rating database for 2019-20.

Category	$0	%
Residential	$14,135	50%
Lifestyle	$1,486	5%
Industrial	$2,211	8%
Commercial	$2,114	7%
Pastoral	$5,484	19%
Horticultural	$1,912	7%
Dairy	$297	1%
Forestry	$579	2%
Utility	$102	0%
Specialist	$44	0%
Mining	$2	0%
Other	$152	1%
Unidentified	$6	0%
Total Rate take	$28,522	100%

Options Analysis of how to achieve a 0% rates increase

23. Taking all the advice into account, a prudent approach would involve an overall assessment of circumstances and decision-making that takes a long-term view with consideration of future financial and non-financial consequences of the decision.

24. Based on this Council needs to consider if, in the long term, a 0% rates increase is a prudent decision to make on behalf of the ratepayers.

25. A number of options are available to Council to achieve a 0% rates increase depending on the options that Council would like to consider and the targeted response that may be considered.

Table / Option 1

Continue with the Proposed Rates Increase / Levels of Service (LoS) and use the Remissions of Rates in Special Circumstances Policy to remit the rates increase and fund the shortfall by borrowing through a resolution of Council.

Pros

Cons

· Relief is given to rate payers based on the rates increases expected this year which reduces their rates required to be paid this year.

· The ability to possibly target the ratepayers that are most affected

· The ability for some ratepayers that are not affected to pay their full rates

· The ability to relax the criteria on the remission policy easily.

· The rates increase in Year 1 of the LTP will be based on the new rates values rather than a lowered value from this year. E.g. the increase will not be this year’s missing increase plus the increase for the first year if the LTP.

· Levels of services are not impacted as the budgets remain the same.

· Benefit to the community of us continuing with planned programme of work (economic activity etc)

· The media ignoring the remission process proposed and reporting that we are still increasing rates / expenditure in the current climate, which could be mitigated with a strong comms programme

· The funding requirement to cover the reduction in income will need to be recovered future from rates.

26. Option 1 provides the ability to apply either:

26.1. A - A universal rates remittance so all rate-payers receive a zero % rates increase (this assumes the community is all impacted equally)

26.2. B - A more targeted approach to benefit sectors / groups of rate-payers most affected (staff need to do more analysis and come back with options of what this looks like)

26.3. C – Remission for those who apply for it only.

27. Staff are seeking legal advice on whether this option would require consultation. It may be that Council can adopt this option with an unbalanced budget should the Council deem it to be prudent without having to consult.

Table / Option 2

Continue with the Proposed Rates Increase / LoS and use the Postponement in Cases of Financial Hardship or Natural Disaster Policy to postpone rates increase and funding the shortfall by borrowing through a resolution of Council.

Pros

Cons

· Postponement is given to rate payers based on the rates increases expected this year

· The ability to target the ratepayers that are most affected

· The ability for some ratepayers that are not affected to pay their full rates

· The ability to relax the criteria on the postponement policy

· Levels of services are not impacted as the budgets remain the same.

· The funding requirement to cover the delay in receiving income will be reduced to only the time required to cover the postponement period

· The media ignoring the remission process and reporting that we are still proceeding with rates increases in the current climate

· The rates will still be required to be paid by the ratepayer at a future date and the debt of ratepayers will sit on our balance sheet.

28. This option would not require consultation. The use of the postponement policy means that the rates are still due and therefore the Levels of Services and the Annual Plan would be adopted as proposed.

Table / Option 3

Re-work the Annual Plan Budget by amending / reducing levels of service to reduce expenditure to achieve a 0% Rates Increase

Pros

Cons

· Simple and clear media reporting of no budget increases

· The ability to include alternative expenditure based on the Council’s appetite for additional Economic Development / Recovery programs, if these can be funded within a zero rates increase.

· Potential to fast track capital projects, if these can be funded within a zero rates increase.

· Allows us to reflect changes to revenue assumptions based on the information we have now

· Community trust / onboard with the Annual plan reflecting the current operating context.

· Impacts all budgets and has implications for delivering the Levels of Service in each activity as we come out of the impact of COVID-19.

· Is likely to trigger an LTP amendment requirement due to the reduction in the Levels of Service.

· Consultation on the changes would be required with consideration of how this would be achieved satisfactorily with the Alert Level 4 requirements.

· It is likely the adoption of the Annual Plan by 30 June will not be met and a delay in striking rates will be required.

· The rates increase in Year 1 of the LTP will be based on a lowered value from this year, e.g. the increase will be this year’s missing increase plus the increase for the first year of the LTP.

· Possible continued impact to Service Delivery into the first year of the next LTP as rate increase are done off a lowered base from the previous year if the missing rates are not included in the Year 1 of the LTP.

· Targeted Rates Reserves will reduce as the reduction of the rates flows into the reserves for future years.

29. Option 3 would require Consultation as the changes to Annual Plan would be classified as significant. This may also result in a concurrent LTP amendment if the Levels of Service are impacted by the changes to the budgets.

30. At the workshop Council asked Officers to investigate the following option (4).

Table / Option 4

Continue with the Proposed Levels of Service (LoS). Update known changes to revenue assumptions, reduce rates income to the same level as 2019/20 and fund the shortfall by borrowing through a resolution of Council.

Pros

Cons

· Simple and clear media reporting of no rates increases

· Allows us to reflect changes to revenue assumptions based on the information we have now

· Community trust / onboard with the Annual plan reflecting the current operating context.

· Levels of services are not impacted as the budgets remain the same.

· Benefit to the community of us continuing with planned programme of work (economic activity etc)

· Consultation on the changes would be required with consideration of how this would be achieved satisfactorily with the Alert Level 4 requirements.

· It is likely the adoption of the Annual Plan by 30 June will not be met and a delay in striking rates will be required.

· The funding requirement to cover the reduction in income will need to be recovered future from rates.

31. High-level analysis of option 4, to date, estimates the shortfall in revenue for the 2020-21 year to be between $6m to $10m.

The Annual Plan and Consultation

32. Online engagement is sensible, but consultation using only the internet is unlikely to be adequate in terms of s.82 of the LGA 02. Councils should provide consultation information in their usual ways except by any means which would breach Covid-19 lockdown rules, or which are no longer available due to external constraints (eg, community newspapers no longer being published/delivered).

33. Councillors should also consider alternatives to the internet, such as:

33.1. using local radio stations to raise awareness and provide information about engagement and participation opportunities

33.2. options for contacting people by telephone and enabling telephone submissions

33.3. household mailouts and/or special deliveries of printed documents under certain circumstances, and

33.4. accepting and processing hard copy submissions by post with reference to advice from health authorities.

34. We note that current advice on essential services published by the Ministry of Business Innovation and Employment advises that “News (including news production) and broadcast media is considered essential. Daily delivery of newspapers is considered essential. Non-daily newspapers for communities that are hard to reach due to physical location and with limited access to digital connectivity, or for non-English language material audiences are considered essential.”

35. Officers consider that the difficulty with Consultation based on the current climate should not be a reason for Council to manufacture an outcome that does not require consultation. Following the assessment of the impact of COVID-19 and to revisit the Annual Plan and update assumptions with the best / latest information, Officers will be in a better position to understand if consultation is required and to develop a plan to ensure that Consultation is completed adequately in terms of s.82 of the Local Government Act.

36. If Consultation is required, then it is likely that adoption of the 2020-21 Annual Plan could be delayed until after 30 June.

Next Steps

37. Officers are assessing the impact of COVID-19 and revisiting the Annual Plan to update assumptions with the best / latest information available to us. Staff will present back the financials to a Council workshop on 29 April, clarify what the revenue shortfall is likely to be and the impact on current Levels of Service.

38. Officers will also provide information on the impact to significant projects with many having been impacted by the current lockdown, for example the LiDAR project where flying has temporarily stopped.

39. Further, analysis on the rating database is being undertaken to explore how to break down the rating database with current information and to be able to assess the impact of the above on a variety of ratepayers.

40. Following this revisit of the Annual Plan, staff will confirm if the revised Annual Plan will require Consultation due to significant or material changes based on the requirements of section 95(2) and (2A) of the LGA.

41. Officers suggest that a ‘package’ of works / initiatives to respond to and address both the immediate effects and the economic recovery to come, are developed as a response to COVID-19, the Drought and any impact of the TB outbreak.

42. The following timeline is indicative only and based on the assumption the Annual Plan will require consultation.

Date	Key deliverable
29 April (Council workshop)	Revised financials presented
20 May	Any new postponement and remission policies adopted (subject to consultation) Supporting Information adopted Consultation Document adopted
25 May	Comms Plan implemented
1 – 22 June	Public consultation undertaken
8 July	Hearings and deliberations
23 July	Revised Annual Plan document completed
29 July	Annual Plan and any new postponement and remission policies adopted

Decision Making Process

43. 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 Hawke’s Bay Regional Council receives and notes the “Annual Plan Update” staff report.

Authored by:

Bronda Smith

Chief Financial Officer

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 22 April 2020

SUBJECT: 22 April 2020 Update on Significant Organisational Activities

Reason for Report

1. The commentary attached provides updates from across the Council, on the status of initiatives and work programmes with new information highlighted in red text.

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 22 April 2020 Update on Significant Organisational Activities.

Authored by:

Drew Broadley

Community Engagement and Communications Manager

Jenny Brown

Principal Business Advisor - RBP

Vicki Butterworth

Cycle Network Coordinator

Desiree Cull

Strategy and Projects Leader

Peter Davis

Manager Environmental Information

Ceri Edmonds

Manager Policy and Planning

Dean Evans

Manager Catchments Delivery

Craig Goodier

Team Leader Engineering

Martina Groves

Manager Regional Projects

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

Martin Moore

Harbourmaster

Thomas Petrie

Project Manager Environmental Hotspots

Brendan Powell

Manager Catchments Policy Implementation

Stacey Rakiraki

Facilities and Fleet Manager

Anne Redgrave

Transport Manager

Helen Shea

Principal Advisor Communications

Andrew Siddles

Acting ICT Manager

Bronda Smith

Chief Financial Officer

Dr Jeff Smith

Manager Scientist

Jolene Townshend

Senior Advisor Integrated Catchment Management

Thomas Wilding

Team Leader Hydrology Hydrogeology

Nick Zaman

Manager Compliance

Leeanne Hooper

Governance Lead

Olivia Giraud-Burrell

Business Analyst

Gill Riley

People and Capability Manager

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Chris Dolley

Group Manager
Asset Management

Liz Lambert

Group Manager Regulation

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

Tom Skerman

Group Manager
Strategic Planning

Iain Maxwell

Group Manager Integrated Catchment Management

Attachment/s

⇩1	Asset Management Significant Activities Update
⇩2	Corporate Services Significant Activities Update
⇩3	Integrated Catchment Management Significant Activities Update
⇩4	Office of the CE & Chair Significant Activities Update
⇩5	Regulation Significant Activities Update
⇩6	Strategic Planning Significant Activities Update