Agenda of Extraordinary Regional Council Meeting

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 13 May 2020

SUBJECT: 13 May 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.

2. In the tables, red text denotes updated information. The exceptions are those tables containing only black text - those having been completely updated.

Decision Making Process

3. 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 13 May 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

Acting Regional Asset Manager

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

Anne Redgrave

Transport Manager

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

Approved by:

Chris Dolley

Group Manager Asset Management

Liz Lambert

Group Manager Regulation

Iain Maxwell

Group Manager Integrated Catchment Management

Tom Skerman

Group Manager Strategic Planning

Attachment/s

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

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 13 May 2020

Subject: Councillor Report-back from External Meetings

Reason for Report

1. This item is in response to Councillor Craig Foss’ request for a minor item “Councilor reporting from external committees” and provides the means for Council to resolve a decision to action that request.

Background /Discussion

2. The following from Cr Foss provides the basis for a Council resolution.

2.1. I propose that we place a standing item on our HBRC meeting agenda inviting councillors to report on any matters arising from their participation on various external forums that they think would be interesting to Council. The purpose is for councillors to inform councillors and the public, and is in addition to any formal reports and updates from staff that we currently receive.

2.2. I do not envisage it will be needed very often, but I believe it is important to have such an avenue in place to help keep everyone informed. For example the recent informal report from Cr. Will Foley regarding a very “robust” TB Free Committee meeting is an excellent example of information that councillors found very useful.

Decision Making Process

3. 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:

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

3.2. The persons affected by this decision are councillors themselves.

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

Recommendations

That Hawke’s Bay Regional Council:

1. Agrees that the decisions to be made are not significant and that Council can exercise its discretion and make decisions on this issue without conferring with persons likely to have an interest in the decision.

2. Agrees to the establishment of a ‘standing information item’ on Regional Council agendas to provide the opportunity for councillors to report on discussions of interest from meetings of Outside Bodies they attend as appointed by Council.

Authored by: Approved by:

Leeanne Hooper

Governance Lead

James Palmer

Chief Executive

Attachment/s

⇩1

Councillor Appointments to Outside Bodies

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 13 May 2020

Subject: Organisational Performance Report for period to 31 March 2020

Reason for Report

1. The purpose of the Organisational Performance Report is to provide the information councillors need as governors to track performance against the level of service measures set in the 2018 Long Term Plan. It provides essential business intelligence and situation-specific factors affecting the organisation’s ability to deliver on what it said it would. It also holds staff to account for non-financial and financial performance and signals through traffic light status reporting issues that may require management intervention.

2. The report is also useful in the preparation for the next long term plan as it familiarises councillors with the current levels of service and how we deliver them. Any significant changes to levels of service require consultation with the community and are typically done during a long term plan. It also useful in the current COVID climate as it points a spotlight on the work we are doing and therefore opportunities to control costs and reprioritise work.

Content of the Report

3. Attached to this paper is the Organisational Performance Report for Quarter 3 of 2019-20. The quarter is the three months from 1 January to 31 March 2020, and contains three parts plus an Executive Summary with highlights and lowlights for the quarter.

3.1. Part 1: Significant Events or Programmes impacting this quarter. These tend to be cross-council so sit outside the groups of activities section.

3.2. Part 2: Business Improvement measures which focus on how well we are performing across a number of corporate-wide measures such as health and safety incidents, and response to customer feedback.

3.3. Part 3: Groups of Activities - Traffic light status and commentary on level of service measures and related 3-digit code workstreams.

Background

4. This is the fifth Organisational Performance Report to be presented. Improvements continue to be made to the content to ensure the information is meaningful and to the process for collating the information to reduce reporting burden.

5. Staff complete their reporting in a software tool called Opal3 once actual financial results for the quarter are loaded on the 20^th of the month following the end of the quarter. Staff choose the status (red, amber, green) of non-financial results but it is fixed against agreed criteria for financial results. For example, red is set at >$30,000 or >10% over or under budget. Staff are then required to provide commentary on what they achieved for the quarter in terms of actual non-financial results against what was planned and to explain the financial result.

6. This is the first time that the financial (as well as non-financial) status reporting at the 3-digit code level has been included in the Organisational Performance Report. Financial information covers operating expenditure such as labour hours and external costs but not capital expenditure. There is a separate report going to the same council meeting with aggregated financial performance and expected full year results.

Change between quarters

7. When the Q2 Organisational Performance Report was presented to council it was noted by one Councillor that it was difficult to see how we are tracking. The following graphs attempt to show the change between quarters. The change in financial workstream status will be reported from next quarter as this was the first time financial data has been included in this report.

Next Steps

8. Further planned improvements to the Organisational Performance Report include setting targets for the business improvements measures and comparisons with industry benchmarks where possible. It is also our goal to fully integrate financial and non-financial reporting into a consolidated report in future quarters.

9. Further training will also be done with staff to improve the 3-digit code so that non-financial reporting describes what has been achieved in the quarter and to adequately explain the financial result, i.e. whether the result is under or over budget for the quarter and the magnitude of the variance.

Decision Making Process

10. 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 “Organisational Performance Report for period to 31 March 2020”.

Authored by:

Desiree Cull

Strategy and Projects Leader

Approved by:

Chris Dolley

Group Manager Asset Management

Jessica Ellerm

Group Manager Corporate Services

Liz Lambert

Group Manager Regulation

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

Ian Macdonald

Group Manager/Controller

Iain Maxwell

Group Manager Integrated Catchment Management

Pieri Munro

Te Pou Whakarae

Tom Skerman

Group Manager Strategic Planning

James Palmer

Chief Executive

Attachment/s

⇩1

Q3 Organisational Performance Report - 1 January to 31 March 2020

Q3 Organisational Performance Report - 1 January to 31 March 2020

Attachment 1

PDF Creator

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 13 May 2020

Subject: Financial Results for the 2019-20 Financial Year, for the Period to 31 March 2020

Reason for Report

1. This item provides Council a financial progress report for the nine months of the 2019-20 financial year to 31 March 2020 and the full year forecast through to 30 June 2020.

Financial Summary

2. The financial results for the period to 31 March 2020 and a forecast through to 30 June 2020 are detailed in the attachment, along with commentary on the high-level variations.

3. The figures include actuals for the 9 months to 31 March 2020 and the budget has been prorated evenly throughout the year for comparison. In summary,

3.1. Operating projects are $2.1m underspent mostly due to underspend by Integrated Catchment Management. All areas have been impacted by unfilled vacancies, additional work required to enable the projects to begin, and most recently, restrictions due to Covid-19

3.2. Capital projects underspent by $1.2m due to a large underspend in Asset Management mainly the Heretaunga Plains project

3.3. Own sourced income is $34.5m unfavourable to budget due to the retention of Port IPO receipts in HBRIC, losses on the managed funds of $4.38m, delayed income from the harvesting of the forestry crops and lower interest rates.

4. The forecast has been prepared by the organisation to forecast the expected actuals through to 30 June, and the results have been compared with the full year budget from the annual plan.

4.1. Operating projects are expected to be approx. $1m underspent

4.2. Capital projects are expected to be underspent by $1.5m due to a large as above

4.3. Own sourced income is expected to be $59m below budget. Of the $59m, $50m is due to the IPO proceeds not being transferred to HBRC (as per LTP budget) as this revenue will remain in HBRIC. The budgeted return from managed fund growth and interest is $7m however this is now forecast as a loss of $4m inclusive of unrealised losses. This will be split for year end between actual interest and dividend income and unrealised losses due to a change in the value of the investments.

4.4. In summary, the overall funding deficit is very hard to predict based on the impacts of COVID and the reconciliation of funding required for year end. The Finance team will provide an update to Council in June of what this may look like from an expected carry forward position and how any resulting general funding deficit may need to be financed.

5. Based on the above, the following could have an overall impact on the year end position.

Revenue

6. For Consents and Compliance, the budget assumes an 80% cost recovery from private benefits (Fees and Charges). While most of the revenue for this group is received at the end of the financial year, indications are that this level of cost recovery will not be met. A more detailed analysis of this has been started to assist with the requirements of the Long Term Plan and any policy changes that may be required

7. The impact of the Covid-19 pandemic on the stock markets is reflected in the recent losses on the managed funds of over $4m. Stock markets have recovered slightly but it is unlikely this situation will be significantly improved by 30 June 2020 and extended periods of lockdowns around the world, business failures and possible world-wide recession may increase the losses.

8. Interest earned is also below budget due to low interest rates.

Operational Expenditure

9. The Covid-19 pandemic response has changed the current working environment, we have not forecast any significant savings arising from staff working remotely (e.g. power for Dalton St) as these will likely be offset by unbudgeted additional costs being incurred such as software licensing and the provision of equipment to enable staff to work from home. Additional costs have also been incurred due to the extended working hours of some staff supporting their colleagues and the community through CDEM.

10. Staff support for the CDEM response and lockdown rules have led to the suspension of some projects but affected staff have been able to progress other work. Staff hours on CDEM support is reducing but this may change at any point if the country reverts to level 4 and the impact of the different levels and the time spent at any level on the demand for welfare support is unknown.

11. The CDEM budget will be overspent and we have estimated $600k per month cost increases due to staff time and welfare costs though an estimated 50% of those costs should be refundable by the government.

12. The delays to projects will likely result in multiple requests for carry forwards into 20/21. Indications at this stage are that both ICM and Strategic Planning will each be requesting $1m to carry forward but due to the uncertainties noted above this will not become clear until later and further details will be provided to council in August.

Capital Expenditure

13. In general, capital expenditure has been significantly affected with projects delayed due to extended planning requirements, consultations, Covid-19, and difficulties recruiting skilled staff. Several projects with PGF funding have been deferred to the new financial year but the funding has been retained while several shovel ready projects have been put forward to the government.

14. For Asset Management, the Heretaunga Plains Flood Control Capital programme will be underspent as previously reported, while the modelling and concept development is being undertaken over the next 12 months. ($1.2m).

15. A similar situation with carry forwards will occur for capital expenditure included in this years’ budget. Indicative projects looking to carry forward to 20/21 include ICM (SkyTEM, Lidar, Environment enhancement projects), Strategic Planning (OWB), Asset Management (Hawea Park construction, Clive River dredging) with forecast carry forward amounts being at least $3m. Due to the uncertainties noted above the actual amounts will not become clear until later and further details will be provided to council in August.

Summary

16. Overall, we are expecting there to be variances against full year budgets. The overall funding deficit is very hard to predict based on the impacts of COVID and the reconciliation of funding required during the year end process. The Finance team will provide an update to Council in June of what this may look like from an expected carry forward position and how any resulting general funding deficit may need to be financed.

17. Any carry forwards will be additional to the 2020/21 Annual Plan budgets and will not impact the Annual Plan process currently underway. Any carry forwards will be considered based on the ability to deliver in addition to the Annual Plan.

Decision Making Process

18. 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 “Financial Results for the 2019-20 Financial Year, for the Period to 31 March 2020” staff report.

Authored by:

Tim Chaplin

Senior Group Accountant

Bronda Smith

Chief Financial Officer

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

James Palmer

Chief Executive

Attachment/s

⇩1

Financials for Period to 31 March 2020

Financials for Period to 31 March 2020

Attachment 1

SECTION A

An overall summary for the organisation has been included in the accompany report. Further details on a group basis are provided below.

Management Comments on Operating Statement
Activity	Management Comment (major variances)
Operational
Strategic Planning	Delays to TANK notification has resulted in the budget being off-track, associated costs (communications, IT, staff input etc) will be pushed into Q4 or later. Hearings have also been delayed in TANK (RPC decision making and Covid-19) and OWB (6-month consultation) resulting in significant budgeted costs being deferred to the future. Covid-19 also prevented the consultants from completing their work. Staff have been diverted for CDEM response. Budget will be underspent and likely to require carry forward. The uncertainty arising from the timing of the Environment Court Hearings for the Ngaruroro Water Conservation Order continues to overshadow the RMA policy and planning budget, with post-covid hearings now likely to commence in July 2020. Covid-19 has had an impact on the RCEP effectiveness review as has internal staff resourcing. This project will be underspent at the end of the financial year, it is envisaged that this could be as much as 70% as the project has not been able to proceed as anticipated.
Asset Management	Revenue is under budget as we are no longer consulting to Gisborne DC and changes in work prioritisation. Expenditure is down due to delays caused by maintenance deferment due to COVID-19, contingency sums for responding to flood events not been fully utilised due to the low number of events, staff turnover and long-term vacancies, and profiling of some items such as energy, insurance and internal charges.
Integrated Catchment Management	$1.4m favourable variance YTD due to receipt of unbudgeted external funding received for LiDAR mapping and SkyTEM (capital funding) which will be carried forward to fund the remainder of the projects. Expenditure on ICM activities are mostly on track, with exception of some biosecurity contracts needing to be delayed due to Covid-19 impacts (e.g. Old Man’s Beard contract- $25k). Community engagement challenges are also driving delays in Environment Enhancement Projects (Tutira, Whatuma and Whakaki lakes), with underspends expected for these projects by year end (carry forward requests likely).
Consents & Compliance	Compliance programme income is behind budget YTD and is expected to be lower than budgeted for the full financial year, as cost recovery at 80% is not able to be achieved with the current fees and charges structure. A review is in progress on the fees and charges in preparation for the long-term plan. Covid-19 impacts will also contribute to reduced consent and compliance recoveries.
Emergency Management	To date, CDEM was behind on expenditure due to staffing issues and invoicing for costs for ECLAB. Covid-19 has significantly changed the forecast with most other work suspended, and staff focused on the response. We anticipate expenditure of $600k per month in the final quarter with an expectation that 50% will be refundable from the Government.
Transport	Transport results are partly a function of reduced public transport patronage and mostly a function of increased cost pressures under the GoBus contract - indexing cost rises and specific costs related to ERA changes for bus drivers as a result of the new driver break legislation. Regional Road Safety also has approx. $100K of revenue to be recognised for November and December. Minimal financial impact from Covid-19 due to NZTA covering fee revenue shortfalls for months of April to June.
Governance & Partnerships	Some minor delays/cancellations of planned work (e.g. Enviroschools) due to Covid-19.
Capital
Asset Management	Major capital projects are under budget due to planning constraints and delays. The main capital item underspent is for the Heretaunga Plains Flood Control Scheme where considerable project planning, modelling and concept development has been required which has deferred construction and reduced planned expenditure for the year. Dredging of the Clive river has been deferred to complete community consultation and meet Council’s preference for land-based disposal leading to an anticipated $660k underspend this year with overall increased costs in 20/21. Construction on Hawea park is delayed due to COVID-19 and expected to carry over to the 20/21 financial year.
Integrated Catchment Management	Sustainable Homes is above budget due to the increased uptake however loan funding has not been drawn down. See further comments above.
Governance & Partnerships	This is on track and regional infrastructure loan repayments and will be met from reserves.
Regional Income	The planned harvesting of forestry crops has been delayed by one to two years due to adjustments in the world market pre and post Covmid-19.
Regional Income
Investment Company	Returns from the Port IPO have been received with $63m being invested by HBRIC in managed funds pending a determination by IRD on the taxable nature of returning these funds to HBRC. Alternative plans are being executed to transfer those managed funds back to HBRC but not as revenue.
Other Investments	The income from the forestry estate has been delayed due to market conditions for one to 2 years. Interest on liquid funds has been reduced due to the very low interest rates and the reduced amount of cash held by the Council. The expected returns from the managed funds has been significantly impacted due to the COVID-19 affect on world stock markets.

Scheme Reserves

Management Comments on Scheme Balances

Note Ref

Activity

Variation from

Reforecast $’000

(F) or (U)

Management Comment (major variances)

Sustainable Homes

$2,203 (U)

Sustainable Homes loan funding is yet to be raised.

SECTION B

Management Comments on Balance Sheet Movements
Note Ref	Activity	Management Comment (major variances)
1	Property, Plant and Equipment	Property, plant and equipment have increased by $2.728m due to the budgeted capital purchasing programme offset by depreciation.
2	Infrastructure Assets	Infrastructure assets have increased by $1.691m since the beginning of the year reflecting capital expenses made for the maintenance and improvement of infrastructure assets offset by depreciation.
3	Investment Property	Investment property has decreased by $1.512m reflecting the disposal of leasehold and properties to the leaseholders.
4	Intangible Assets	Intangible assets have decreased by $743,000 due to the amortisation on existing assets.
5	Financial Assets	Total cash, cash equivalents and financial assets have increased by $34m since the beginning of the year with the expenditure of operating cash being offset by the receipts from HBRIC of $43m from the IPO. Cash has reduced by $10m with the bulk of liquid assets now being invested in managed funds.
6	Sustainable Homes	Advances to Home Owners through the sustainable homes programme have increased by $945,000 reflecting the increased up-take from the public since the beginning of the year offset by repayments of existing clean heat loans.
7	Forestry Assets	Forestry Assets have increased by $209,000 reflecting the capital spending on the harvest road and bridge for Tutira.
8	Accounts Receivable	Accounts Receivable have decreased by $2.45m since the beginning of the year reflecting the payment of rates invoices that were sent out in September and are due at the end of January.
9	Loan to HBRIC Limited	Council approved a loan facility for HBRIC Ltd of which $6.5m had been drawn down but was repaid in September.
10	Accrued Income, Prepayments and Work in Progress	Accrued Income has decreased by $2.67m reflecting a decrease in accruals, prepayments and work in progress provisions compared to year end.
11	Borrowings	Borrowings have decreased by $2.885m, being the repayments made for the year to date. 2019/20 borrowings as per the annual plan will occur later in this year.
12	Employee Entitlements	Employee Entitlements have decreased by $8,000 overall due to provisions for outstanding annual leave balances, sick and long service leave being used during the year. This is recalculated in December and June.
13	Accounts Payable	Accounts payable have decreased by $7.32m. This is due to the $3.9m payable to ACC for annuity costs and $2.8m in trade payables.
14	Accrued Expenses	Accrued expenses have decreased by $23,000 compared to last year due to the reversal of accruals from year end. Further adjustments to be made following the receipt of election costs and planned audit costs.
15	Deposits and Retentions	Income in advance has increased $4.5m since the end of last year due to rates income received in advance and is decreasing through the year as rates income is recognised.

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