Agenda of Corporate and Strategic Committee

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: Establishment of Investment Company

Reason for Report

1. At its meeting on 14 September 2011, the Corporate and Strategic Committee considered a paper on the Investment Company Board Structure and Composition.

2. That paper reviewed options for governance and management of the investment company and recommended the Council adopt a staged process of governance, beginning with a three person Establishment Board, moving to full Board in December 2012, and the appointment of the Chief Executive of the Council as a member of the Establishment Board and the company’s Managing Director.

3. The Committee resolved this paper should “lie on the table” and asked for a revised paper providing more information on:

3.1. Size of the proposed Transition Board of the Company, its composition, the process of selecting suitable candidates for appointment to it and the eligibility of directors of the Transition Board for selection and appointment to the Full Board at the end of the transition period in December 2012.

3.2. Position of the Chief Executive of the Council as Managing Director of the Investment Company and whether a succession plan for this position is required at this stage of the investment company’s establishment.

3.3. Managing conflicts of interest involving councillor and council officer (i.e. Chief Executive as Managing Director) directors of the investment company

3.4. Council’s control of the investment company through its Statement of Shareholder Objectives and the company’s Statement of Corporate Intent.

3.5. Anticipated shape and scale of the Investment Company at the end of the proposed transition period in December 2012, and indications of its development beyond that date.

4. This report therefore addresses these issues and replaces the 14 September paper to the Corporate and Strategic Committee (Attachment 1) now “lying on the table”.

Transition Board

Size and Composition of the Board

5. On further discussion with the Chairman covering the most appropriate number of members on the Transition Board, it is now proposed to increase this to six to reflect Council’s position as sole shareholder of the investment company. These six members being:

5.1.1. Two Councillor directors.

5.1.2. The Council’s Chief Executive Officer, ex officio as Managing Director of the investment company.

5.1.3. Three independent persons having the appropriate skills and experience to act as non-executive directors of an investment company.

Directors Fees and Expenses

6. Independent members of the Transition Board will be paid per diem rates (to be determined) for attendance at Board Meetings and other Board approved activities requiring directors attendance.

7. Councillor and council officer-directors will receive no fee for their role as members of the Board of the investment company.

8. All directors will be reimbursed actual incidental expenses of attending to the business of the investment company.

Selection and Appointment of Directors

9. The appointment of Councillors as directors of the Transition Board will be made by Council from amongst those councillors putting their names forward for consideration.

10. The appointment of the Council’s Chief Executive Officer ex officio as a member of the Transition Board and Managing Director will be made by Council.

11. The independent members proposed to join the Transition Board will be identified by the Chairman of the Council and nominated for consideration by Council.

12. All appointments are subject to the approval of the Council.

13. The Transition Board will be replaced by a Full Board in December 2012 (director recruitment being run in parallel with the Port of Napier Limited director recruitment) or the tenure of the existing Board may be continued for a further period.

14. If the decision is made that the move to a full Board is to be December 2012, then recruitment, selection and appointment of the members could be completed on the following basis:

14.1. If possible the selection process for the Full Board of the investment company will be undertaken in parallel with the selection process for replacement members of the Port of Napier Limited to achieve best fit of candidates to the two Boards, efficiency of process by avoiding duplication and containing costs.

14.2. The selection process for independent directors (i.e. people other than councillors or council officers appointed to the Board of the investment company) will include the following steps:

14.2.1. Advertising for persons interested in being directors of the company.

14.2.2. Receiving applications.

14.2.3. Obtaining independent specialist advice to develop a shortlist of applicants for consideration by the Council.

14.2.4. Final selection and appointment by the Council as shareholder of the investment company.

15. Existing independent members of the Transition Board will be eligible to submit their names for consideration to become ongoing members of the Full Board, and will be considered for appointment alongside, and in the same way, as for all other applicants for the positions of independent directors.

Functions of the Transition Board

16. The Transition Board will be responsible during the transition period for:

16.1. Recommend an appropriate Board structure to Council to govern the investment company, direct its affairs and protect its interests over the long term.

16.2. Governing and directing its affairs until the appointment of the Full Board, including:

16.2.1. Receiving and affirming the Council’s Statement of Objectives as the company’s fundamental objectives.

16.2.2. Receiving transferred assets.

16.2.3. Developing its strategic plan.

16.2.4. Submitting and agreeing a Statement of Corporate Intent with the Council.

16.2.5. Firming up prospective investments proposed in Waterco and PONL initiatives and seeking funding for investment from the Council and other appropriate parties (if any).

16.2.6. Identifying and evaluating other potential investment projects that may have significant value, and where appropriate, submitting them to Council and requesting funding assistance.

16.2.7. Finalising administration arrangements with the Council.

Managing Director

17. Options for the appointment of a Chief Executive of the investment company include:

17.1. Appointing an independent person as Chief Executive to operate the company as an entirely separate business unit. This approach has been adopted for the much larger Council owned investment companies (eg, CCHL and ACIL) at a much later stage of their development than is the case for the Hawke’s Bay Regional Investment Company.

17.2. Appointing the Council’s Chief Executive Officer as Chief Executive of the investment company.

17.3. Contracting an external service provider (eg, an investment funds manager) to manage the investment company.

18. Appointing the Council’s Chief Executive Officer ex officio as Chief Executive Officer and Managing Director of the investment company will:

18.1. In effect continue his existing direct responsibility for managing the Council’s whole investment portfolio;

18.2. Ensure his experience and skills are directly available to the company as it grows in response to Council’s implementation of an active investment policy (as decided by Council and adopted in Section 6 of the investment policy in the 2009-2019 Ten Year Plan)

18.3. Help maintain close Council management control of the company during its early development stages and best establish the ongoing alignment of the company’s investment activities with the Council’s investment and strategic development goals and objectives; and,

18.4. Ensure continuity and consistency of current management oversight of the investment portfolio, which is important at a time when the Council is considering major new investments such as the Ruataniwha Plains Water Harvesting scheme.

19. Council will continue to have full access to the advice from its Chief Executive on investment issues in this situation, supported by advice from:

19.1. Other Council officers.

19.2. Independent external advisers.

19.3. The independent directors of the investment company.

20. This appointment would continue irrespective of the person doing the job of the Council’s Chief Executive Officer as an ex officio position, which means succession is determined by the Council at all times.

21. As noted in the Investment Company Proposal report to Council dated 29 June 2011, it will have its own operational and strategic management capability supported by appropriate accounting, audit, taxation and secretarial services in addition to governance provided by a Board of Directors. While the Managing Director will be responsible for these tasks, the operating budget for the investment company includes funding to obtain external resources to undertake the additional work involved, so that he can continue to focus on the strategic issues of implementing an active investment policy.

Managing Conflicts of Interest

22. All directors will be required on appointment to identify and inform the investment company of all the other situations where they hold appointments as a director, officer, shareholder or trustee of a limited liability company (public and private), joint venture, limited partnership, public trust or other corporate entity or trust. The investment company will hold this information in a Register of Interests and will publish it in its Annual Report. All directors will be responsible for updating this information as it changes from time to time.

23. Councillor and Council officer directors having conflicts of interest in the investment company will be subject to the following regime:

23.1. They must identify their conflict and declare it to fellow Board members.

23.2. They may speak to issues where a conflict of interest arises, having previously declared their conflict, but they may not vote on them.

23.3. All conflicts of interest shall be reported to the Council when it is considering reports or proposals from the investment company.

24. In addition, Council will seek its own independent assessment or peer review of all investment proposals put forward by the investment company.

25. The Statement of Objectives, having been determined by the Council itself, should avoid any conflict of interest by the investment company’s Managing Director with the Council’s core requirements.

Council’s Control of the Investment Company

26. The Council will control of the investment company is founded upon its ability to appoint and remove directors from the Board of the investment company, Council’s Statement of Objectives for the company, the company’s agreed Statement of Corporate Intent and its Constitution. The features of these three documents are summarised in 26-29 below.

Statement of Objectives

27. In order to ensure the investment company clearly understands the Council’s expectations as its shareholder, the Council will detail its objectives for the company to its Board and management from time to time. The first Statement of Objectives will be provided to the Transition Board at its first meeting, and will, amongst other things, stipulate:

27.1. Council’s targets for returns on total assets, and on shareholders’ funds, debt/equity ratio, interest cover ratio, and funding limitations;

27.2. Dividend policies to be adopted; and,

27.3. Requirements to support Council’s strategic investment priorities.

28. An initial draft Statement of Objectives is attached to this paper as Attachment 2. Please note that the dividend payments included in this draft Statement have been taken from projected dividend payments provided by the Port of Napier Limited to Council in February 2011. A request has been made of the Port to update their profit and dividend projections for inclusion in Council’s LTP 2012-22. When these projections have been received, the figures and the draft Statement of Objectives will be amended.

Statement of Corporate Intent

29. The investment company will negotiate a Statement of Corporate Intent with the Council to meet the requirements of the Council’s Statement of Objectives. The Statement of Corporate Intent will detail, amongst other things, its:

29.1. Mission, vision and objectives.

29.2. Nature and scope of its activities and powers to invest.

29.3. Performance targets.

29.4. Strategic plan.

29.5. Governance and management structure.

29.6. Reporting obligations.

Company Constitution

30. The founding principles of the investment company’s constitution will be contained in provisions:

30.1. Directing the nature and scope of the investment activities of the company.

30.2. Determining the size of the Board, specifying number of directors and the terms and conditions of their appointment.

30.3. Requiring the preparation of Statements of Intent in accordance with the requirements of Local Government Act 2002 each of which will specify the company’s obligations to report to Council amongst other matters.

30.4. Incorporating Council’s requirements that its investments and investment income are to be used for regional council purposes. Words approved by Council in 2010 to reflect this were:

“All investments and use all income derived from these investments, for Regional Council purposes and functions as defined in statute, that is, they must generate financial and economic and, where appropriate, environmental, social and cultural benefits for the Hawke’s Bay Region.”

31. The Company Constitution is presently being developed by Council’s lawyers, however the Constitution can only be completed for submitting to Council for approval when Council has approved the governance process.

Development of the Investment Company

32. The company’s initial investment - $120.5 million. Council’s existing shareholding in Port of Napier will be transferred to the investment company at valuation, currently around $120.5 million.

33. By December 2012 - $130-$135 million. It is anticipated the company will hold two major investments by then – the Port of Napier Limited and, subject to Council decisions to proceed with investment in the Ruataniwha Plains Water Harvesting Scheme, Waterco, the company to be formed for this investment. Assuming Waterco is in the process of securing consents required under the RMA, but has not commenced construction of works for the scheme by December 2012; total asset values in the investment company could be around $130-$135 million. The increase in value reflects the proposal that Waterco purchase from the Council, the accrued costs of the feasibility study for the Ruataniwha Plains Water Harvesting Scheme, and costs that will have been incurred by Waterco to fund the RMA process covering that scheme.

34. Beyond 2012 - $160+ million. Further investments are likely to be made as part of the development of Port of Napier Limited and investment in Waterco will expand as expenditure on construction of the dams and reservoirs proceeds. The investment company is also likely to be called on to invest in other regional development projects. By 2015 total investments managed by the investment company could be of the order of $160+ million.

Transfer of Assets

35. The investment company is intended to hold corporate investments involving actual or potential private sector participation to enable achievement of improved financial returns from this part of the investment portfolio compared with the returns currently achieved from these investments.

36. The structure is intended to facilitate investment in commercially sound regional infrastructure projects using both the Council’s investible resources and increasing the quantum of capital available for Council investments by attracting private sector investment in them, whether by way of partnering in direct ownership (equity) of assets or providing debt to the investment company.

37. This structure will enable the Council to “leverage” its own investment through effective partnerships with the private sector and cost effective access to debt to improve returns on its own investment beyond what it currently achieves.

38. Initially this means PONL and Waterco will be transferred to the investment company because they fit its purpose and structure, they are foundations of the Council’s infrastructure investment, have potential to leverage the Council’s investments in conjunction with other government and private sector entities and improve tax efficiency across the investment portfolio.

39. Table 1 below summarises the assets proposed to be transferred upon commencement of business by the investment company.

Table 1: Assets Proposed to be Transferred to the Investment Company

Source: Hawke’s Bay Regional Council, October 2011

40. On the other hand although Council’s wastewater assets (such as those at Mahia and Waipukurau) or open space assets (such as Tutira and Waihapua), potentially could generate future investment returns from sale of carbon credits or forestry as well as fulfil conservation and recreation functions will not be transferred to the investment company because any future financial returns would be taxable if received through an investment company structure, but not taxable if received directly by the Council.

41. Future forest assets that are proposed on high country sites within the region with the intention of stabilising exposed hill country sites and yielding a return to Council through the sale of carbon credits are proposed to be not included in Council assets to be transferred to the investment company because doing so would result in making their future profits taxable on the investment company and consequently taxable to the Council. However no tax would be payable on profits if the assets remain directly owned by the Council.

42. This proposed course of action has been recommended by PricewaterhouseCoopers who have stated in their opinion that:

42.1. Any profit from sell down of the forest assets by the investment holding company would ultimately be taxable in the Council’s hands.

42.2. Any income from sale of carbon credits or trees would also be taxable in the Council’s hands if received through the investment company.

42.3. Whilst operating losses may arise initially and during the early stages of the investment that could be offset against other group profits to reduce tax payable by the investment company at that time, when the asset is eventually sold these tax offsets would be reversed and tax would then become payable by the investment company. The net potential gain from deferring tax in this way is likely to be small and not sufficient to offset taxes payable on income and sale proceeds if the investments are held in the investment company.

43. Although current and future forestry assets are not to intended be transferred to the investment company now, this situation could change in the future if, for example, joint ownership with private sector partners proved commercially attractive. This could mean the Council would reconsider the structure of forestry investment from time to time.

44. Even if the investment company has no direct ownership of forestry assets, the knowledge and commercial acumen resting in the members of its Board and management will be available to the Council’s forestry management team in an advisory capacity as required.

45. Current assets to be transferred to the investment company will be transferred on the date of transfer at valuations proposed to made on the following basis:

45.1. For the Port of Napier Limited shareholding, at the value recorded in the financial statements of the Hawke’s Bay Regional Council as at 30 June 2011, unless the shareholding is revalued in accordance with Council policy or directives between 30 June 2011 and the date of transfer, in which case the transfer will be made at the then revalued figure.

45.2. For Waterco, at the value equal to its net shareholder’s funds as at the date of transfer. This value will include the price paid for feasibility study assets purchased by Waterco from the Council as at the date of transfer.

45.3. For any other development asset selected to be transferred subsequent to this report, at a value equal to the accumulated net expenditure to the date of transfer incurred by the Council.

46. Table 1 above shows the current values of the assets proposed to be transferred ($120.540 million) as recorded in the Council’s financial statements as at 30 June 2011. However, actual valuations on transfer may differ from these figures.

47. Final valuations of assets to be transferred to the company will be determined as at the actual date of transfer.

Next Steps

Indicative Timetable

Date	Item
23 November 2011	Council to ratify appointments of Councillor and independent directors.
14 December 2011	Council to formally adopt the Company Constitution, Statement of Objectives and Transfer of Assets.
Date to be set	Inaugural meeting of the Investment Company Board.

48. Subsequent to its formation, the investment company will develop and submit a Statement of Corporate Intent to the Council in accordance with the terms of the Council’s Statement of Objectives.

Decision Making Process

49. Council completed a special consultative process on the proposal to consider establishment of an investment company. The consultation process was undertaken during April and May 2011.

Recommendations

The Corporate and Strategic Committee:

1. Notes that a special consultative process was undertaken during April and May 2011 on the proposal to establish an investment company.

2. Receives the paper dated 14 September 2011 to the Corporate and Strategic Committee entitled “Investment Company Board Structure and Composition” (Attachment 1), and accepts that this paper replaces it.

The Corporate and Strategic Committee recommends that Council:

3. Approves the adoption of a staged process for governance of the investment company, initially appointing six persons to a Transition Board.

4. Approves the appointment of two councillors as members of the Transition Board of the investment company, and those Councillors to be appointed be ratified at the Regional Council meeting on 23 November 2011.

5. Approves the appointment of the Chief Executive of the Council as an ex officio member of the Transition Board of the investment company and its Chief Executive Officer and Managing Director, to be ratified at the Council Meeting on 23 November 2011.

6. Agrees to appoint three further independent persons who have appropriate skills and experience as members of the Transition Board of the investment company; such persons to be identified and nominated by the Chairman of the Council for approval or otherwise at the Regional Council meeting on 23 November 2011.

7. Notes that a paper to finalise matters covering investment company establishment, including the Council’s Statement of Objectives, the company’s Constitution and the transfer of assets will be submitted to the Council meeting on 14 December 2011 for adoption.

Paul Drury

Group Manager Corporate Services

Andrew Newman

Chief Executive

Attachment/s

1 View	Corporate & Strategic - Investment Company Paper - 14 September 2011
2 View	Draft Statement of Objectives for the Investment Company

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: Māori Constituencies

Reason for Report

1. Under Section S19Z of the Local Electoral Act 2001 the Regional Council may resolve that the Region be divided into 1 or more Māori constituencies for electoral purposes. If it wishes to do so for the 2013 Local Body Elections it must pass a resolution to that effect by 23 November 2011. That resolution must then be publicly notified by 30 November 2011, and indicate that a poll is required to countermand the resolution.

2. This paper provides background on the issue in order for Council to then make a decision on the matter.

Background

3. The establishment of Māori Constituencies was last considered by Council in 2005 when, based on the Māori Committee recommendation to Council that it did not support the establishment of a Māori Constituency, the Council at the time decided not to make a decision either way (i.e. to maintain the status quo). The resolutions were “that Council:

3.1. Exercises its discretion under Section 79(1)(a) and 82(3) of the Act, and makes a decision on this issue having conferred directly with the Māori Committee and others and also due to the option available to the public to demand a poll under the Local Electoral Act should they choose to do so and can obtain the necessary number of signatures (5% of the electors).

3.2. Makes no decision on this matter and therefore by default allows the provisions contained in Section 19ZB (Electors may demand poll) to determine whether or not 1 or more Māori Constituencies will be established in the Hawke's Bay Region.

3.3. Publicly notifies the electors of the Region of their rights to demand a poll as provided for under Section 19ZB of the Local Electoral Act 2001.”

4. The possible establishment of Māori constituencies has been raised on a number of occasions over the years but no decision has been taken on the issue and no demand for a poll of electors has been received.

5. Apart from Environment Bay of Plenty, where the provision of Māori constituencies was specifically legislated for in 2001 (the Bay of Plenty Regional Council [Maori Constituency Empowering] Act 2001), the only other Council that has voted (27 October 2011) to establish separate Māori constituencies to date is Waikato Regional Council. A number of Council’s have considered the option and some have run polls on the question. The results of those polls have, on all occasions, been opposed to their establishment.

Options Available for the Establishment of Māori Constituencies

6. The decision to establish Māori constituencies can be initiated in two ways:

6.1. a local authority can resolve that its district be divided into one or more Maori constituencies for electoral purposes; or

6.2. a poll of electors of the local authority can be held to decide the issue.

7. A poll can arise from either:

7.1. a public demand (i.e. 5% of the number of electors enrolled as eligible to vote at the previous triennial election); or

7.2. a Council decision.

8. If the decision is taken to establish such constituencies there is a tight legislative process and timeframe that must be followed.

9. If a valid demand is received the Council must hold a poll. The result of any poll held either as a result of an electors’ demand or a Council decision, is binding for at least the next two triennial elections and any associated elections (i.e. by-elections) and continues in effect until a further resolution or poll of electors takes effect.

10. If the decision is taken to establish Māori constituencies, either by a Council resolution or as the result of a poll, the Council is required to undertake a full representation review of its membership before the year in which the triennial election is to be held. The decision to establish separate Māori constituencies must be built into the Council’s initial representation review proposal which is then open to the normal representation review consultation process as set out in the LEA.

Establishment of Māori Constituencies by Council Resolution

11. A local authority may resolve to establish one or more Māori constituencies for electoral purposes at any time. However the timing of that resolution determines when the decision comes into effect.

12. If the resolution is made after a triennial election, and no later than 23 November of the year that is two years before the next triennial election, the resolution takes effect, unless the result of any subsequent poll that may be demanded countermands that decision, for the next triennial election.

13. That means that if the decision to establish Māori constituencies is made by 23 November 2011 and that decision is not countermanded by any poll of electors that might be successfully demanded (before 28 February 2012), Māori constituencies would be in place for at least the 2013 and 2016 local elections.

14. Any decision to establish Māori constituencies would need to be included in the Council’s initial proposal as part of the representation review it is required to undertake in 2012, in preparation for the 2013 triennial elections.

15. If the resolution is made after 23 November 2011 (and before 23 November 2014), and the result of any poll that may be held does not countermand that decision, the resolution will take effect at least for the 2016 and 2019 triennial general elections. A further representation review would also be required in 2014/2015 if that were the case.

16. If the Council resolves to establish Māori constituencies it is required to give public notice (within seven days of its decision) of the right of electors, who may be opposed to the Council’s decision, to demand that a poll be held on the issue.

Demand for Poll by Electors

17. Five percent of the electors of Hawke’s Bay may, at any time, demand that a poll be held to determine whether the region should be divided into one or more Māori constituencies. The requirement that five percent of the people on the general roll are needed to demand that a poll be taken ensures that Māori representation on councils is determined by the whole community.

18. If a valid demand is received before 28 February in the year before the next triennial election, the poll must be held within 82 days of notice having been given to the Electoral Officer that a poll is required. If the poll is held before 21 May in the year before the next triennial election, the result of the poll takes effect at that election.

19. If a valid demand is received after 28 February in the year before the next triennial election, the poll required by the demand must be held after 21 May in that year. The result of a poll held under these circumstances does not take effect until the next (2016) triennial election.

20. If a valid demand is received a poll must be held in accordance with the provisions of the Local Electoral Act 2001.

21. A valid demand in Hawke’s Bay’s case would require the signatures of 7740 eligible electors (i.e. 5% of 154,800).

Council Decision to Hold a Poll

22. The Council may, at any time, resolve to hold a poll on whether the region should be divided into one or more Māori constituencies. Any poll must be held within 82 days of the Electoral Officer receiving notice that a poll is required.

23. As outlined in the previous section, if the decision to hold a poll is made before 28 February 2012 the poll must be held before 21 May 2012 and the result of the poll will take effect from the 2013 election.

24. If however the decision is made after 28 February 2012 (and before 28 February 2014) the result of the poll will not take effect until the 2016 election.

Effect of polls

25. If the result of any poll held before 21 May 2012 requires the division of the region into one or more Māori constituencies, those constituencies must be retained:

25.1. for the next two triennial elections (i.e. 2013 and 2016) and any associated elections; and

25.2. for all subsequent triennial elections and by-elections until a further Council resolution or poll takes effect, whichever occurs first.

26. If the result of any poll held after 21 May 2012 requires the division of the region into one or more Māori constituencies, those constituencies must be retained:

26.1. for the 2016 and 2019 triennial elections and any associated election, and

26.2. for all subsequent triennial elections and by-elections until a further Council resolution or poll takes effect, whichever occurs first.

27. If the result of the poll is against the establishment of Māori constituencies, that decision (i.e. that the region not be divided into Māori constituencies for electoral purposes) must also stand for at least the two subsequent triennial general elections.

Cost of Holding a Poll

28. The cost of running a poll would be in the vicinity of $100,000 and no provision has been made for this expenditure.

Timeframes

29. Any decision/demand to establish Māori constituencies in time for the 2013 election must be made within the following timeframes:

29.1. Council resolution - prior to 23 November 2011

29.2. Council decision to hold a poll – by 28 February 2012

29.3. Demand for a poll from electors – by 28 February 2012

30. If the decision is made to establish Māori constituencies, either by resolution or as a result of a poll, Council is required to carry out a review of its representation arrangements in accordance with Schedule 1A to the Local Electoral Act (i.e. it is not possible to establish Māori constituencies without also carrying out a full representation review).

31. There is no specific deadline for Council to agree its initial representation review proposal except that its decision must be made by 31 August 2012 where Māori constituencies are to be established. The decision must, in any event, be made in time to meet the deadline for giving public notice of its proposal (i.e. within 14 days of Council’s resolution and not later than 8 September 2012).

The Hawke’s Bay Perspective

32. The decision by the Māori Committee in 2005, to recommend that Council not establish Māori Constituencies, resulted from feedback from two hui and further discussion by each of the groups represented at the Committee.

33. While there was broad agreement with direct Māori involvement in Council decision making, there were issues that made support of the establishment of a Maori Constituency difficult to agree to.

34. One of the main reasons the Māori Committee is against the establishment of Māori constituencies in the region is the possibility that non tangata whenua could be elected, thereby denying tangata whenua direct input into decision-making on issues directly affecting them. This is in particular reference to the role of the Regional Council in dealing with natural resource issues.

35. There was also concern that the Māori Committee would not continue if constituencies were established. It was strongly felt that the representation model used to form the Māori Committee was more likely to achieve a broad support and voice for Māori notwithstanding the limited input into decision-making by this model, and also that the relationship established over a number of years was valuable to both parties and had been effective and so should be retained.

36. These issues are likely to still be relevant for the present Committee and may be even more relevant with the establishment of the Regional Planning Committee with Treaty settlement groups.

37. At its meeting on 20 September 2011, the Māori Committee recommended that:

37.1. Council agrees not to promote or support the establishment of a Māori Constituency for the 2013 local authority elections.

Summary and Conclusions

38. This report sets out the procedures and timeframes that must be complied with when establishing Māori constituencies and the end results if the decision is taken to proceed with their establishment.

39. A summary of these key actions and dates is:

Option	Requirements	Critical date(s)	Clause
Council resolves to establish Māori Constituencies	Must be resolved by 23 November 2011 Must publicly notify decision and that decision can be countermanded by a poll decision If poll is required and demanded before 28 February 2012, then poll must be held before 21 May 2012	23 November 2011 30 November 2011 21 May 2012	Section 19Z Local Electoral Act 2001 Section 19ZA Section 19ZB Section 19ZC
Council resolves to hold a poll on the issue of establishing Māori Constituencies	If held before 21 May 2012 then simple majority result stands for two elections	21 May 2012	Section 19ZD Section 19ZF
The Public demands a poll to decide whether to have Māori Constituencies	Must be submitted by at least 5% of the number of electors enrolled as eligible to vote at previous general election of the local authority To affect the 2013 elections, must be demanded by 28 February 2012 and completed by 21 May 2012	28 February 2012 21 May 2012	Sections 19ZB & 19ZC
Council resolves not to establish Māori Constituencies	Could still be required if a poll was demanded and the outcome supported it	Poll demanded by 28 February 2012 and completed by 21 May 2012	Sections 19ZB & 19ZC

Decision Making Process

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

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

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

40.3. The decision does not fall within the definition of Council’s policy on significance, hence Council’s inclusion of Council’s Māori Committee in the decision making process on this issue.

40.4. The persons affected by this decision are the electors within the region. The Local Electoral Act (2001) gives the community an opportunity to input into this decision making process through the option of demanding a poll.

40.5. Options that have been considered are detailed in the text of this paper.

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

40.7. 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

The Corporate and Strategic Committee recommends that Council:

1. Exercises its discretion under Section 79(1)(a) and 82(3) of the Act, and makes a decision on this issue having conferred directly with the Māori Committee and also due to the option available to the public to demand a poll under the Local Electoral Act should they choose to do so and can obtain the necessary number of signatures (5% of the electors).

Either

2. Resolves to not establish Māori Constituencies, effectively maintaining the status quo, for the 2013 Local Body Elections.

Or Resolves to establish 1 or more Māori Constituencies for the 2013 Local Body Elections.

Or Resolves to hold a public poll at the earliest opportunity on whether 1 or more Māori constituencies should be established in the Hawke's Bay Region for the next triennial local body election in 2013.

3. Instructs staff to publicly notify the electors of the Region of Council’s resolution (above).

Leeanne Hooper

Governance & Corporate Administration Manager

Paul Drury

Group Manager Corporate Services

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: Local Government Funding Agency

Reason for Report

1. To provide background information on the proposed Local Government Funding Agency (LGFA) to Council to enable discussion and a decision on whether this Council should become a member of LGFA and, if so, on what basis this membership should proceed. Any decision to proceed to membership should recognise the statutory requirement for a special consultative process as the LGFA is a Council controlled organisation. Council’s Investment and Liability Management policies will also require amendment.

Comment

2. During 2009 Local Government New Zealand and Central Government Treasury jointly funded a scoping study to investigate the feasibility of a local government debt vehicle. Cameron Partners and Asia Pacific Risk Management were engaged to undertake this study. In summary, the study concluded that there is potential for significant benefits to the local government sector in terms of enhancing access to funding and lowering the overall cost of funds.

3. Stuart Henderson from Asia Pacific Risk Management and Treasury Advisor to this Council over the last two years, will be presenting the Local Government Funding Agency proposals to Council at this meeting. The intention is for Council to be able to ask one of the designers of the scheme, any questions that they may have on the proposal in order to be able to clarify the way forward for this Council.

4. During May 2010, a group of nine councils agreed to undertake the next stage of work, including detailed financial modelling, to confirm overall financial benefits of the proposed local government debt vehicle. The work was funded by nine Councils (Auckland City Council, Manukau City Council (later replaced by Western Bay of Plenty Council), Hamilton City Council, Tauranga City Council, Whangarei District Council, Wellington City Council, Greater Wellington Regional Council, Tasman District Council and Christchurch City Council) at a cost of $50,000 each. The overall design of the local government debt vehicle has been based around the arrangements which exist in Norway, Sweden and Denmark for this sector.

5. During September 2010, the group agreed to further progress this initiative, subject to Central Government funding and support for new legislation to establish the proposed new local government debt vehicle. The key parts of this work programme have been:

5.1. Discussion/agreement in principle with rating agencies to finalise the structure of the proposed funding vehicle with the objective of obtaining credit rating equivalent to Central Government; and

5.2. Discussion/agreement with the Ministers of Finance, Local Government and Revenue and the relevant government officials to confirm funding allocation from Central Government. There is a need for new legislation to establish this funding vehicle and approval for the New Zealand Debt Management Office to provide standby funding lines and operational involvement.

6. The work programme has been completed to a level to proceed with setting up the Local Government Funding Agency Scheme, with nine principal shareholder Councils confirming their participation. Currently there are approximately 50 Councils that are either members of LGFA or are having discussions on the proposal to become members of LGFA.

7. New legislation has been drafted and it is anticipated that this legislation will be passed during November 2011.

8. The following sections of this report describe the structure of the LGFA and requirements of the Council should it decide to become an Establishment Shareholder with the potential for Council to achieve the benefits of lower debt servicing costs. The advantages and disadvantages of the options for the Council are also explained.

Considerations/Issues

9. Attachment 1 to this paper is a Draft Information Memorandum (IM) prepared by Cameron Partners and Asia Pacific Risk Management. This document outlines the following:

9.1. The purposes of the Information Memorandum and provide some background on the purpose of, and rational for, the LGFA scheme.

9.2. Sets out how the LGFA scheme works, the transactions that participating local authorities will be entering into as part of their participation in the LGFA scheme.

9.3. Sets out the costs and benefits to individual Councils of participating in the LGFA scheme.

Summary of the Proposed Local Government Funding Agency Scheme

10. The overall objective of the Local Government Funding Agency Scheme is to allow participating councils to source funding at lower margins than they currently do. The new entity to be established is to be called New Zealand Local Government Funding Agency Limited.

Ownership

11. Central Government has agreed to provide $5.0 million of equity, of which $450,000 is able to be used to fund initial set up costs. Central Government ownership is to be no more than 20% and Local Government at a minimum of 80%. The nine establishment Councils are expected to collectively provide equity in the range of $10m - $20m.

12. It is anticipated that with the interest being shown by up to 50 councils on becoming shareholding members of LGFA, that the equity from local government sources will be in the order of $20m. Most of the councils proposing to join the LGFA, other than the nine establishment councils, are proposing to invest $100,000 in equity. All initial funding provided to-date for various stages of work programmes are to be capitalised.

13. All shareholding councils will also be required to subscribe uncalled capital equal to the paid up equity contribution.

14. Local Government Funding Agency requires equity to ensure that it meets a minimum capital adequacy ratio, which is likely to be equal to at least 1.6% of its total assets. So all borrowings Councils will be required to reinvest 1.6% of each loan from the LGFA back with the LGFA as Borrower Notes. The LGFA will pay a return to Councils equal to 2% above the LGFA’s borrowing rate.

Guarantee

15. Councils will be required to enter into a guarantee when joining the Local Government Funding Agency Scheme. Under this guarantee, the guarantors (participating councils) will guarantee the payment obligations of other guaranteeing councils (Cross Guarantee) and payment obligations of the LGFA itself.

16. All councils borrowing from the Local Government Funding Agency will be required to provide security for borrowing with a charge over rates revenue.

Risks

17. The risk associated with the cross guarantee will only materialise in the event that a participating council defaults on its debt obligations. This risk is very low on the basis that there has been no debt default by a Council in New Zealand.

18. Also it has been suggested that one of the requirements for being able to borrow from the LGFA is that councils will have made best efforts to insure their infrastructural assets either through the LAPP Scheme or through commercial insurance if available. This issue is being followed up with the key advisers on the LGFA establishment programme who have agreed to pursue this as part of the borrowing criteria for local authorities from the LGFA.

19. The Local Government Funding Agency Guarantee will only ever be called if the Local Government Funding Agency defaults. Consequently, a call on the Local Government Funding Agency Guarantee will only occur if the numerous safeguards put in place to prevent a Local Government Funding Agency default fail. This is highly unlikely to happen given the strict rules and parameters it will be working under.

Treasury Policy Amendments - Local Government Funding Agency Scheme

20. This Council’s Treasury policies (Investment policy and Liability Management policy) will require amendment to allow participation in the Local Government Funding Agency scheme. Council's involvement in the Local Government Funding Agency as a shareholding Council, providing guarantees and specific debt raising arrangements with the Local Government Funding Agency were not contemplated in the current policies.

Summary of Transactions Council will need to enter into to join the Local Government Funding Agency Scheme

21. To participate fully in the Local Government Funding Agency Scheme Council will be required to:

21.1. Subscribe for shares in the Local Government Funding Agency to provide it with capital (refer to Attachment 1 Information Memorandum (IM) paragraphs 16 and 31).

21.2. Possibly commit to meeting a certain proportion of its borrowing needs from the Local Government Funding Agency (refer to IM paragraph 62).

21.3. Borrow from the Local Government Funding Agency.

21.4. Subscribe for Uncalled Capital in the Local Government Funding Agency (refer to IM paragraphs 38 to 39).

21.5. Subscribe for Borrower Notes (refer to IM paragraphs 32 to 37).

21.6. Enter into the Guarantee (refer to IM paragraphs 40 to 45).

21.7. Commit to providing equity to the Local Government Funding Agency under certain circumstances (refer to IM paragraphs 49 to 53).

21.8. Possibly purchase one share in the Local Government Funding Agency at the time of joining the Local Government Funding Agency Scheme (refer to IM paragraph 54).

21.9. Provide a rates revenue charge to secure obligations under the Local Government Funding Agency Scheme.

Financial Costs and Benefits of the Local Government Funding Agency Scheme

22. Based on Council's LTP 2012-22 (currently in progress), new external debt could reach over $40m over the first five years of that Plan period specifically to fund Council’s equity participation in the water harvesting to be undertaken by Council’s Investment Company, and also in the borrowing required for the delivery of the Insulation/Heatsmart programme.

23. The table below is an attempt to establish for Council, the financial impact of being a shareholder of LGFA. The following assumptions are made for the purpose of the calculations:

23.1. That because this Council’s borrowing requirement exceeds $20m over the next few years, that if the Council was to join the LGFA it would need to join as a shareholding member.

23.2. That the majority of Council’s borrowing would need to be made through LGFA as per their requirements.

23.3. This Council would not obtain an “external credit rating” from one of the crediting agencies because of the high per annum costs relative to proposed borrowings.

23.4. Equity contribution as an establishment shareholding council will be at the minimum level of $100,000.00 (One hundred thousand dollars) and this is the level recommended for this Council. It is assumed that equity contributions will receive a return on equity in excess of the borrowing rate for councils from Local Government Funding Agency and therefore a positive contribution to Council.

23.5. Any borrowing from the Local Government Funding Agency will require reinvestment of 1.6% (referred to as Borrower Notes) of the amount borrowed to be reinvested back with the LGFA. The returns on these reinvestments have been factored into estimated net interest savings.

Estimated Savings on $40m Borrowing
	Reduction in Basis Points Achieved by LGFA
	40 Basis Points	50 Basis Points
$40 million - $1.6m set aside as borrowing notes on the $40m ($640,000 at say 6% borrowing) - Financial savings to Council (per annum) by year five	$160,000 $40,000 $120,000	$200,000 $40,000 $160,000

Financial Covenants

24. All Local Government borrowers will comply with financial covenants outlined in the following table, although bespoke financial covenants (and associated reporting and monitoring requirements) for individual Local Government borrowers may be approved by the Board or shareholders following a robust credit analysis.

Financial Covenant	Board Approval Required to Exceed	Shareholder Approval Required to Exceed
Net Debt / Total Revenue	<175%	<250%
Net Interest / Total Revenue	<20%	<20%
Net interest / Annual Rates Revenue	<25%	<30%
Liquidity	>110%	>110%

Issues and Options relating to Local Government Funding Agency Scheme

Option 1 - Status Quo

25. Maintain the current process and methodology for funding and therefore no Treasury Policy amendment required.

Advantages

26. No risks associated with having a shareholding in Local Government Funding Agency.

27. No risks associated with providing guarantees associated with Local Government Funding Agency ownership.

Disadvantages

28. Limited competition for long-term funding at reasonable margins limited to the current financial markets.

Option 2 – Participation in the Local Government Funding Agency Scheme as a Shareholder

29. Join the Local Government Funding Agency Scheme as a shareholder.

Advantages

30. Net interest savings estimated between $120,000 and $160,000 per annum by year five on $40 million of borrowings.

31. Access to long term (10 years plus) funding at reasonable margins.

32. Voting as a shareholder for the appointment of directors to the Local Government Funding Agency.

33. Influence over governance of the Local Government Funding Agency.

Disadvantages

34. Shareholding risks associated with Local Government Funding Agency (assessed as minimal risk).

35. Guarantees associated with Local Government Funding Agency shareholding (assessed as minimal risk).

Option 3 - Non-Shareholding Borrower

36. Maintain the current process and methodology for funding and therefore no Treasury Policy amendment required.

Advantages

37. No risks associated with having a shareholding in Local Government Funding Agency.

38. Only very limited funding available, likely to be not more than $20.0 million. This option may only be suitable for councils with very low debt.

Disadvantages

39. Limited access to long term (10 years plus) funding at reasonable margins.

Treasury Policy Amendments

40. If Council resolves to become a shareholding member of the LGFA it will need to modify the Investment and Liability Management policies in order to borrow from the LGFA and invest in the LGFA in terms of shareholding subscription and borrowing notes (1.6% of borrowings).

Summary of this Council Paper

41. The establishment of the LGFA was originally promoted by nine large councils with very large borrowing programmes worth hundreds of millions of dollars. The rationale was that if they grouped together and borrowed as one body, that the interest rates achieved would be lower than if they individually had borrowing programmes. A credit rating for these large Councils would be undertaken by one of the credit rating agencies at some considerable cost to these Councils, however given the very large value of their borrowing programme, the cost of credit rating could be justified. The credit rating was necessary to achieve improved interest rates.

42. Subsequent to the nine Councils promoting the LGFA, there was an invitation for other Councils to join with a view to those Councils being able to achieve reductions in interest rates. These Councils had substantially lower borrowing programmes and would, in most cases, not achieve credit rating because of the high costs and would receive much lower interest reductions.

43. The principle behind the LGFA passing on interest reductions was based on the premise that the larger borrowing Councils would drive the better economies on interest rates, and therefore should receive the greater reductions in rates.

44. The uptake for joining the LGFA in the Regional Council sector of Local Government is Greater Wellington and Bay of Plenty with membership status of the LGFA and Horizons proposing to undertake consultation through their LTP 2012-22.

Advantages to this Council Joining the LGFA

45. If this Council undertook a borrowing programme of between $40m - $50m over the first five years of the LTP 2012-22 then it has been assessed by the promoters of LGFA that interest rate reductions to Council would be between $24,000 and $32,000 in year one and increasing to between $120,000 and $160,000 in year five.

NB: Observations from recent borrowings from trading banks have indicated that given this Council’s strong balance sheet and also the recognition by major trading banks that the LGFA operation is commencing, it has been observed that bank margins on lending have reduced.

Disadvantages to this Council Joining the LGFA

46. The need for cross guarantee for other councils’ loan defaults (if any).

47. The requirement to set aside 1.6% of all borrowings to be retained by LGFA (no interest on this sum).

48. Undertake to borrow from the LGFA.

49. Council’s relationship with trading banks for the purposes of borrowing would be substantially diminished as those relationships would be built up by the LGFA.

50. Commit to providing further equity to LGFA when requested.

51. Commit to pay $100,000 of share capital to become a shareholding member.

52. Need to comply with financial covenants as set out by LGFA – for example, one of the covenants states net interest to annual rates revenue not to exceed 25%. This could present difficulties for this Council due to the low rates revenue relative to total revenue because of Council’s substantial earnings from the investment portfolio. Council may well have to ask not only LGFA Board approval to increase this covenant, but may well have to seek the approval of all LGFA shareholders.

Decision Making Process

53. If Council was to resolve to become a shareholding member of the LGFA then because the LGFA is a Council controlled organisation, Council would need to carry out a special consultative process before committing to the shareholding and, further the amendments required to the Council’s Investment and Liability Management policies would also be subject to a special consultative process under the Local Government Act 2002.

54. If Council wants to proceed to become a shareholding member of the LGFA then the special consultative process could be undertaken as part of the LTP 2012-22.

Recommendations

1. The Corporate and Strategic Committee makes note that a special consultative process would need to be undertaken to allow feedback from the community if Council was proposing to become a shareholder of the LGFA (the LGFA being a Council controlled organisation) and for the amendments required to Council’s Investment and Liability Management policies. The Committee further notes that this consultation process could be carried out as part of the LTP 2012-22.

The Corporate and Strategic Committee recommends that Council:

Either

2. Maintains the current process and methodology for funding of Council’s loan requirements, namely through a competitive process with major trading banks, noting that the continuation of the current process would not require any special consultative process or amendments to Council’s Investment and the Liability Management policies.

Gives notice to the LGA that Council wishes to participate as a non-shareholder borrower, noting that current borrowing and funding processes would therefore remain through competition between trading banks and would in this instance be extended to requesting LGFA to provide the Council with a borrowing rate.

Becomes a shareholding member of the LGFA with an initial shareholding of $100,000, and that a special consultative process be undertaken on this proposal in Council’s LTP 2012-22. It is noted that this special consultative process would include the Statement of Proposal to Become a Shareholder, the required amendments to the Investment and the Liability Management policies. It is further noted that this option will provide Council with the ability to make a decision subsequent to the adoption of the LTP 2012‑22 to take up a shareholding in the LGFA.

Paul Drury

Group Manager Corporate Services

Andrew Newman

Chief Executive

Attachment/s

1 View

Proposed LGFA Scheme Information Memorandum

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: Solar Hot Water Scheme

Reason for Report

1. This report brings to Council a proposal for funding of a solar hot water scheme with the potential for the inclusion of the proposal in the 2012-22 Long Term Plan.

2. Approval of the proposal would require a commitment by Council to provide loan funding for property owners to install solar hot water, and loans would be repayable to the Regional Council as a voluntary targeted rate.

Strategic Fit

3. One of the focus areas of Council’s Draft Strategic Plan is to contribute towards resilient communities. One of the measures of Council’s success in this will be the opportunities to improve household sustainability.

4. Building community resilience to climate change, reducing greenhouse gas emissions as far as reasonably practicable and maximising climate change opportunities represent an implementation challenge to local government at times. The HB Solar Saver Scheme is an opportunity to achieve energy efficiencies using a natural renewable resource available in abundance in Hawke’s Bay and to reduce community dependence on other forms of energy.

Discussion

5. This proposal has arisen from the receipt of a business case jointly prepared by officers from Hawke’s Bay Regional Council, Napier City Council and Hastings District Council. The business case is attached, and details how the scheme would work. The principle points are:

5.1. Funding from the Voluntary Targeted Rate would be provided by HBRC up to $6.0m over five years. HBRC will handle all payments to suppliers and all collections from homeowners.

5.2. The business case proposes that through the supplier an upfront fee of approximately $340 (plus GST) would be charged for the building consent fee and an administration fee to join the scheme and passed on by the supplier to either Napier or Hastings Council, as appropriate.

5.3. The upfront fee would be used to fund a Project Manager, employed by the territorial councils, who would be responsible for managing the day to day aspects of the scheme; reducing any impact the scheme may have on the building consenting and inspection teams of the TAs and on the Finance section of Hawke’s Bay Regional Council.

6. The business case investigates the financial return for the homeowner from installing a solar hot water scheme and the payback time when using the Voluntary Targeted Rate (VTR) as a means to financing the installation. Depending on the household situation the average net cost to the household after deducting expected energy savings from the VTR repayments are between $80-500 p.a. for a family-type household and $120‑400 p.a. for a non-family household. It is expected that households will break even from year 9 (one year before they complete their repayments). There are a large range of variables that would affect the payback period and return of any solar hot water installation, including: the size and cost of the installation, the amount of hot water consumed, and whether the marginal cost or the full cost of the installation is being used in the calculation.

Financial and Resource Implications

7. There is currently no financial provision for Council to fund this scheme. The rationale for Council’s involvement is that its ratepayer base covers both interested territorial authorities and provides scope for additional territorial authorities to join the scheme. However if only one territorial authority decided to proceed with the scheme there would no longer be the justification for the Regional Council to fund a single territorial authority activity.

8. The proposal for Council to borrow $6 million would have to be consulted upon as part of the Long-Term Plan. The long-term effect of the borrowing is cost neutral to Council. It is anticipated that the rate of uptake of the scheme will increase over the first 3 years from 100 in year 1 to 300 in year 3 where it will then be capped. This cap will allow the Council to spread the borrowing of the funds over a 5 year period, and will also enable the increased workload of Council finance staff to be appropriately managed. The scheme would provide an increased workload for HBRC rating and accounting teams, however it is expected that this could be absorbed within these functions.

9. Scheme set up costs are not expected to be significant as a large amount of the work has already been undertaken by Nelson City Council and would be transferable to a Hawke’s Bay Scheme. Costs will be incurred in developing the Request for Proposal (RFP) for the preferred suppliers and the evaluation of the tenders received. It is estimated that set-up costs would be approximately $30,000, shared across the three councils.

10. The development of a “core brand” would incur a one-off cost, estimated to be $5,000, and shared by the three councils. Public relations costs would be met largely by the accredited suppliers.

Options to Consider

11. At this stage of the process there are three options for Council to consider.

11.1. Unconditional inclusion in Council’s Draft Long Term Plan – the proposal for Council to borrow $6M to fund the scheme would be included in the Draft Long Term Plan.

11.2. Conditional inclusion in Council’s Draft Long Term Plan – the proposal for Council to borrow $6M to fund the scheme would be included in the Draft Long Term Plan, provided that both Napier City and Hastings District councils also agreed to consult on the scheme through their Long Term Plans, given their roles in its implementation.

11.3. Do nothing –not include the proposal in Council’s Draft Long Term Plan.

Assessment of Options

12. The Solar Saver Scheme developed by Nelson City Council has been developed to minimise the effect on Council resources and to make it as easy as possible for the homeowner to join the scheme. The attached business case aims to replicate those objectives with the Hawke’s Bay Regional Council providing the funding and administration for a Voluntary Targeted Rate where homeowners can repay the cost of the solar hot water installation over 10 years with a fixed rate of interest.

13. The ‘Solar Saver’ scheme, assembled in conjunction with HDC and NCC provides a win-win for all participants. For the Councils involved, it provides a way for them to play a role in proactively supporting and encouraging ways to improve the uptake of renewable energy options. For the homeowner the VTR scheme is a low cost option that should encourage more homeowners to install solar hot water systems. The scheme creates a good Internal Rate of Return and the net cost to the homeowner is not significant while they are paying off their VTR loan, at the same time the installation of a solar hot water unit is expected to have added value to the property.

14. The preferred option is for the Committee to agree to include the ‘Solar Saver’ scheme in the 2012-22 LTP for consultation, subject to the Hastings District and Napier City councils agreeing to consult as well.

Decision Making Process

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

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

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

15.3. The decision to consult does not fall within the definition of Council’s policy on significance. However any final decision, if supportive of the proposal, is significant under the Local Government Act criteria.

15.4. The persons affected by this decision are property owners within the boundaries of Hastings District and Napier City areas and potentially in the future all regional property owners.

15.5. Options that have been considered include including the proposal in the Draft Long Term Plan without conditions, including the proposal in the Draft Long Term Plan subject to conditions, and doing nothing.

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

15.7. 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 will consult with the community through the Draft Long Term Plan 2012-22 process prior to making a final decision.

Recommendations

The Corporate and Strategic Committee recommends that Council:

1. Agrees that the decision to be made is significant under the criteria contained in Council’s adopted policy on significance and that any final decision on whether or not to proceed will be made after consideration of submissions through the 2012-22 Long Term Plan process.

2. Includes a proposal to fund a Solar Hot Water Scheme for public consultation in the Draft Long Term Plan 2012-22.

3. Notes that Council agrees that 2) above is subject to the Hastings District Council and the Napier City Council agreeing to participate in the scheme as outlined in the “Solar Hot Water Joint Business Case for a Voluntary Targeted Rate Proposal”.

Liz Lambert

Group Manager External Relations

Attachment/s

Solar Hot Water Joint Business Case for a Voluntary Targeted Rate Proposal

Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: Infrastructure Insurance

Reason for Report

1. At its meeting on 29 June 2011, Council were updated on the situation with regard to insurance of Council’s infrastructure assets. At that time the insurance market was extremely fluid, and staff were working with Council’s commercial insurers to secure insurance for 60% of the value of Council’s infrastructure assets. This has now been secured.

2. Council were also advised that staff will undertake a review over the next four months of Council’s infrastructure asset insurance, including its membership of LAPP, and report back to Council on the appropriate mix of insurance to cover damage to Council’s infrastructure assets in the event of a disaster.

3. This report sets out that review.

Current Disaster Damage Risk Management Policy

4. Council’s current Disaster Damage Risk Management Policy is set out in Section 2.5 of Council’s Policy Handbook (copy attached – Appendix 1). The current policy is based on mitigating the risk to Council for its infrastructure assets by a combination of measures including:

4.1. maintenance of infrastructure assets to their original design criteria; and

4.2. where feasible and economic, protection of assets from the effects of natural disasters; and

4.3. financial strategies to provide for the cost of repair and restoration of assets damaged in the disaster which include:

4.3.1. Commercial insurance cover up to $15M on Council infrastructure assets with $3M excess on each and every claim,

4.3.2. Cover by the Local Authority Protection Programme (LAPP) Scheme of 40% of claim costs above 0.2% of the declared value of Council’s infrastructure assets (excluding fixed assets)

4.3.3. The establishment of adequate scheme and other provisions to meet the disaster damage insurance excess.

Current Situation

5. As at 30 June 2011, Council’s infrastructure assets were valued as follows

5.1. Pump stations $10,600,000

5.2. Land $9,000,000

5.3. Live tree edge protection $16,600,000

5.4. Stopbanks, drains/channels, groyne etc $120,600,000

6. Council were advised through a report presented to the 29 June 2011 Council meeting that insurance premiums had substantially increased as a result of the Christchurch earthquake. Staff have managed to secure commercial insurance for the 2011/12 year to cover 60% of the cost of replacement of assets at a premium of $136,000. This policy has a deductable cost of $5m (i.e. Insurance will only meet 60% of the cost of repair above $5M, excluding any betterment).

7. LAPP advised that the premiums for the 2011/12 financial year would increase from $80,000 to $324,600. Staff have advised LAPP that Council is reviewing its membership of LAPP. Continued membership of LAPP is discussed later in this report.

Options for Insurance Cover for Infrastructure Assets

Fixed Assets

8. Council’s pumpstations with a current asset value of approximately $10,600,000 are currently insured through a commercial material damage policy. This policy has an excess of $10,000 and will meet the cost of damage to the pump stations whether it be from natural disaster, or mechanical or electrical failure.

9. No change is recommended to this disaster risk management approach for these assets, and for the purposes of this report these fixed assets are not included as part of Council’s infrastructure assets.

LAPP Disaster Fund

10. The LAPP Disaster Fund was established in 1993. It covers “generally uninsurable” assets and will pay 40% of claim costs above an excess of 0.2% of the declared asset value of Council’s infrastructure assets. The remaining 60% of uninsurable assets is paid at the discretion of government in accordance with the National Civil Defence Emergency Management Plan or by Council’s own reserve arrangements.

11. The advantage of LAPP is that it covers all of Council’s “generally uninsurable” infrastructure assets including live tree edge protection. (Tree crops are specifically excluded from commercial insurance policies.)

12. LAPP will only cover 40% of the cost of reinstatement of the assets. LAPP was specifically established to enable member authorities to insure for the 40% not covered by central government under their National Civil Defence Recovery Plan. Payment under the National Civil Defence Recovery Plan is at the discretion of Central Government and while there is therefore no guarantee that financial assistance will be provided, Central Government have provided assistance in accordance with this policy following a number of recent disasters where the wider regional community has been impacted.

Commercial Insurance

13. Commercial insurance has been secured by Council to cover the cost of reinstatement of infrastructure assets following a disaster. This insurance will cover 60% of up to $19M of costs with a deductable amount of $5M.

14. Commercial insurance specifically excludes live tree edge protection from its policy and therefore the excess of any commercial insurance policy must be considered on the cost of reinstatement of assets excluding any damage to that live tree edge protection.

Self Insurance

15. Council self insures its current scheme assets through

15.1. Requiring each scheme to have its own disaster reserve the size of which is calculated in accordance with the current Disaster Management Policy.

15.2. The Regional Disaster fund which is designed to meet the difference in cost of reinstating Scheme assets following any disaster between the scheme disaster excess and the central government or commercial insurance excess.

Damage Scenarios

16. Set out in attachment 2 are four damage scenarios, including estimated asset reinstatement costs for a small, medium and large disaster event.

Scenario 1 – localised disaster ($120,000)

17. A localised disaster event has the potential to occur to any one of Council’s smaller schemes without any significant damage occurring to any other scheme. This scenario occurred to the Kopuawhara Scheme in 2002 and is the subject of a report to the November meeting of the Asset Management and Biosecurity Committee following the April 2011 flood event. This example is given to illustrate the effect of such a disaster on smaller schemes and its potential impact on Council’s funds.

Scenario 2 – Medium district wide event ($1,000,000)

18. A medium district wide event is considered to be in the range of $0.5M to $2.5M asset reinstatement costs. The threshold for government financial support under the National Civil Defence Plan recovery provisions is not specific, however a claim to central government is likely to be unsuccessful unless the disaster causes widespread disruption to the Hawke’s Bay community. Such an event could result in widespread damage to regional infrastructure other than that managed by Council, however Scheme infrastructure could be heavily impacted but there be little significant damage to other infrastructure. Staff believe that asset reinstatement costs for Council’s infrastructure assets could be as much as $2.5M, and significantly impact the whole region or a centre of population, before the threshold for government to grant assistance is exceeded.

Scenario 3 – Significant event severely impacting Heretaunga Plains ($5,000,000)

19. In a significant disaster event affecting the Heretaunga Plains staff expect considerable damage will have occurred to private property and regional infrastructure outside flood protection schemes, and therefore expect there will be central government interest in the event and central government financial support under the National Civil Defence Recovery Plan will be forthcoming. However a major flood event could be contained within the stopbanks and while significant scheme damage is incurred, the event may not affect the regional community and therefore not be eligible for central government support.

20. The scenario in the attachment uses this scenario to assess the potential financial impact on Scheme assets.

Scenario 4 - Extreme event with widespread damage

21. Such an event will definitely severely impact on the region as a whole and result in significant central government interest as a result of widespread national infrastructure damage and significant impact on the national economy. Such an event would therefore trigger government assistance under the National Civil Defence Recovery Plan.

22. In addition staff expect that such an event will have a significant impact on a number of Council managed schemes, and result in a long term recovery plan for those schemes needing to be developed. Thus Asset Management Plans would need to be rewritten and annual work plans and funding reviewed.

23. These four scenarios have been used in this report to assess Council’s disaster risk and are the basis for the disaster risk management policy recommended in this report.

Flood Damage Repairs

24. It should be noted that the cost of reinstatement of flood protection assets following damage by a flood can be significantly greater than their replacement value. A recent example of this is the flood damage that occurred on the left bank of the Ngaruroro River (Kommerens) in April 2006. In that flood event approximately 250 metres of river edge was lost to the flood.

25. The assets destroyed were of low value, being live willow edge protection severely weakened by sawfly damage, and therefore the event would not result in either the LAPP fund or commercial insurance excesses being exceeded. The cost of repair was approximately $160,000.

26. The reasons for the difference:

26.1. Council wishes to reinstate the level of protection that was provided by the destroyed or damaged assets as quickly as possible. This often involves the use of different techniques (often structural steel and concrete) rather than live tree edge protection.

26.2. The level of protection provided by live tree edge protection can only be achieved once trees have become established and grown. Depending on how quickly trees grow, this can take a number of years.

26.3. Willow trees, prior to their destruction by willow sawfly, could be used to rapidly reinstate the level of protection, using techniques such as slotting in conjunction with rope and rail permeable groynes. With few willow trees now available, concrete or rope and rail groynes must now be used.

26.4. Following any disaster, plant and equipment is in high demand as many organisations and individuals wish to clean up and get their lives and businesses operating efficiently again. Costs of doing works invariably increase during such periods.

27. The following terms differentiate between the various levels of costs that will arise as a result of major damage to Council’s infrastructure assets.

27.1. Cost of Replacement – means the cost that would normally be incurred in replacing assets in their current form such that it ultimately (over time) provides the same level of risk mitigation as the current asset.

27.2. Cost of Reinstatement – means the cost of replacing a current asset following a disaster. This cost can be expected to be higher than a cost of replacement because:

27.2.1. normal methods of construction of the asset may not be able to be used.

27.2.2. the ground under the asset may have been eroded by a flood event. Therefore the ground may need to be reinstated (which is uninsurable), or the asset redesigned or realigned. This could require land purchase or other additional costs.

27.2.3. there is likely to be demand for labour and plant to undertake repair work. This is known in the insurance industry as demand surge.

27.3. Cost of reinstating level of protection – this is likely to be more costly than reinstatement of an asset because the type of work to achieve the level of protection may be substantially different, and more costly, than originally used.

27.3.1. Using edge protection as the example, it maybe that rope and rail permeable groynes and/or concrete or rock groynes are required to replace the original asset, and to provide for the more immediate reinstatement of the level of protection that would be provided by reinstating the original asset.

27.4. It should be noted that both the LAPP insurance and commercial insurance policies provide for the cost of reinstatement of Council’s infrastructure assets, and any improvement or “betterment” would not be covered by insurance.

28. Accordingly Council must recognise that following any major disaster event there maybe uninsurable liability associated with betterment.

Disaster Risk

29. The disaster scenarios set out in Attachment 2 show that subject to central government agreeing to meet infrastructure asset replacement costs in accordance with the National Civil Defence Recovery Plan for significant disasters, Council’s major financial risk is from small to medium disasters which do not trigger central government intervention.

30. The scenarios as set out predict that there will be significant damage to live tree edge protection on the major schemes for both the medium and major disaster scenarios.

31. It should be noted that while Council’s commercial insurers will not fund live tree edge protection, rope and rail permeable groynes and concrete akmon groynes which form an integral part of the edge protection in areas where sawfly remediation work has been undertaken are insured under Council’s commercial insurance policy. These structural measures place less reliance on live tree edge protection to minimise the risk of lateral river scour during elevated river flows. Accordingly the risk of significant damage associated with lateral scour on the Heretaunga Plains Scheme Rivers is considerably less than on the Upper Tukituki Scheme.

32. Should lateral scour and associated damage to edge protection occur in a location where concrete or rope and rail permeable groynes have been constructed, then reinstatement of that hard engineering works will be insured for repair costs above the excess on Council’s insurance policies.

33. From the scenarios, and particularly the medium and major disaster scenarios, it is apparent that Council’s maximum financial exposure to the disaster event is likely to be in the order of $1M to $5M, subject to there being no requirement for betterment as a result of the damage.

34. This is unlikely to be the case and therefore Council needs to be aware of the potential need for betterment works in any restoration work following a major disaster. As with the sawfly remediation project it is likely that Council will seek to reinstate the level of protection provided by its infrastructure assets as rapidly as possible following any disaster. This can be considerably more expensive than merely reinstating the original infrastructure assets.

35. Future capital works proposed under the review of the Heretaunga Plains Scheme – Rivers will include works that will, over time, reduce this exposure.

Maximum Probable Loss

36. Because of the nature and spread of flood protection and drainage assets, only a portion are likely to be lost in any one event. An extreme flood event has potential to cause the greatest degree of damage to the assets, however a failure of one asset (e.g. a stopbank) will reduce the flooding pressure on other parts of the asset. The generally accepted maximum probable degree of loss for such assets is between 10% and 20% of their value.

37. With the total value of assets of $120,600,000 (excluding fixed assets and live tree edge protection) staff believe that Council assets will be adequately insured by the current level of commercial insurance (60% of $19M with a deductable of $5M).

CDEM Emergency Response and Recovery Costs

38. In addition to the reinstatement of Council’s infrastructure assets following a disaster, Council will play a significant role in recovery activities following any medium to large disaster affecting the regional community as a direct result of its civil defence emergency management, and soil conservation and river control responsibilities. While some of this cost maybe met as a result of redirecting Council resources from projects planned through the LTCCP and Annual Planning process, it is highly likely that Council as administrating authority for the CDEM Group will seek to employ a recovery management resource with associated administrative and consultant support, and will need to respond to numerous enquiries associated with soil erosion and flood damage to waterways.

39. Costs could be several hundreds of thousands of dollars, of which only a portion may be recoverable from Ministry of Civil Defence and other central government agencies.

Recommended Approach

40. The Christchurch earthquake has highlighted a risk with the LAPP mutual fund approach. Staff believe that there will be a re-evaluation of the LAPP fund size and level of reinsurance as the fund regrows following that event, however until the fund regrows, the size of contributions to LAPP will be large. Prior to the Christchurch earthquake LAPP premiums were at a significant discount and the LAPP trustees felt that they had sufficient money held to cover the maximum probable loss.

41. LAPP advises that it is already in a position to be able to meet the costs of a further disaster up to $40M.

42. If Council wishes to withdraw from the LAPP Scheme, the LAPP Trust Deed requires that it must advise LAPP in writing on or prior to the end of any Fund Year (Financial year). Members who have given notice of their desire to withdraw are required to pay their Annual Contribution due for the following funding year. Accordingly Council will be required to pay a contribution in the 2011/12 and 2012/13 years.

43. While continuing to contribute, Council will be covered by the LAPP scheme until the time of its withdrawal.

44. The LAPP Trust Deed further states that “Any notice in writing of a Member’s desire to withdraw from membership may itself be withdrawn at any time prior to the termination of its membership”. Accordingly Council is able to review its withdrawal of LAPP and any stage after it has given notice, until the end of that notice period.

45. Staff propose that Council gives notice of its intention to withdraw from LAPP, however prior to time that comes into effect, Council should review its situation and decide whether or not LAPP is adequately able to cover Council assets, and that cover is the best option available. An alternative approach which may be considered at that time is for Council to contribute to an increased disaster reserve held by Council, or a mutual scheme among regional councils designed specifically for flood control and drainage assets. Such a scheme has already been proposed, but will requires further development.

Decision Making Process

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

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

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

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

46.4. The persons affected by this decision are the beneficiaries the Schemes Council administers, however the decision to be made is with regard to the prudent management of risk associated with the schemes and the effect on the persons is believed to be positive.

46.5. Options that have been considered are discussed in this agenda item.

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

46.7. 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

The Corporate and Strategic Committee recommends that Council:

1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted policy on significance and that Council can exercise its discretion under Sections 79(1)(a) and 82(3) of the Local Government Act 2002 and make decisions on this issue without conferring directly with the community and persons likely to be affected by or to have an interest in the decision due to the nature and significance of the issue to be considered and decided.

2. Advises LAPP of its intention to withdraw from the fund in accordance with the LAPP Trust Deed on 30 June 2013.

3. Instructs staff to undertake a further review of Council’s infrastructure asset insurance arrangements prior to 30 June 2013 and determine whether a more cost effective and secure arrangement is available.

4. Agrees that in the interim, the Regional Disaster Reserve account is grown through increases in investment value and the reinvestment of dividends to a maximum of $5.0M. Should the value of the fund exceed $5.0M, then surplus investments will be transferred to Council’s operating account, with the Chief Executive to decide what investments should be sold and the timing of any sale. Any such sale will be reported to Council.

Mike Adye

Group Manager

Asset Management

Andrew Newman

Chief Executive

Attachment/s

1 View	Policy 2.5
2 View	Options for Insurance Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: Webcasting of Council and Committee Meetings

Reason for Report

1. Council received two submissions during the 2011/12 Annual Plan process seeking the webcasting of Council and major Committee meetings.

2. Following consideration of these submissions Council resolved that it:

2.1. “Makes no change to the budget for 2011/12, however instructs staff to bring back to Council the funding alternatives available for the various options including audio recording of Council and Committee meetings.” (Minutes Council meeting 8-10 June 2011)

3. Expert advice has been sought from Tandem Studios, a company that specialises in online audio and video, and whose recent projects include the broadcasting of Parliament and of the Royal Commission of Inquiry into the Canterbury Earthquakes. This advice is intended solely for the purpose of providing an estimate of a likely range of costs for potential inclusion in the Draft 2012-22 Long Term Plan.

4. Tandem Studios has prepared an initial assessment of Council’s likely needs and a copy of that report is attached. It is important to note that, at this stage, Tandem staff have not visited Council for a visual assessment of specific needs.

Strategic Fit

5. In its Strategic Plan Council has identified that a “fit for purpose” organisation is a key enabler to delivering on its outcomes. It recognises that HBRC needs to be a responsive organisation that meets changing needs in a timely manner and delivers on these needs efficiently.

6. One of the challenges to delivering on this is that ratepayer expectations demand an efficient, cost effective undertaking of operations in a way that also meets their needs in terms of levels of service. The scheduling of Council meetings is seen as a barrier for people who may wish to attend but are unable to because of other commitments. Council’s reputation and response on matters is under constant scrutiny. Communications between Council and the public, in whatever form, needs to be efficient and effective.

Discussion

7. The Tandem Studios report outlines the requirements for a comprehensive rich web content package to connect to an online audience. It provides costs for both video and audio options. Key features of the report are:

7.1. Two video options are presented – the key difference between the two being the number of cameras to be used (one versus two, with a second camera allowing for the videoing of presenters and presentations)

7.2. An audio options is also presented for Council’s consideration

7.3. Both video and audio options require hosting facilities via the internet and the report covers the technical requirements for these, including the building of a multi media website for the streaming, hosting, playing recorded video and creating a searchable database for archiving of all video

7.4. The video options would provide for live streaming of Council and Committee meetings, with recorded footage edited into “bite sized” segments on a specifically created Council website

7.5. For audio recordings the meetings would be recorded, then edited, and them made available for playback within 48 hours.

Financial and Resource Implications

8. The costings provided for guidance are based on the use of two cameras for the video option, and on an audio option.

9. Comparative costs are as follows.

	Two-camera video option $	Audio only option $
One-off establishment costs
Site visit, consultation, final plan with full costs	5500	4500
Multi-media website creation	4900	4900
You-Tube channel creation and set up	500	N/A
PC and camera needs, installation of required equipment	10,000-15,000	N/A
Audio equipment set-up and installation	N/A	10,000
Capital Cost Estimate	$20,900-25,900	$19,400
Ongoing Operational Costs (p.a.)
Streaming ongoing	200-400 per meeting (7,200 – 14,400 p.a.)	200-400 per meeting (7,200 – 14,400 p.a.
Website maintenance, back up, updates and hosting	2400	2400
Video or audio edit and uploads	$21,600	$21,600
On-going operational costs Estimate	$31,200-38,400	$31,200-38,400

* Based upon 36 meetings per year and 5 hours per meeting

Options to Consider

10. There are two options for Council to consider.

10.1. Inclusion in Council’s Draft Long Term Plan – the proposal for Council to expend approximately $20,000-$25,000 one-off capital costs and $55,000-$60,000 operating costs per annum would be included in the Draft Long Term Plan.

10.2. Do nothing – not include the proposal in Council’s Draft Long Term Plan.

11. If Council wishes to include the proposal in the Draft Long Term Plan it could consider at a later date, through submissions, whether this would be a video or audio option.

Decision Making Process

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

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

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

12.3. The decision does fall within the definition of Council’s policy on significance.

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

12.5. Options that have been considered include: doing nothing and not broadcasting Committee and Council meetings; using audio broadcasts; and using video broadcasts.

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

12.7. Council will consult directly with the community on this proposal through the 2012-22 Long Term Plan process.

Recommendations

The Corporate and Strategic Committee recommends that Council:

Either:

2. Includes the financial costs of webcasting Council and committee meetings in the Draft 2012-22 Long Term Plan for public consultation.

Resolves not to include the financial costs of webcasting Council and committee meetings in the Draft 2012-22 Long Term Plan.

Liz Lambert

Group Manager External Relations

Attachment/s

1 View

Webcasting Proposal

Webcasting Proposal

Attachment 1

Hawkes Bay Regional Council -Streaming solution from Tandem Studios

Company Background

Tandem Studios (Tandem) is one of New Zealand’s leading producers of online audio and video.

We currently provide streaming solutions for New Zealand Parliament and other city councils though out the country.

Tandem is set up as a rich web content creation company - not as a traditional video production company. Our processes and creative approach are focused on a high quality, low cost product which connects to an online web audience.

What we do

The Tandem team brings extensive traditional media experience to the fast expanding world of new media. We work at the forefront of this new and constantly evolving online communications area, including, but not limited to the provision of the following services...

· VidCasts (online video)

· PodCasts (online audio)

· Live streaming via the Internet

· Consult or design and manage Social Media: multi media sites, twitter, Facebook etc

· PowerPoint to video with voice

· Content for iPad and smart phones

· Public consultation via social media and video

Streaming and video archive experience

Specific to these clients we have:

• Designed, built and managed a multi media website for New Zealand’s Clerk of the House where we record and edit every hour of parliament when the House is sitting. www.inthehouse.co.nz

• Streaming Taupo District Council meetings, designing, building and managing multi media website and editing meeting videos. http://taupo.yourcouncil.co.nz/http://taupo.yourcouncil.co.nz/

• Full solution for the Wellington City Councils new streaming website http://www.live.wellington.govt.nz/www.live.wellington.govt.nz

• Full solution for the Royal Commission into collapse of buildings in Christchurch CBD. In house TV, audio, a multiple media website, live stream video edits. http://canterbury-hearings.royalcommission.govt.nz/http://canterbury-hearings.royalcommission.govt.nz/

Some of our New Media clients

Other Tandem clients who have requested similar services from Tandem:

Deloitte Auckland - Fairfax Media - Dept of Education - Walt Disney - Lincoln University, Taupo District Council - Wellington City Council - Christchurch City Council, and the New Zealand Parliament's Clerk of the House.

Tandem has just gone through a rigorous process with the Royal Commission into collapse of buildings in the Christchurch CBD, and is now providing streaming services and a video archive similar to your RFI.

Why us?

Tandem is set up as a rich web content creation company (not as a traditional video production company). Our processes and creative approach are focused on a high quality low cost product which connects to an online web audience.

Through our experience we understand how people are using the internet and how critical it is to place sight, sound and motion on your website in order to connect and engage with your ratepayers, especially to openly communicate the business of Hawkes Bay Regional Council.

Filming, streaming then editing and uploading Council meetings

Your Needs

· Hawkes Bay Regional Council (HBRC) wants to increase the level of communication from Council meetings to the ratepayers of the region.

· Setup camera (s) in Council chambers

· Live streaming of council and committee meetings

· Build a ‘Your Council’ multi media website for streaming, hosting, playing the recorded video and creating a searchable data base for archiving of all video. The site will includes blog, social media links, presentations (where possible) and links to council agendas

· Take the recorded footage from the Council meetings and make available in easily found ‘bite sized’ segments on the HBRC ‘Your Council’ website, creating an archive of the Council meetings and a resource for ratepayers

· Ensure all video edits are correctly labeled with the meeting agenda items and speakers etc, and can easily found and shared through social media

· Where possibly link the video back to any supporting documentation

· Ensure all video is available for many years (forever?)

· Also provide an audio podcast solution

Our Solution

· Tandem would work closely with HBRC to ensure the aims of producing and streaming online video and the recordings of HBRC – with a full report on all aspects of your needs

· Build a multi media sub site (Your Council) skinned to match the HBRC brand, and linked from and back to the main HBRC site

· Set up cameras with quality audio in each room as required.

· Provide and operate camera equipment etc, live stream via the internet, record and edit for placement for archiving into the HBRC ‘Your Council’ website.e.g as per Taupo District Council.

Camera set up

Two options…

1. One camera in a permanent position that covers the entire council table and any presenters

2. Two cameras in permanent positions to cover the entire council table and any presenters

Solution:

Option #1 is cheaper in set up, wiring and equipment cost, but one camera may not cover the entire table and all people. One engineer required for PC video streaming, recording, operating the camera switching gear and loading graphics.

Tandem believes the best option is #2 with two cameras in locked positions. One camera is looking down towards the top table with Chairman and staff. The 2^nd camera would be behind the top table looking back at the full Council table. Again only one engineer (HBRC staff member would be trained for this role) is required to switch cameras, record, and stream, and load the graphics.

Option #3 would provide a mobile facility for streaming but require an audio set up for each committee member (this may already be in place).

Advantages of option #2:

· Council table shots are balanced in not favouring any councilor

· Only one engineer required

· Savings in staff and equipment

· Savings in the installation and set up

· Easy to upgrade to option #3 if required

Disadvantages of option #2

· Both cameras must be placed in a premier position for a wide angle, clear image which equally covers all councillors, Chairman, key staff and any presenter, especially if councillors have to move seats to view the presenter.

· Only after full inspection and testing can we fully understand the room limitations, advantages and requirements.

Tandem would provide

Step one:

1. An audio and video inspection of the Council chamber and committee rooms to gauge site requirements to establish sight lines and for equipment placement, wiring, audio needs and PC setup for streaming and recording etc

2. Report to HBRC on equipment, installation needs, costs and time frames

3. A producer to manage the project.

Step two:

1. Work with HBRC IT department on PC needs, equipment purchases and installing of wiring and PC as per the report

2. Manage installation of all video and audio needs and ensure PC is correctly set up for recording, streaming and the vision mixing of cameras

3. Provide/train an engineer who will test camera and audio prior to all meetings then manage the record and stream etc

4. Set up and provide live streaming solution

5. Provide and load all software for streaming and the recording and vision mixing

6. Set up system delivery of recordings to Tandem studio for editing

7. Build the HBRC ‘Your Council’ website.

Step three:

1. Allocate Tandem editing studios and facilities with an engineer to edit all recorded video then meta tag and load into the website for playing and sharing

2. An editor to ensure all material is proofed and correct before loading into the website

3. All website management and hosting of the video

4. Full training to HBRC staff so they can manage the blog sites and other features

5. A producer to work with all parties to manage streaming each meeting then recording and upload process as required etc.

Steps

Indicative costing:

• Full site visit, consultation and final plan with full costs $5500 (once only)

(2 x producers visiting all sites, test camera locations, review current audio or plan new audio feeds, Internet capabilities, plan all cable laying, staff locations and exact equipment needed. All travel costs and expenses. Produce a full plan detailing all aspects of live streaming and audio needs for all locations)

• LaBon(tm) multi media website creation $4900 (once only)

You tube Channel creation and set up $500 (once only)

• Streaming set up $500 (once only per location)

• Manage installation of cameras, cables and equipment with all set up costs per venue. (Cable and installation costs to be supplied once number, size and particular issues of each venue are known).

PC and camera needs with all equipment for streaming and recording of meetings. $10,000 - $15,000 (estimate only, but can only confirm pricing after a full site visit, viewing of current audio set up and final plan has been presented)

On-going costs per meeting:

•Tandem can provide full training in the use of all equipment and processes to stream and video capture with ongoing HBRC staff support. $130ph

• Streaming ongoing $200 to $400 per meeting

(this may change through number of viewers and can be more accurate after further discussion on your streaming quality expectations)

• Website maintenance, back up, updates and hosting. $200 per month

• Video edit and uploads with meta tagging, links to PDF $250 per meeting hour

In addition;

Extra graphics and additional equipment may be required after further discussion with HBRC and after the full site visits.

Additional website changes as requested by the client or as needed through technology changes $160 per hour

Podcast audio only:

All meetings recorded then edited and made available for playback with in 48 hours

Indicative costing:

• Full site visit, consultation and final plan with full costs $4500 (once only)

(2 x producers visiting all sites, test and review current audio or plan new audio feeds, Internet capabilities, plan all cable laying, staff locations and exact equipment needed for audio recording. All travel costs and expenses. Produce a full plan detailing all aspects of audio recording and audio needs for all locations)

• LaBon(tm) multi media website creation for audio hosting and playback. $4900 (once only)

Audio needs with all equipment for quality recording of meetings and any additional Microphones or audio equipment. $10,000 (estimate only, but will confirm pricing after a full site visit with viewing of current audio set up and existing equipment and after a detailed plan has been presented)

Audio hosting service set up (the audio version of You Tube) once only $750 -$1200 per year (This depends on the amount of audio hosted and listened to per year)

On-going costs per meeting:

•Tandem can provide full training in the use of all equipment and processes to manage audio, record and read for podcast creation with ongoing Hawkes Bay staff support $130ph

• Streaming ongoing $200 to $400 per meeting

(this may change through number of viewers and can be more accurate after further discussion on your streaming quality expectations)

• Website maintenance, back up, updates and hosting. $200 per month

• Audio edit and uploads to website with meta tagging, links to PDF $250 per meeting hour

In addition;

Extra and additional equipment may be required after further discussion with HBRC and after the full site visits.

Additional website changes as requested by the client or as needed through technology changes $160 per hour

Step one:

Site inspection and full report video and steaming of council meetings.

This includes…

· A visit to the site by an audio and video engineer to view both rooms to gauge the best possible site lines for camera placement

· Designing and working with HBRC staff on a plan of where cameras, wiring, audio and PC can be placed

· Research and advice on equipment purchase (either HBRC can purchase or Tandem can on behalf of HBRC)

· Full plan of complete streaming solution with costs

· Establish a time line and project plan

Step two:

· Work remotely with HBRC IT or maintenance staff on the Installation of all equipment, software, PC and wiring as per the report. Advise on what PC and set up is required

· Purchase all the software for live streaming, recording and vision mixing on the on site PC’s

· Set up streaming via the internet

Train HBRC staff in use of the equipment and how to manage each live streaming session, vision mixing, loading graphics into the stream, and recording of the video and sending to Tandem for editing.

On sight Introduction and explanation of new equipment and process to Chairman, councilors and other interested parties (as decided by HBRC)

Build the HBRC multi media ‘Your Council’ website for streaming, video playback and hosting and for archiving. Include all social media features, blogs and the ability to host or link to any power point presentations to council meetings. The site would include council agendas for each meeting and would link back to the main HBRC website. HBRC will be staff will be trained and instructed on how to upload agendas into the blogs.

The video would be hosted via You Tube (an HBRC You Tube page would be established)

(This cost depends on final website specifications)

On going web hosting and update costs

Ongoing streaming costs, this depends on number of viewers.

Step three:

· Allocate the Tandem engineer and studio space for editing each council or committee meeting

· Meta tag and load edited video into the HBRC ‘Your Council’ website for playing, sharing and archive

· An editor to ensure all material is proofed and correct before loading into the website

· All website management and hosting of the video

· Monthly ongoing site maintenance, upgrades and hosting

· A producer to work with all parties to manage streaming each meeting then recording and upload process as required etc

· Full reporting of site visits and video views

· All client contact with HBRC

In addition:

Train (via Skype, email and written process) HBRC staff to manage blogs and other site features

Ongoing production or development of new features or other issues that may develop or be require meetings with HBRC

‘Your Council’ website:

Tandem will design, build and host a website to easily find the library of edited video as per the NZ Parliament website www.inthehouse.co.nz and as for the Taupo District Council

The advantage of the website is the data base and the variety of ways to search the 10,000 videos by name, subject and date.

Videos can link to other relevant topics e.g. the video of the 2^nd reading of the ‘water’ bill; will link to the earlier first readings.

The website also includes…

· Links back to the main website

· Social media links to Facebook, Twitter and YouTube

· Moderated feedback on Your Tube

· Response to questions via Facebook or Twitter

· All recording, editing and uploading of video

· Similar in style and colour to the main HBRC website

· Self managed blog that HBRC can upload

· Written material that is relevant to the council or committee meeting videos can be converted into a PDF and placed on the HBRC main website, with the appropriate video linking to that PDF.

Tandem would work with HBRC to ensure the online ‘Your Council’ solution is constantly up to date and ensure the Hawke’s Bay ratepayers are provided with a simple solution to view online, an open and transparent political process.

HAWKE’S BAY REGIONAL COUNCIL

CORPORATE AND Strategic Committee

Wednesday 09 November 2011

Subject: Public Transport Update

Reason for Report

1. This agenda item provides the Committee with an update on public transport services, including trends since the previous update in July 2011. This report contains patronage and revenue graphs which are updated each month and provided to this Committee and the Regional Transport Committee.

General Information

2. The overall performance of the bus service continues to be positive with good passenger growth and fare recovery levels.

1. Total Passenger Trips

3. Since 2009 average monthly trips have trended upward as follows.

2. 2009 – 33,758

3. 2010 – 42,888

4. 2011 (to September) – 51,597

6. The following graph outlines total passenger trips from February 2009 to September 2011.

7. Diagram 1 – Passenger Numbers – February 2009 - September 2011

Patronage and Financial Trends

4. The following graph shows a comparison of fare revenue from February 2009 to September 2011.

Diagram 2 – Total Revenue – February 2009 - September 2011

Farebox Recovery (total fares as a percentage)

5. The following graph shows the farebox recovery trend (i.e. the total amount of fares), as a percentage, for each month from September 2010 to September 2011. The average farebox recovery for this period was 38.3%.

Diagram 3 – Farebox Recovery – September 2010 - September 2011

Capacity

6. This graph shows the seat capacity utilised on a monthly basis from September 2010 to September 2011. The average utilised capacity for this period was 57%.

Diagram 4 – Capacity September 2010 - September 2011

SuperGold Card Trips

7. The following graph shows the number of SuperGold cardholder trips from September 2010 to September 2011. SuperGold cardholders continue to make very good use of this concession.

Diagram 5 – Number of SuperGold Card Trips – September 2010 - September 2011

Improvements to Bus Services

8. Increased frequencies on Route 12 services are proving popular with passengers. Services now operate every 15 minutes in peak times and every 30 minutes in off-peak times. Four new buses have been added to the fleet to deliver these services. The increased frequencies make public transport a viable mode of transport for a greater number of people, enabling them to get to and from work on time.

9. The 6-month trial of a Napier-Ahuriri-Westshore-Ahuriri-Napier service got off to a great start on Monday 17 October. Staff worked closely with Napier City Council to determine the route and bus stop locations for the service. Branded the ‘Hopper’, graphics reflecting the scenic route have been applied to both sides of the bus. Staff have received many phone calls from ratepayers all of a congratulatory/complimentary nature. The trial has been particularly well received by the Ahuriri Business Association, the staff/residents of the Princess Alexander Retirement Village and the Manager of the Crown Hotel. Passenger statistics will be closely monitored and if successful (and approved by Council) this service could become permanent at the end of the trial period.

Infrastructure

Bus Stops

10. Re-routing all Hastings services through Home HQ (formerly Nelson Park) was due to commence on Monday 31 October. However a recent site visit confirmed that the newly installed speed bumps are not suitable for buses, and HDC are currently working with the developer to find a solution. Once this matter has been resolved and the K-Mart bus stop relocated from Avenue Road to Russell Street (near the Environment Centre), Hastings services will travel along Russell Street, right into St Aubyn Street, left into Holt Place, through Home HQ, right into Alexandra Crescent and right onto Karamu Road.

11. A new bus shelter was installed at the Lee Road bus stop, near the Meeanee Road intersection in Taradale. The shelter was funded jointly by HBRC and NCC, with NCC taking responsibility for repair and maintenance. Sadly two large glass panels were smashed and had to be repaired within a week of the installation.

Travel Plans

12. ‘Walk Once a Week’ days are proving to be very successful at St Mary’s School Hastings and Lucknow School Havelock North. Both schools are investigating a ‘kiss’n’drop zone’ to help alleviate congestion and improve safety at the school gate.

13. The HBRC travel plan team continue to work on initiatives to encourage more staff to use active modes of transport on their journey to and from work, with an emphasis on public transport. Recently staff were offered a goBay smartcard loaded with $40 as an incentive to use public transport. To date 35 staff have taken up this offer and feedback has been very positive, particularly with regard to the improved frequencies/earlier start times on Route 12.

Other

14. The draft Regional Public Transport Plan (RPTP) was endorsed by the RTC and adopted by Council on 27 July. The RPTP is required to follow Council’s special consultative process under the Local Government Act.

Total Mobility Update

15. Below is a table showing details of Total Mobility client numbers and expenditure to date for the 2011/12 financial year.

Diagram 6 – Total Mobility Statistics - June to September 2011

Decision Making Process

16. Council is required to make a decision in accordance with Part 6 Sub-Part 1, of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained within this section of the Act in relation to this item and have concluded that, as this report is for information only and no decision is to be made, the decision making provisions of the Local Government Act 2002 do not apply.

Recommendation

1. That the Corporate and Strategic Committee receives the Public Transport Update.

Carol Gilbertson

Governance and Public Transport

Manager

Paul Drury

Group Manager

Corporate Services

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: Implementation of Air Plan Rules - Communications

Reason for Report

1. As has been recently discussed at the Environmental Management Committee and Regional Council meetings the changes to the air quality rules for the Napier and Hastings air shed are shortly to come into effect.

2. The two rules which will have immediate effect from 1 January 2012 are the “point of sale” rule (Rule 18(h)) and the banning of the use of domestic open fires (Rule 18(b)). The purpose of this paper is to inform councillors of the actions underway to communicate the changes to the public.

Discussion

Actions to Date

3. Media interest responded to: articles in Dominion Post, Napier Mail, Courier, Wairoa Star, Hastings Mail, Hawke’s Bay Today, plus a radio interview with Councillor Rose.

4. The Regional Council’s publication “Our Place” and Regional Council rates notice – information was included in both these publications and sent to all households in Hawke’s Bay (including those out of the affected airsheds) informing them of the dates for the cessation of open fires and of the availability of grants and loan funding. The “Good Wood” message regarding the burning of dry wood was also reinforced.

5. Other communications:

5.1. E-news: an email newsletter from the HeatSmart Programme Coordinator sent to all EECA approved Hawke’s Bay suppliers, covering details of the changes.

5.2. The Institute of Valuers (HB Branch) has been sent updated information and an offer has been made by staff to attend a branch meeting for Q&A.

5.3. The Citizens Advice Bureau has been sent updated information and an offer has been made by staff to attend a meeting for Q&A.

5.4. Grey Power has been sent updated information and an offer has been made by staff to attend a meeting for Q&A.

5.5. Leaders and Property Brokers (real estate companies) have been sent updated information

5.6. Lawyers to be contacted with information pack on point of sale rule

5.7. Banks/mortgage brokers to be contacted with information pack on point of sale rule

5.8. Credit union offer – 2000 Credit Union members have been sent a newsletter offering them 3.51% loans

5.9. Housing NZ liaison – ensuring refurbishment programme for fire replacement matches HBRC deadlines

5.10. Media releases being planned for November/December to remind people of deadlines for rule implementation

Events planned

6. The following events are booked and planned:

6.1. Home Show – McLean Park 4-6 November

6.2. Healthy Homes promotion – Anderson Park 19 November

6.3. Home and Garden Expo – Pettigrew Arena May 2012

6.4. Event marking 1000^th HeatSmart customer

6.5. Supplier bonus draws over summer period

HBRC Website Revision

7. In addition to an information update of the Council website on the air rules Council staff are also investigating:

7.1. Liaising with EIT students about the possibility of them developing a YouTube –style clip as a promotion for clean heat

7.2. The ability to carry out a web search using an interactive map for people to determine whether or not they are in an airshed and consequential linked information as to what rules apply

7.3. A revision of the information pack with the new rates for EECA grants.

Further Opportunities

8. Discussions are underway internally to look at the feasibility of issuing a “Certificate of Compliance” from HeatSmart for domestic fires that meet the required standards, as a marketing tool for house sales.

Decision Making Process

9. Council is required to make a decision in accordance with Part 6 Sub-Part 1, of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained within this section of the Act in relation to this item and have concluded that, as this report is for information only and no decision is to be made, the decision making provisions of the Local Government Act 2002 do not apply.

Recommendation

1. That the Corporate and Strategic Committee receives the report.

Liz Lambert

Group Manager

External Relations

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 09 November 2011

Subject: 2010/11 Human Resources Report

Reason for Report

1. This agenda item is to provide Council with a brief overview of some of the key human resources metrics recorded each year as part of the internal annual human resources report, and relates to the year from 1 July 2010 to 30 June 2011.

Key Metrics

Staff Numbers (Previous year in brackets)

2. As at 30 June 2011 171 FTE (169.6 FTE)
Made up of:

2.1. Dalton Street (including Wairoa and Waipukurau offices) 143 (124.1) FTE

2.2. Operations (Taradale and Waipukurau) 28 (33) FTE

3. Changes to Dalton street establishment includes addition of 3 (2 FTE) staff from VHB (economic development) and 4 staff ‘transferred’ from Operations at Works group to the Asset Management group.

4. Staff turn over for the year ending 30 June 2010 was 6.3% (6.6%). A total of 11 staff left Council’s employ during the year (excludes redundancy and parental leave). The level of staff turnover continues to be very low and compares very favourably with the national average for equivalent local government entities that provided data to the Online Executive Search National Survey: Local authorities 10.3%.

Staff Leave Usage

5. For the year ending 30 June 2011, the average number of sick leave days taken was 6.5, slightly up from an average of 5.4 days the previous year. The usage of sick leave is at an acceptable level and we do not have any issues with use of sick leave other than what seems to be a ‘generational issue’ whereby younger staff see sick leave as an entitlement to use and older staff see it as an ‘insurance’ against potential requirement.

6. For the year ending 30 June 2011, the average number of annual leave days taken was 17, down from 19 days in the previous year. Annual leave usage is an issue a small number of staff need to have monitored to ensure they use their entitlement. Council, as a good employer, is aware of the need for staff to have a good work/life balance and Managers are regularly reminded to discuss this with their staff and ensure it is being appropriately used.

Average Age – Tenure

7. For the year ending 30 June 2011, the average age of Dalton Street staff was 44 (47) and the number of years working for Council was 9 (12).

8. For the year ending 30 June 2011, the average age of Operations staff was 50 (55) and the number of years working for Council was 13 (16).

Age Profile

Age	20-25	26-30	31-35	36-40	41-45	46-50	51-55	56-60	61-65
Dalton St	6	10	21	21	20	19	20	12	10
Operations	1	0	0	4	2	7	6	3	4

9. The increasing average age of the work force continues to be a concern in terms of work force planning and succession. Succession planning remains an important aspect of HR planning in an attempt to ‘plan’ for retirement issues.

Work Related Accidents (an incident where no injury happens is also recorded as an ‘accident’)

10. Dalton Street: 9 accidents and total of 46 days off work.

11. Operations: 15 accidents and total of 42 days off work.

12. There were no serious accidents in this year, and most accidents required no time off work.

13. Under the new formula used to establish the ACC levy the Council has achieved an additional discount to the 20% awarded under the Workplace Safety Management programme (Tertiary level) by its favourable comparison with other Councils’ accident records.

Staff Training

14. The training budget for the year was 2.6% of the salary budget. The corporate training budget, which is applied to identified ‘corporate needs’, has been used to assist with the development of leadership skills in staff identified as having leadership potential, communication skills training and health and safety requirements.

Decision Making Process

15. Council is required to make a decision in accordance with Part 6 Sub-Part 1, of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained within this section of the Act in relation to this item and have concluded that, as this report is for information only and no decision is to be made, the decision making provisions of the Local Government Act 2002 do not apply.

Recommendation

1. That the Committee receives the report.

Viv Moule

Human Resources Manager

Andrew Newman

Chief Executive

Attachment/s

There are no attachments for this report.

Agenda Item	Action	Person Responsible	Due Date	Status Comment
7. Opportunities for further improvement of Regional Council Services	Winder report to be distributed once finalised	PD	done	Distributed to Councillors with the 13 October workshop papers

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