Agenda of Corporate and Strategic Committee

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 March 2014

SUBJECT: Strategic Planning Process for 2015-25 Long Term Plan

Reason for Report

1. This paper provides the Committee with an overview of the strategic planning process for the development of the Long Term Plan 2015-25 (LTP) for the Committee’s consideration, comment and endorsement. It reflects on previous strategic planning processes as well as providing the legislative context for Long Term Plans.

Legislative context

2. The purpose of local government is set out in section 10 of the Local Government Act 2002 as being:

(a) to enable democratic local decision-making and action by, and on behalf of, communities; and

(b) to meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses.

3. Section 11 states that the role of local authorities (territorial, regional and unitary authorities) is to:

(a) give effect to the purpose of the Local Government Act and

(b) perform the duties and exercise the rights conferred on it by or under this Act and any other enactment.

4. Section 11A requires local authorities to have ‘particular regard to the contribution that the following core services make to its communities:

(a) Network infrastructure

(b) Public transport services

(c) Solid waste collection and disposal

(d) The avoidance or mitigation of natural hazards

(e) Libraries, museums, reserves, recreational facilities, and other community infrastructure.

5. In performing its role, local authorities must act in accordance with the following principles outlined in s14(1) as follows:

(a) a local authority should—

(i) conduct its business in an open, transparent, and democratically accountable manner; and

(ii) give effect to its identified priorities and desired outcomes in an efficient and effective manner:

(b) a local authority should make itself aware of, and should have regard to, the views of all of its communities; and

(c) when making a decision, a local authority should take account of—

(i) the diversity of the community, and the community's interests, within its district or region; and

(ii) the interests of future as well as current communities; and

(iii) the likely impact of any decision on the interests referred to in subparagraphs (i) and (ii):

(d) a local authority should provide opportunities for Māori to contribute to its decision-making processes:

(e) a local authority should collaborate and co-operate with other local authorities and bodies as it considers appropriate to promote or achieve its priorities and desired outcomes, and make efficient use of resources; and

(f) a local authority should undertake any commercial transactions in accordance with sound business practices; and

(fa) a local authority should periodically—

(i) assess the expected returns to the authority from investing in, or undertaking, a commercial activity; and

(ii) satisfy itself that the expected returns are likely to outweigh the risks inherent in the investment or activity; and

(g) a local authority should ensure prudent stewardship and the efficient and effective use of its resources in the interests of its district or region; and

(h) in taking a sustainable development approach, a local authority should take into account—

(i) the social, economic, and cultural interests of people and communities; and

(ii) the need to maintain and enhance the quality of the environment; and

(iii) the reasonably foreseeable needs of future generations.

(2) If any of these principles conflict in any particular case, the local authority should resolve the conflict in accordance with the principle in subsection (1)(a)(i).

6. The sections describing the purpose and role of local government have been amended since the Long Term Plan (2012-22) was prepared. The amendments sought to focus local government on core responsibilities and ensure more rigour around decisions to be involved in commercial activities. Previously the purpose of the Local Government Act was to promote social, cultural, economic and environmental well being in the district or region.

Previous Strategic Planning Processes

7. The strategic planning for the development of the 2009-19 Long Term Plan comprised the following elements:

7.1. Identification of 14 key strategic issues (2008 Council workshop);

7.2. Development of a goal and objectives for each issue (contained in a document Embracing Futures Thinking – the Yellow Book);

7.3. Engagement with stakeholders on the draft goals and objectives;

7.4. The ‘Embracing Futures Thinking’ speaker series to profile and debate the issues;

7.5. Filtering and prioritising the issues from 14 to 6 for detailed attention in the Long Term Plan.

8. The strategic planning for the development of the 2012-22 Long Term Plan built on the foundation provided by the 2009-19 LTP. It comprised the following elements.

8.1. The development of a set of futures scenarios for Hawke’s Bay in 2050

8.2. Continuing the ‘Embracing Futures Thinking’ speaker series

8.3. Holding Land and Water Symposiums to continue the community dialogue

8.4. Development of the Hawke’s Bay Land and Water Management Strategy

8.5. Proposing the overall direction of HBRC in a Strategic Plan in 2011, including HBRC’s picture of the future in 2050.

9. The Strategic Plan was widely circulated to interested parties and which formed the starting point for The Right Debate section of the Long Term Plan.

What were the key issues in 2008?

10. The fourteen key issues identified were Sustainability, Water Futures, Land Use Change, Climate Change, Renewable Energy, Future Regional Infrastructure, Open Space, Economic Development, Regional Futures Scenarios, Regional Leadership, Partnerships with Maori, Investment, Operational Activities and Organisational Competency. The six priority issues were those that are in bold.

What is Council’s current vision and purpose statement?

11. Council revised its vision in 2008 as follows.

11.1. A region with a vibrant community, a prosperous economy, a clean and healthy environment, now and for future generations.

12. The vision statement was considered to incorporate the concept of sustainable development. The Bruntland Commission defined Sustainable Development as: development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

13. In the 2011 Strategic Plan, Council considered why the Regional Council existed and came up with the following purpose statement.

13.1. Hawke’s Bay Regional Council has a long term focus and we exist because of our statutory role in four core functions –

13.1.1. Natural resource knowledge and management

13.1.2. Natural hazard assessment and management

13.1.3. Regional strategic planning

13.1.4. Regional scale infrastructure and services.

What’s the Current Strategic Framework

14. The Strategic Plan provides the current strategic framework as shown in Attachment 1.

15. Keeping in mind the Council’s purpose statement, it identifies three Strategic Goals of Resilient Ecosystems, Resilient Economy and Resilient Communities and then the strategic objective for six focus areas – Land, Water Quality, Water Allocation, Water Security, Natural Hazards and Infrastructure, People and Communities.

16. To support these Strategic Goals and Objectives, four enablers were identified – foresight and strategy, investment, strategic alliances and having a ‘fit for purpose’ organisation.

Use of Scenarios as a Strategic Planning Tool

17. Having foresight was seen as a critical element of strategic thinking when Council was developing the last two Long Term Plans. Predictions of the future based on the past are important but they do not go far enough. To assist Council and the community getting beyond a future based on predictions only, a set of future scenarios for Hawke’s Bay were prepared.

18. This process involved identifying key drivers for change through a comprehensive STEEP analysis (looking at Social, Technological, Environmental, Economic and Political Trends) and interviews with key community figures and identifying those with a high degree of uncertainty. Three critical uncertainties emerged:

18.1. Land based economy – how and why this might change

18.2. Water and Soil management

18.3. Maori leadership change and investment of Treaty money.

19. Stories were constructed around these three critical uncertainties, in order to bring them to life and make them more tangible.

20. The publication HB2050: Land River Us provides a comprehensive summary of the scenario development process. The Executive Summary is included in Attachment 2. This resource tool is still relevant for the upcoming Strategic Planning process.

21. The Long Term Plan identified a review of the STEEP Trends to be undertaken in this financial year. This would be funded from Project 192 which is currently over expended in relation to the Tukituki Catchment Proposal expert witness costs. As these were done in 2010, it may be a matter of identifying any new emerging trends. The 2010 trend analysis work is summarised in pages 70 to 102 of HB2050 Land River Us.

Hawke’s Bay Land and Water Management Strategy

22. This document provides an overarching direction for the management of land and water and it was developed over a nine month period through a collaborative stakeholder process. A stock take of HBRC’s action and initiatives that deliver on the strategies policies and objectives has been undertaken and this report is provided in Attachment 3. We hope that this will assist Councillors understanding of the work Council is undertaking and how it fits into current strategic directions.

23. The Hawke’s Bay Land and Water Management Strategy does indicate that it would be reviewed in November 2014. However, it is appropriate that this Council consider the strategy in light of the upcoming strategic planning process for the Long Term Plan and through that process, provide some guidance to staff as to where the Strategy might fit in any revised strategic direction.

Proposed Strategic Planning for the 2015 - 25 Long Term Plan

24. It is proposed that the planning process involves both a review of current statements of purpose and vision, the current strategic framework, where the Council saw Hawke’s Bay in 2050, and a fresh look at the issues, risks, challenges and opportunities facing Hawke’s Bay.

25. Based on the previous Long Term Plan processes, the production of a discussion document containing Council’s proposed strategic direction has been a useful way for Council to engage with stakeholders and constituents and it is suggested that a document in some form is produced again.

26. The process is iterative in that staff will work to further develop Council’s proposals in the context of relevant legislation and high level budgeting initially, and once the strategic direction is more defined, to develop it in the context of project financials and resourcing. Staff will also bring proposals to workshops for Council’s consideration.

27. A draft programme and timeline is proposed in Table 1 for the Committee’s consideration and comment.

28. An alternative option would be to start this process once the 2014-15 Annual Plan has been adopted. This is not recommended as it does not leave adequate time to engage the community on the broader issues facing the region and possible strategies for dealing with them. It is recommended that Council turn their minds to the Long Term Plan once the draft Annual Plan has been adopted, i.e. in April.

Table 1: Proposed Strategic Planning Programme and Timeline

Phase	Period	Method/output
What will HB look and feel like in 2050? Identification / review of key issues Review purpose, vision and values, strategic framework	April to June	Council / staff workshops
Produce a branded document for public engagement (Embracing Futures Thinking yellow book, Strategic Plan discussion document	July	Document adopted at 16 July 2014 C&S meeting, then Council
Informal engagement – Councillor / stakeholder level	August - October	Stakeholder meetings Speaker series?
Finalise Preferred Strategic Direction	November	C&S Comm / Council paper
Adopt Draft Long Term Plan	March 2015	Draft Long Term Plan
Consultation	April-May	Engagement Strategy
Hearings	Early June 2015	Officers Reports and recommendations
Adopt Long Term Plan	June 2015	Council paper / LTP

29. Papers relating to the Strategic Planning process and overall Strategic Direction of Council are generally considered by the Corporate and Strategic Committee with recommendations to Council. Separate LTP Strategy workshops for Council have also been scheduled in Councillor’s calendars. In addition a number of Field Trip days have been pencilled.

30. Where possible dates of strategic planning workshops / meetings should fit into dates that Councillors already have scheduled in their diaries.

31. The dates for these meetings/workshops/field trips in 2014 are as follows.

31.1. Wednesday 7 May 2014 (Strategic Planning workshop)

31.2. Wednesday 21 May 2014

31.3. Thursday 12 June 2014

31.4. Wednesday 16 July 2014 (C&S Committee)

31.5. Wednesday 23 July 2014

31.6. Thursday 21 August 2014

31.7. Wednesday 10 September 2014 (C&S Committee)

31.8. Wednesday 16 and 17 September 2014 (LTP Strategy Workshop)

31.9. Tuesday 21 October 2014

31.10. Wednesday 12 November 2014 (C&S Committee)

31.11. Wednesday 19 November 2014.

Financial and Resource Implications

32. There will be budget provision in the 2014-15 for the project management of the development of the Long Term Plan, including auditing and printing.

33. Costs associated with the Strategic Planning process in the current financial year could include:

33.1. An independent workshop facilitator (up to $5000, time, travel and accommodation)

33.2. Designing and printing of the discussion document depending on size (no. of pages), production quality, and number of copies. ($5000 to $15,000)

33.3. External speaker event - speaker fee, travel, accommodation, venue ($5000 - 8000)

34. One of the performance targets was to host three Embracing Futures Thinking events each year. None have been held to date but the strategic planning exercise would fall into that category.

35. As discussed above in terms of the review of the STEEP trends, these events would be provided for in Project 192 which is currently over-expended due to expert witness costs associated with the Tukituki Plan Change.

36. The reforecasting exercise currently being undertaken will allow a review of expenditure across Councils activities in relation to the above initiatives.

Decision Making Process

37. 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:

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

37.2. The use of the special consultative procedure is prescribed by legislation and this decision relates to the planning work required to prepare for that special consultative process on the Long Term Plan.

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

37.4. The persons affected by this decision are all ratepayers and all persons with an interest in the region.

37.5. Options that have been considered have been limited to timing as the Local Government Act sets out clear principles for Council in relation to its role. It is recommended that Council turn their minds to the Long Term Plan once the draft Annual Plan has been adopted.

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

37.7. 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

That the Corporate and Strategic Committee:

1. Receives the report on the Strategic Planning for the Long Term Plan 2015-25, noting the outcomes from previous strategic planning processes.

2. Considers the proposed Strategic Planning process and programme as outlined in Table 1 and makes any amendments as required.

The Corporate and Strategic Committee recommends that Council:

3. 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.

4. Adopts the Proposed Strategic Planning Programme for the development of the Long Term Plan as set out in Table 1 including any amendments agreed by the Committee.

Helen Codlin

Group Manager

Strategic Development

Liz Lambert

Chief Executive

Attachment/s

1	Extract from HB2050	Under Separate Cover
2	Strategic Plan Framework	Under Separate Cover
3	Land and Water Management Strategy Stocktake	Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 March 2014

SUBJECT: Top 10 Corporate Risks Assessment

Reason for Report

1. Staff have reviewed the corporate risk management framework for Council consideration. This framework was adopted by Council in March 2009 and forms the basis of the formal risk management and reporting process for Council. The revised framework is attached as Attachment 1.

2. This paper explains the framework and seeks agreement from the Committee that it be put forward for Council adoption.

3. In accordance with this framework details of the top ten risks to which HBRC is exposed are set out in Attachment 2. An assessment of the relative risks of each of these is set out in Attachment 3.

Background

4. Risk is defined as the likelihood of a threat occurring multiplied by the consequence of that threat should it occur. Risks are managed or mitigated by control mechanisms which reduce the likelihood of the threat occurring or reduce the consequences should it occur.

5. The risk framework was developed to enable threats that have the potential to impact on HBRC to be assessed and quantified. This involves:

5.1. A process to quantify threat likelihood

5.2. A process to quantify threat consequence

5.3. A risk analysis process and worksheets which allow the various threats to be compared and the concept of risk to be communicated.

6. On a day-to-day basis HBRC staff manage a large number of risks. Staff experience, qualifications and professional judgement are critical to the management and mitigation of many routine operational risks. Council, as the governance body for the organisation, should be aware of the major risks to which the organisation is exposed, and the steps in place to manage or mitigate those risks.

7. The framework presented in Attachment 1 to this agenda item sets out the process for key risks and their mitigation steps to be identified, quantified, and reported to Council.

8. Attachment 2 includes a written summary of the top 10 risk issues, how they are being managed or mitigated and describes the progress in managing these risks over the past term of Council.

9. Attachment 3 quantifies the risks.

Risk Management

10. Risk management is an iterative process consisting of well defined steps which, taken in sequence, support better decision making by contributing a greater insight into risks and their impacts. It requires a systematic, logical method of identifying, analysing, evaluating, treating, monitoring and communicating risks associated with any activity, function or process, and will enable Council to better predict and respond to organisational risks.

11. Risk management is recognised as an integral part of good management practice and good governance. To be most effective risk management should become part of an organisation’s culture. It should be integrated into an organisation’s philosophy, practices and business plans rather than be viewed or practiced as a separate programme.

12. The top 10 risks presented in this paper have largely been identified by the previous Council through the process of developing their Stategic Plan. The current Council will be reviewing that Strategic Plan and developing their own Strategic Plan over the coming months. The new Strategic Plan will be the foundation for the 2015-25 LTP which should include appropriate resource to manage or mitigate the key risks.

The Risk Management Framework

13. As HBRC’s business landscape continues to evolve, there will be a need for the organisation to continuously review and improve the ability to identify and manage corporate risks. This framework and process of risk management set out in this agenda item will establish the oversight, control and discipline to drive continuous improvement of HBRC’s corporate risk management in a changing operating environment. Three key criteria are used to quantify the potential impact of a threat on HBRC. These threat consequences form the basis of this risk management framework and are:

13.1. The financial impact on HBRC

13.2. HBRC’s reputation with its stakeholders

13.3. HBRC’s operational capability.

14. The top 10 risks that have potential impact on Council are assessed using this framework. The risks, once identified, are analysed using the following steps.

14.1. Assessment of Inherent Risk
Inherent risk has been assessed based on the risk if little or no mitigation steps were in place.

14.2. Assessment of Residual Risk
Residual risk has been assessed based on risk control mechanisms currently in place and the assumption that these risk control mechanisms are functioning. If this is the case then the residual risk is equal to the current risk.

15. It is important to recognise that the failure of a mitigation method (risk control) may result in the risk being at an inherent risk level rather than a residual risk level. It is therefore essential that for the management of risk that the control mechanisms are monitored to ensure that they continue to effectively mitigate that risk.

16. The framework includes clear parameters under which the risk likelihood and consequences have been established. These may be reviewed from time to time as part of the ongoing improvement of HBRC’s risk management processes.

17. If risk management is to be effective, risks must be reviewed regularly. The framework for the review and management of risk provides for this review and reporting. It is therefore recommended that the Committee consider the attached policy and framework and, subject to amendment, seek its adoption by Council.

Top 10 Risks

18. The risk policy and framework requires the top 10 risks to be considered by the Corporate and Strategic Committee 6 monthly. They were last considered on 8 May 2013. They delay is a result of local body elections and restricted time for the last meeting of the Committee held in December 2013.

19. The risk mitigation approaches set out on each of the risk narratives are included as part of planned work programmes for HBRC staff. These will be reviewed as part of the 2014-15 Annual Plan development.

20. Risk mitigation continues to be undertaken and accordingly staff believed that the current level of risk is being effectively managed.

21. Staff will continue to monitor current and emerging risks and report to Council six monthly in accordance with the risk management policy framework.

Decision Making Process

22. 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:

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

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

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

22.4. No persons are directly affected by this decision.

22.5. Options that have been considered are set out in this paper.

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

22.7. 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. Adopts the Hawke’s Bay Regional Council Risk Management Policy and Framework, March 2014.

3. Considers the top ten risks currently facing Council.

4. Approves the risk mitigation approach to each of the ten risk issues as set out.

Mike Adye

Group Manager

Asset Management

Liz Lambert

Chief Executive

Attachment/s

1	HBRC Risk Assessment Policy	Under Separate Cover
2	1 - 10 Top 10 Risks	Under Separate Cover
3	Top 10 Risk Assessment Spreadsheet (2 pages)	Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 March 2014

SUBJECT: Oil and Gas Exploration Policy Development

Reason for Report

1. At its meeting on 11 December 2013, the Committee received a staff report outlining possible processes that Council might undertake to engage with the public on the development of policy for petroleum and gas exploration in the Region. Council endorsed, in principle, a draft community engagement proposal (the draft proposal).

2. This report provides an update on that draft proposal and how neighbouring Horizons Regional Council (Horizons) and Tararua District Council (TDC) (key partners in the draft proposal) have responded in recent weeks.

3. This report revisits the draft proposal and presents several options for the Committee’s consideration in terms of developing a policy for petroleum and gas exploration in the Region.

The draft community engagement proposal

4. Council previously endorsed the draft proposal in principle. The draft proposal involved formation of a multi-stakeholder group (MSG) to be “tasked with considering matters related to prospecting, exploration and development of petroleum and gas resources in Hawke's Bay and peripheral areas.”

5. The MSG was presented by New Zealand Petroleum and Minerals (NZP&M) as “a joint venture between the Hawke's Bay Regional Council, Horizons Regional Council, territorial authorities in the region, local iwi and NZ Petroleum and Minerals on behalf of the Crown.”

6. On 11 February, Horizons met to consider the same draft proposal. Horizons’ resolutions could be described as being ‘lukewarm’ to the draft proposal, and their position is to liaise with their TDC counterparts before deciding on how best to proceed with joining the MSG joint venture - if proceeding at all. Representatives of TDC and Horizons are scheduled to have that discussion before the end of March.

Options for moving forward

7. The short term implication of the Horizons and TDC positions is clearly that the draft proposal cannot be advanced with all parties as currently written. Given this, staff have identified four broad options for next steps; outlined in Table 1.

Table 1 – options for moving forward

	Outline of options
A	Defer formation of MSG (and its associated tasks) until Horizons and TDC are ready and willing to participate in the draft proposal’s joint venture. The timing of this is indefinite until discussions occur between Horizons and TDC representatives.
B	Defer formation of MSG (and its associated tasks) and incorporate proposal for preparation of a regional petroleum and gas strategy (and/or renewable energy strategy) into the 2015-2025 Long Term Plan development process. [NB: see separate item in this agenda discussing review of strategic plan and the strategic planning processes].
C	Proceed with formation of MSG (and its associated tasks) without Horizons and TDC being parties at commencement, but with option for them to join either at later date or in a manner that is aligned with the approach taken by them.
D	Same as Option C in the short term (including 2014/15 financial year), for ‘Phase 1’ plus incorporation of broader proposal for development of a strategy (or strategies) and their potential implementation into the 2015-2025 LTP.

8. Since Horizons made its decision on 11 February, staff have had further discussions with representatives from Horizons and NZP&M. NZP&M remains eager to engage in a process without delay, covering the Hawke's Bay region (i.e. options C or D).

Financial and Resource Implications

9. As noted in previous staff reports on this matter, Council’s existing commitments in the 2012-22 Long Term Plan and 2013/14 Annual Plan do not currently provide budgets for the establishment and servicing of the MSG and associated process.

10. Options A and B would incur the least financial and resource costs in the short term (i.e. remainder of the 2013/14 financial year. Options C and D would demand resourcing in the current 2013/14 financial year and beyond.

11. Assuming Option A is revisited after 30 June 2014, then options A, C and D would demand resourcing for the 2014/15 and 2015/16 periods.

12. Option B would defer the need for any short-term resourcing until fuller consideration of Council’s broader priorities and strategies occurs through preparation of the LTP. If the project were to indeed emerge as a priority for inclusion in the LTP, then the LTP process would inevitably assign the necessary resources. It is possible that other potential ‘joint venture’ partners (e.g. Horizons, TDC and Hawke's Bay TLAs) could also then assign resource contributions to the work.

13. Staff have estimated possible costs associated with ‘Phase 1’ of the MSG process proposal if it were to commence in the near future. Phase 1 would focus on development of a policy on petroleum and gas exploration in the region. Cost estimates for Phase 1 are set out in Table 2. Costs associated with the draft proposal’s Phase 2 (renewable energy resources) have not yet been estimated.

Table 2 – Cost estimates for MSG Phase 1 petroleum and gas policy

	Time (Days)	Time($)	Consultants	Meeting exp	Travel costs	Admin& printing	ESTIMATE TOTALS
Establish MSG	3.0	2,280	-	500	1,000	300	$ 4,080
MSG setup&admin	5.0	3,800	-	-	-	500	$ 4,300
Report to MSG	2.5	1,900	-	-	-	500	$ 2,400
Staff advisory to MSG	10.0	7,600	-	-	-	-	$ 7,600
HBRC MSG membership	4.5	3,420	-	-	-	-	$ 3,420
Misc meeting exp	-	-	2,000	1,350	-	500	$ 3,850
Travel&accom exp	4.0	3,040	-	-	7,750	500	$ 11,290
Information gaps	-	-	5,000*	-	500	-	$ 5,500
	29	$22,040	$ 7,000	$ 1,850	$ 9,250	$ 2,300	$ 42,440

* assumes minor research and information gathering required. This figure does not accommodate significant amounts of new research and consultancy works to inform the MSG process.

14. Staff consider that the non-staff time costs could be funded by Project 179 (‘Economic Development’). Nevertheless, staff time costs would require diversion of some staff from Executive, Economic Development, Planning and Science teams. This re-deployment would have implications for the delivery of existing project commitments. Initial MSG setup costs could potentially be spread across two financial years (i.e. current 2013/14 and 2014/15 years).

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

15.4. The persons affected by this decision are all persons with an interest in the region’s management of natural and physical resources.

15.5. Options that have been considered include doing nothing, and the options outlined in Table 1 of the report.

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 can exercise its discretion and make a decision without consulting directly with the community or others having an interest in the decision.

Recommendations

That the Corporate and Strategic Committee:

1. Receives the report titled ‘Oil and gas exploration policy development’.

2. Considers the options in Table 1 of the report and their respective implications, particularly resourcing implications.

The Corporate and Strategic Committee recommends that Council:

4. Adopts Option [to be determined by Committee] as Council’s preferred approach to Oil and Gas Exploration policy development for the Region.

Tom Skerman

Economic Development Manager

Gavin Ide

Manager, Strategy and Policy

Helen Codlin

Group Manager

Strategic Development

Liz Lambert

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 March 2014

SUBJECT: HBRC Appointment and Remuneration of Directors Policy

Reason for Report

1. At the meeting on 18 December 2013 Council noted that “the final HBRC Appointment and Remuneration of Directors Policy is under development and will be presented to the 12 March 2014 Corporate and Strategic Committee meeting for consideration, and for adoption at the 26 March 2014 Regional Council meeting”.

2. The purpose of this report is to present the Policy to the Committee for consideration and recommending to the Council meeting at the end of March.

Discussion

3. During deliberations on the make-up of the Transition Board of HBRIC Ltd – Council’s 100% owned investment company – the Council resolved to make changes to the HBRIC Ltd Constitution as follows.

“That Clauses 8.1 and 8.3(a) of the Constitution be amended to:

8.1 Minimum and maximum numbers: The minimum number of Directors shall be three (3) and the maximum number of Directors shall be seven (7).

8.3 Appointment of Directors and Chairperson:

a. HBRC shall appoint at least three (3) and up to seven (7) Directors to the Board of the company (including the right to appoint and remove and nominate alternates) in accordance with HBRC’s Policy concerning Director appointments of existing Council Members (Councillor Directors), and Directors who are independent of the Council (Independent Directors). HBRC shall appoint a Chairperson from amongst the Directors so appointed;”

4. At the time this was resolved Council adopted an interim policy for the appointment and remuneration of directors to have effect until 30 June 2014. This policy states:

Hawke’s Bay Regional Council

Interim Policy on Appointment of Directors

[Adopted 18 December 2013]

Purpose

The purpose of this policy is to set out Council’s intentions for the appointment of directors to the Board of the HBRIC for the period from 18 December 2013 until 30 June 2014.

Appointment of Directors

1. The Hawke’s Bay Regional Council shall not appoint any of its members (“Councillor Directors”) to the Board

2. The Hawke’s Bay Regional Council shall appoint up to seven Directors who are independent of the Council to the Board (“Independent Directors”)

3. If the need arises, in addition to those already appointed, directors will be appointed based on merit

5. It is prudent that, prior to the appointment of the permanent HBRIC Ltd Board, Council has a formal policy in place for the appointment of Directors to its organisations.

6. The proposed policy is attached as Attachment 1. Councillors are now asked to review the policy and provide comment and changes as required in time for the appointment of the permanent HBRIC Ltd Board.

7. Some of the key principles that this proposed policy covers in relation to HBRIC Ltd, CCOs and CCTOs are:

7.1. The appointment process for Councillor and Independent Directors

7.2. The process for the appointment of a Chairperson

7.3. Length of tenure for Directors

7.4. Remuneration of Directors.

8. A draft of the proposed policy was considered by the Chairman and one of the directors of HBRIC Ltd under deputation from the Governance, Appointments and Remuneration Committee. Their advice was sought to provide governance expertise on how the process of establishing and maintain a permanent Board can be optimised.

9. The Governance, Appointments and Remuneration Committee support the draft policy as presented to the Corporate and Strategic Committee.

Appointments Committee

10. Concurrent with the adoption of the Policy Council needs to consider the appointment of a permanent Board to replace the current Transition Board from 1 July 2014. This will need to occur irrespective of the final form of the Policy. However the draft Policy does put in place a suggested approach for this process, which includes the establishment of an Appointments Committee.

11. Paragraph 17 of the draft policy provides this information in detail. It does state that the committee will comprise four members who are not seeking appointment to the HBRIC Ltd Board and that “where possible the committee members will include the current chair of HBRIC Ltd, a Councillor, a recently retired councillor and an external experienced director”.

12. It is suggested that the membership of this Committee be confirmed at the Council meeting on 26 March so that the Committee can produce recommendations for HBRIC Ltd Board membership to the Council by 28 May 2014.

13. A paper will be added to the recommendations from this Corporate and Strategic Committee meeting, with names for Council to consider for the Appointments Committee. Suggestions from councillors on potential committee members will be welcomed ahead of the preparation of the paper.

Decision Making Process

14. 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:

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

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

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

14.4. The persons affected by this decision are the members of the HBRIC Ltd Transition Board of Directors and any directors of existing or future Council CCOs or CCTOs.

14.5. Options have been considered in previous papers and Council has previously resolved to develop a policy.

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

14.7. 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

That Corporate and Strategic Committee:

2. Receives the Draft Policy on Appointment and Remuneration of Directors.

The Corporate and Strategic Committee recommends that Council:

3. Adopts a final Policy subject to the inclusion of any amendments agreed at the Corporate and Strategic Committee meeting.

4. Determines the membership of an Appointments Committee (as set out in paragraph 17 of the Policy) which will recommend to Council the appointment of Directors to the permanent Board of HBRIC Ltd.

Liz Lambert

Chief Executive

Attachment/s

Draft Policy on Appointment and Remuneration of Directors

Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 March 2014

SUBJECT: Infrastructure Asset Insurance

Reason for Report

1. This report reviews Council's financial risk management provisions for its infrastructure assets when impacted by a disaster.

2. The report recommends some changes to the current arrangements and sets out a proposed policy.

Summary of Recommendations

3. HBRC holds insurance for damage to any Council owned fixed asset, e.g. pump station, for the full cost of repair in excess of $10,000 of reinstatement of the asset. This is through a material damage policy with a commercial insurer. This report recommends that this insurance is maintained.

4. HBRC currently has a 3 tiered approach to managing and/or transferring the financial risk for disaster damage to infrastructure assets other than fixed assets. The tiers are:

4.1. Tier 1
Disaster reserves are held by each flood control and drainage scheme administered by HBRC. These reserves meet the cost of a relatively small disaster that results in the need for repairs to scheme infrastructure assets.

4.2. Tier 2
A regional disaster reserve is held to cover the difference between individual scheme disaster reserves and the excess on HBRC external insurance cover or government contribution.

4.3. Tier 3
External insurance provided by either a mutual arrangement and/or commercial insurance, and central government contribution.

5. The report recommends some changes to the way this is managed. It is proposed that:

5.1. The disaster damage reserves held for each flood control and drainage scheme are amalgamated into two Scheme disaster damage reserves, one covering Schemes on the Heretaunga Plains and the other covering all other Schemes

5.2. The regional disaster damage reserve is continued

5.3. HBRC continues with its membership of the Local Authority Protection Programme (LAPP).

6. The proposed policy for these separate reserves is set out in the recommendation section of this report.

Background

7. HBRC infrastructure assets are those associated with flood control and drainage schemes and open space areas owned and/or administered by Council. The most recent valuation of these assets estimates their replacement value at in excess of $190M.

8. HBRC could manage financial risk to its assets in several ways. HBRC could carry some or all of the risk itself (self insurance), it could share the risk with other councils, or it could shift the risk by purchasing insurance.

9. HBRC is one of 46 member councils that operate a risk sharing arrangement, the Local Authority Protection Programme (LAPP). LAPP is a charitable Trust, not an insurance company. It is intended to help member councils meet their share of the costs, above a specified threshold, of restoring flood control and drainage infrastructure after a natural disaster.

10. HBRC holds disaster reserves to cover the LAPP threshold, ($1,259,000) specific exclusions from LAPP cover, and potential risks associated with central government funding.

11. Central government carries a portion of the risk through its policy to meet a portion of the cost of repair to local authority infrastructure assets following a disaster. This is also subject to a specific threshold (approx $600,000) and to criteria set out in the Guide to the National Civil Defence Emergency Management (CDEM) Plan. Central government policy can be viewed on the following web address:

http://www.civildefence.govt.nz/memwebsite.nsf/wpg_URL/For-the-CDEM-Sector-Publications-The-Guide.

Section 26 specifically deals with Government financial support.

HBRC Exposure to Infrastructure Asset Damage

12. Central government policy requires local authorities to have undertaken proper planning for risk management. Staff believe that like the existing HBRC policy, the policy recommended in this paper meets HBRC’s obligations with regard to proper planning.

13. HBRC’s infrastructure assets are most concentrated on the Heretaunga Plains. In a significant disaster event this area poses the highest risk of infrastructure asset damage. However the flood control and drainage assets on the Heretaunga Plains are considered robust in their ability to withstand a significant event which does not exceed their design capacity. A disaster affecting these assets is highly likely to also impact on Napier and/or Hastings and therefore trigger central government support.

14. HBRC also administers a number of smaller schemes throughout the region which are less robust. Some of these schemes protect rural areas. A significant localised disaster affecting one of more of them may not meet central government criteria for assistance under the National Civil Defence Plan.

15. The likelihood of damage to those Schemes is therefore greater than for assets on the Heretaunga Plains, and there is less likely to be a contribution from central government towards repair costs.

16. Attachment 1 sets out the possible level of damage in a range of return period flood events, and other significant natural hazard events.

Other financial exposure

17. HBRC’s financial exposure to a natural hazard event also includes the following.

17.1. The cost of responding to and managing the event, which could include:

17.1.1. Unbudgeted staff time

17.1.2. Plant and equipment hire including helicopters

17.1.3. Employment of unbudgeted external resource to support staff in the response. It is expected there will be considerable pressure on Council and as a result, Council staff to provide information, increase the level of communication (including public meetings).

17.2. The cost of reinstatement of any uninsured assets; which includes recreational assets that are not part of a flood protection and drainage Scheme, i.e. pathways and associated assets that are not constructed on a stopbank, and assets within open space areas.

17.3. The deductable (excess) on any insurance and LAPP policy ($1,259,000) and the threshold for eligibility for central government assistance ($600,000).

17.4. The risk that central government will determine that HBRC is not eligible for central government assistance because the disaster does not trigger the criteria set out in the National Civil Defence Plan.

17.5. The risk of the cost of reinstating the level of service provided by the assets costs considerably more than their estimated replacement or optimised replacement value, and central government and/or HBRC’s insurers refuse to cover a portion of that cost.

17.6. The cost of HBRC involvement in responding to issues with waterways outside Scheme areas.

17.7. Liability as a member of LAPP in the event that the LAPP fund is exhausted (ref section below).

LAPP Scheme

18. The LAPP Disaster Fund was established in 1993. LAPP currently has 46 local government organisation members. It will pay 40% of claim costs above a preset excess. The remaining 60% is paid at the discretion of government in accordance with the Guide to the National Civil Defence Emergency Management Plan.

19. The LAPP fund was exhausted by claims following the Canterbury earthquakes in the 2010/11 financial year. It has been rebuilding since. At the end of the 2013/14 financial year it is expected to hold in excess of $12M, provided it has no major claims made against it. For the 2013/14 year LAPP has purchased reinsurance that allows it to provide cover of up to $60M above an excess of $40M. This, with a 60% contribution from central government, covers damage of up to $250M.

20. Until the fund is sufficiently large to meet the reinsurance excess, there is a mutual liability on each of the members should a disaster occur in any one of the member districts or regions. This liability will require HBRC to contribute up to a maximum of 5 times its annual contribution ($234,400 ex GST for the 2013/14 year) should a single event occur with damage exceeding $100M, and a further 5 times the annual contribution should a second event of equivalent size occur in that same year. This liability reduces as LAPP increases its fund.

21. LAPP reinsurance provides cover for two disaster events in any financial year.

22. The features of the Scheme are:

22.1. Annual contributions are based on a series of factors including the value of infrastructure assets, regional exposures to risk and extraordinary contributions that may be necessary

22.2. The fund is designed as natural disaster catastrophe protection

22.3. Distributions are at the discretion of the Trustees and members are not guaranteed a distribution in the event of a natural disaster or emergency, however the intent of LAPP is to meet the needs of local authorities

22.4. Contributions are held in trust for the purposes of the fund

22.5. Payout from the fund is not dependant on Central Government contributing under the National CDEM Plan

22.6. LAPP covers all assets that are part of engineered flood control schemes, including live trees and walkways and pathways where these are part of a stopbank, provided they are included on the asset schedule provided by Council

22.7. LAPP covers assets which are declared at “optimised replacement cost”

22.8. HBRC excess for LAPP is $1,259,000 for the 2013/14 year. This is reviewed by LAPP annually.

23. Staff reviewed the relative benefits of commercial insurance vs LAPP in more detail in the briefing paper presented to the Corporate and Strategic Committee on January 2013. At that time Council agreed to remain a member of LAPP and not to renew its commercial insurance policy for infrastructure assets in the 2013/14 financial year. A copy of that briefing paper is available on request.

Central Government

24. Government policy is to meet 60% of the cost of a disaster above the threshold of 0.002% of the capital value of the region (approx $600,000). This financial support may be available during or after a civil defence emergency subject to on a range of mandates, criteria and triggers, which may be in statute, regulation or Cabinet decisions, or made by ministerial discretion. Cabinet will identify and approve the overall appropriate mix of government financial support to be provided.

25. The Guide to the National Civil Defence Emergency Management (CDEM) Plan states “The purpose of this emergency recovery is to restore the affected community to a position in which normal social and economic activity may be resumed as quickly as possible. To achieve this, it is essential to have proper planning for risk management. The Government considers local risks to be a local responsibility. Local authorities are primarily responsible for dealing with the impact of an emergency in their geographical and functional areas of responsibility. Government assistance is contingent upon that expectation.”

HBRC Infrastructure Assets

26. HBRC’s infrastructure assets have an optimised replacement cost of $190,510,000. This is the value stated in the September 2013 asset Schedule provided to LAPP. These values will be used by LAPP for determining the HBRC contribution for the 2014/15 financial year. Note at this stage optimised values for the river edge only have been included. Values for other assets will be reviewed over time as Scheme reviews are undertaken. Details of the make-up of this value are set out in Attachment 2.

27. Optimised replacement cost means the cost of reinstating the asset using design codes and techniques, materials, or alternative structures that have been determined as the most appropriate for that asset if it was to be built today.

28. The difference between the estimated replacement cost and optimised replacement cost for the river edges is approximately $35M.

Managing HBRC Financial Exposure

29. As at 30 June 2013, HBRC held the following disaster reserve funds.

Table 1
Reserve Name	Balance as at 30 June 2013
Scheme Reserves
Upper Tukituki	$552,217
Other small schemes	$128,551
Heretaunga Plains - Rivers	$1,160,656
Heretaunga Plains – Drainage catchments	$638,366
Total Schemes	$2,479,790

Wairoa Flood Reserve	$702,660
Regional Disaster Reserve	$3,332,758
Total Reserves	$6,515,208

30. The Regional Disaster Reserve and individual Scheme reserves were established in 1996 in accordance with HBRC policy. Not all of the Scheme reserves are at their target levels. This is because:

30.1. Some have been drawn on to meet the cost of repairs following a flood event

30.2. Some have limited funding to enable them to build up their funds. The Scheme disaster reserves are linked to inflation resulting in their threshold increasing each time the assets are revalued.

31. The Wairoa Flood Reserve was established from $500,000 committed by Council at its meeting on 7 June 2000 to Wairoa flood mitigation works, as well as $144,000 retained as part of the surplus funds share arising from a Port of Napier Special dividend due to Wairoa area ratepayers.

32. Wairoa is at risk from flooding as no mitigation works have ever been built. A range of options to provide flood protection to Wairoa urban area have been investigated but none were identified that were effective and affordable to the community. To compound Wairoa’s risk, water levels in the lower reaches of the river, can be artificially heightened when the river mouth bar has a reduced flood capacity. The river mouth drifts up or down the coast over a distance of approximately 2km depending on sea and river conditions. Under certain sea and river conditions, or when the river mouth is in certain locations the mouth can become blocked. Lower areas of Wairoa town can be flooded unless the river mouth is mechanically opened. In 2000 HBRC enhanced the early warning system for potential flooding of Wairoa, and established the Wairoa Flood Reserve to fund a significant HBRC response should flooding occur.

33. The purpose of this Reserve is to fund flood mitigation and recovery work within the Wairoa District.

Proposed Approach

34. Staff propose that HBRC:

34.1. Continues to mitigate the financial risk associated with a disaster through transferring some risk (40% above the prescribed threshold) through membership of LAPP.

34.2. Relies on Central Government to meet 60% of the cost of reinstatement of assets (above their prescribed threshold) following most significant disaster events.

34.3. Maintains a tiered system of managing its financial exposure to a disaster, with any withdrawals from HBRC reserves at Council discretion, including:

34.3.1. Each flood control and drainage scheme having access to funding sources to meet reinstatement costs up to the capacity of the respective fund, or the LAPP excess, whichever is the smaller, subject to any limitations established by Council policy

34.3.2. A regional disaster reserve to cover the financial exposure of HBRC as set out in section 17 above, subject to any limitations established by Council policy

34.3.3. Continues to maintain a separate flood reserve for the Wairoa District.

35. With regard to 34.3.1 above, staff recommend that Scheme disaster reserves are managed as follows.

Heretaunga Plains Flood Control and Drainage Scheme Disaster Reserves

36. The Heretaunga Plains Scheme – Rivers is by far HBRC’s largest Scheme. The optimised replacement value for its assets is $88,138,000 as at 30 June 2013. There are also 9 Drainage Catchment Scheme areas servicing the Heretaunga Plains with assets with a replacement value of $52,452,000. While the drainage assets within one of the drainage areas could be impacted by a disaster event, the most likely scenario is that a disaster causes widespread damage to a number of the Scheme areas including the Heretaunga Plains Scheme – Rivers.

36.1. A major disaster event causing such widespread damage is most likely to trigger the criteria for central government funding under the National Civil Defence Plan, and therefore the financial exposure of HBRC is reasonably predictable.

36.2. Disaster reserves for all of the Schemes covering the Heretaunga Plains had a balance as at 30 June 2013 of $1,799,022.

36.3. Staff suggest that Schemes covering the Heretaunga Plains stand on their own. A proposed policy for this area is set out in the recommendations below.

Other Schemes Disaster Reserves

37. There are 14 other flood control and drainage schemes administered by HBRC. The largest of these is the Upper Tuktituki Scheme. The combined optimised replacement value of infrastructure assets for these schemes is $49,920,000. Some Schemes have no assets as the purpose of the Scheme is to maintain waterways free of vegetation with the potential to impede the flow. As at 30 June 2013 the disaster reserves held for all of these Schemes was $680,768. Note that the Makara Scheme disaster reserve was drawn down by $40,200 during the 2012/13 financial year to fund initial work for the repair of the Makara No 1 dam.

37.1. It is proposed that the disaster reserves for each of these Schemes be combined into a Small Scheme disaster reserve. It is possible that significant damage to one or more of these small Schemes will occur in any one event without triggering the criteria for central government funding under the National Civil Defence Plan. This reserve will therefore need to cater for an increased level of risk than the Heretaunga Plains Scheme reserve.

37.2. It should also be noted that the assets in a number of these schemes are prone to damage because the schemes are in a number of cases designed to provide a flood protection standard of less than a 1% annual exceedance probability (commonly known as a 100 year standard), and because operational budgets are limited to allow for a basic standard of maintenance.

37.3. Staff therefore propose clear limitations with regard to what will be funded by the reserve and what remain Scheme costs. These limitations are set out in the proposed policy. It is also necessary to ensure that the fund is equitable to all schemes. This means that their contribution to the reserve is in proportion to the risk of them drawing funding from the reserve to meet the cost of repairs to those assets.

37.4. The proposed criteria for this reserve are designed to provide equity among these Schemes. Every disaster event will be unique. It is therefore impossible to determine the likely impact of future disasters on individual schemes. It is suggested that the criteria are regularly reviewed and updated.

Regional Disaster Reserve

38. The Regional Disaster Reserve has been established to:

38.1. Meet any extraordinary costs of managing the response and recovery to a disaster event

38.2. Meet up to 60% of any unfunded portion of asset reinstatement cost following a disaster event.

39. Current policy requires the Regional Disaster Reserve to be managed such that the value of its investments (including any cash) remains within the range $2.75M to $3.75M, and states that if investments exceed $3.75M in value then some investments may be sold and the proceeds credited to Council’s general funding operating account.

40. Since the inception of the Disaster Reserve (over 10 years ago) this fund has been managed by Pearson Investment Advisory Ltd, a Wellington based investment advisor who manages funds for a number of local bodies. Council’s policy is to allocate investment of these funds to equity (30%) and government stock (70%). Because of the investment in equities component, returns have on average been 1% higher than Council could have obtained if the funds were put on term bank deposits.

41. Initial Council policy determined that interest and dividends were to be used by Council’s general operating account, however for the last two years in order to build up the fund, dividend and interest has been credited back to the fund. The market value of investments held in this fund was $3.6M at 30 June 2013. Even with Council’s commitment to transfer $720,000 to the rebuilding of the Makara dam, the balance in this fund will still be just under $3M.

42. This paper recommends that when the value of this fund exceeds $3M, 2.5% return on these funds accrue to the Regional Disaster Reserve and any return in excess of 2.5% be credited to Council’s general operating account. If the fund is below $3M, then all returns be credited to the Reserve.

Decision Making Process

43. 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:

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

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

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

43.4. No persons are directly affected by this issue.

43.5. Options that have been considered are set out in this paper and previous papers on the issue.

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

43.7. 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:

2. Adopts the following HBRC Disaster Damage Risk Management Policy, including any amendments agreed at the Committee meeting.

HBRC Disaster Damage Risk Management Policy

1. Background

This policy supersedes HBRC’s Disaster Damage Risk Management Policy adopted by Council in 2007, and subsequent decisions regarding this issue.

This review (March 2014) has confirmed that HBRC continues to face considerable ongoing financial risk from a natural disaster event.

This policy deals specifically with disaster damage risks to HBRC owned or administered infrastructure assets, and the requirement for HBRC to respond to an event that causes major disruption to the community.

In addition to its role as the manager of flood control and drainage schemes throughout the region, HBRC will play a significant role in any response as a result of its civil defence responsibilities including resourcing to the civil defence emergency coordination centre, and the provision of reconnaissance and hazard information to input to the response planning and decision making. There may also be a significant cost in securing information and data arising from the event, especially a flood event. Significant flood events provide a valuable source of data to enable verification of models and assumptions made as part of HBRC staff flood hazard assessment and flood control and drainage activities.

HBRC may qualify for Central Government assistance for the reinstatement of HBRC infrastructure assets in the event of a disaster however such assistance is more likely to be forthcoming following a significant disaster affecting the Heretaunga Plains. Central government assistance is less likely to be available for a disaster event impacting a small portion of the region.

While HBRC should meet the expectations of central government by implementing this policy, HBRC acknowledge that central government and LAPP funding may not be available to cover the costs of every disaster. This policy also makes some provision to cover that risk.

2. Financial Risk Management Initiatives

HBRC will mitigate its financial risk associated with a disaster event. The following will make up HBRC risk mitigation approach.

2.1 Disaster damage to Council-owned fixed assets

· Insurance policies will be held with appropriate indemnity or replacement value cover; and

· Assets will continue to be effectively maintained.

2.2 Disaster damage leading to Third Party liability

· The employment of suitably qualified and experienced staff and robust decision making processes.

· Appropriate and relevant HBRC policy and sound technical practices for maintaining HBRC assets thereby minimising any exposure through negligence.

· An insurance policy will be held to cover this risk.

2.3 Disaster impact on Council’s Business Continuance Capability

· A Business Continuance Plan will be maintained and regularly updated which contains specific actions and ongoing requirements to help check systems to enable HBRC to continue to operate after a disaster.

2.4 Sound maintenance of infrastructure assets

· Infrastructure assets will be maintained in accordance with asset management plans. This will include an annual programme of maintenance and a regular assessment of asset condition.

· Where feasible and economic this may include improvements to increase asset resilience to damage from a natural disaster.

2.5 Use of surplus operating funds and reprioritisation of maintenance and capital works

· Following any disaster event the first call to fund the reinstatement costs of infrastructure assets will be any surplus operating funds held by the Scheme under which the assets are administered.

· The second call will be through the reprioritisation of the maintenance or capital expenditure programme for that Scheme.

· Scheme depreciation reserves will only be utilised where a depreciable asset requires replacement, in which case the difference between the depreciated value of that asset and its replacement cost can be sourced from the relevant depreciation reserve. Note that if the new asset results in an increase in the level of service provided by the Scheme, the difference between the cost of the new asset and the replacement cost of the current asset will be a cost on the Scheme.

· Only after these options have been fully assessed and funding from these sources committed, will Council agreement to funds from other financial reserves being drawn on be sought.

2.6 HBRC held financial reserves

· Financial reserves will be held to mitigate HBRC’s financial exposure to natural hazards. The following reserves will be held by HBRC

o The Wairoa District Flood Reserve

o The small schemes disaster reserve

o The Heretaunga Plains Schemes disaster reserve

o The Regional Disaster Reserve

2.7 Membership of LAPP

· HBRC will maintain its membership of the Local Authority Protection Programme (LAPP) and meet the requirements of LAPP.

2.8 Maintain proper planning for risk management

· In order to comply with the criteria set out in the National Civil Defence Emergency Management Plan, HBRC will maintain proper planning for risk management. Implementation of this policy will demonstrate this.

3. Criteria for Contributions and Withdrawals From Reserves

Criteria for contributions and withdrawals from these reserves are:

3.1 The Wairoa Flood Reserve

The reserve will be managed such that the capital purchasing power of the reserve sum, less any capital authorised to be withdrawn from the reserve by HBRC, shall be maintained by increasing the reserve each year by 2.5% from interest earned by the reserve.

The balance of interest earned by the reserve shall be used to subsidise work undertaken through the Wairoa Rivers and Streams Scheme to manage and reduce flood risk to public and/or community infrastructure within the Wairoa District.

Council may authorise capital sums to be drawn from the reserve to undertake specific major flood mitigation or erosion protection projects within the Wairoa District or for flood recovery works in the same area.

3.2 The Small Schemes Disaster Reserve

The small schemes disaster reserve shall provide for the following flood control and drainage schemes:

· Upper Tukituki Flood control scheme

· Upper Makara flood control scheme

· Paeroa Scheme

· Porangahau flood control Scheme

· Poukawa Drainage Scheme

· Ohuia – Whakaki Drainage Scheme

· Esk River flood control Scheme

· Whirinaki Flood Control Scheme

· Maraetotara River Control Scheme

· Kopuawhara Flood Scheme

· Te Ngarue River Control Scheme

· Opoho Scheme

· Kairakau Community Scheme

· The following assets within the Wairoa Rivers and Streams Scheme

o Tawhara Flood detention dam and outlet channel

o Tuhara Drain

o Nuhaka Railway Drain

The reserve shall be made up of all of the current Scheme disaster reserves held by each of the above Schemes. As at 30 June 2013 the combined balance was $680,768.

Each Scheme will contribute annually to the reserve in proportion to the value of Scheme assets, the vulnerability of the scheme assets (vulnerability factor) and the vulnerability of the Scheme (scheme factor). Annual contributions will be calculated as follows.

(Value of asset class) x (vulnerability factor) x (scheme factor)/1000

All Schemes with no assets, eg. Te Ngarue and Porangahau shall contribute a fixed amount of $20 per km, x a scheme vulnerability factor, of river channel under the Scheme.

Annual contributions shall be made to the reserve as set out in Table 6 each year that the reserve balance is below the LAPP excess (i.e. currently $1,259,000). Interest earned by the reserve shall be credited to the reserve. Annual contributions may increase each year in accordance with inflation.

When the reserve balance is above the LAPP excess the Group Manager Asset Management and Group Manager Corporate Services may agree to a discount on the annual contribution from each scheme. No annual contributions from schemes will be made if the reserve balance is in excess of 2 times the LAPP excess. If the reserve is over 2.5 times the LAPP excess the Group Managers may agree to return money from reserve income to the Schemes.

At Council discretion individual schemes will be eligible to draw up to 100 times their annual contribution from the reserve, provided the reserve holds adequate funds.

The following costs may be eligible for payment from this Reserve.

· The cost of reinstatement of assets identified on the LAPP asset schedule, or their replacement with alternative assets that will reinstate a similar level of service provided by the original assets, less any provision held within the Scheme depreciation fund for reinstatement of that asset, up to a maximum of the LAPP excess or central government threshold, whichever is the greater.

· The cost of repair works within a scheme area (excluding district wide schemes). Eligible repair works may include channel works which improve flood flow capacity, bank protection works where this work will assist in protecting a residential dwelling (however this could be subject to a contribution from the building’s owner to recognise any private good, and may be subject to the owner providing details of other insurance claims made or received), or any other works subject to Council approval. The Reserve will not be used for the purchase of land. Where land upon which an asset has been sited is lost, the asset should be relocated.

3.3 The Heretaunga Plains Scheme Disaster Reserve

The Heretaunga Plains Schemes disaster reserve shall provide for the following flood control and drainage schemes.

· The Heretaunga Plains Scheme – Rivers

· Napier Meeanee Drainage area

· Brookfields Awatoto Drainage area

· Pakowhai Drainage area

· Muddy Creek Drainage area

· Haumoana Drainage area

· Karamu and Tributaries Drainage area

· Raupare Twyford drainage area

· Tutaekuri-Waimate Drainage area

· Puninga Drainage area

The reserve shall be made up of all of the current Scheme disaster reserves held by each of the above Schemes. As at 30 June 2013 the combined balance was $1,799,022.

Value of asset class x vulnerability factor x scheme factor/1000.

Annual contributions shall be made to the reserve as set out in Table 7 at any time that the reserve balance is below the LAPP excess. (ie currently $1,259,000). Annual contributions may increase each year in accordance with inflation.

When the reserve balance is above the LAPP excess the Group Manager Asset Management and Group Manager Corporate Services may agree to a lesser amount being contributed from each scheme or a contribution from this reserve being made to the regional disaster reserve. No Scheme contributions will be made if the reserve balance is in excess of 1.5 times the LAPP excess. If the reserve is over 2.0 times the LAPP excess the Group Managers may agree to return money from the reserve income to the Schemes.

At Council discretion individual schemes will be eligible to draw from the reserve up to 100 times their annual contribution from the reserve, provided the reserve holds adequate funds.

Withdrawal from the reserve will only be considered after consideration of deferment of routine annual maintenance and programmed capital works. Any payments from the reserve shall be at the discretion of Council.

The following costs may be eligible for payment from this Reserve.

· The cost of repair works within a scheme area. Eligible repair works may include channel works which improve flood flow capacity, bank protection works, however where this work will assist in protecting a residential or commercial building this may be subject to the owner providing details of other insurance claims made or received and agreeing to an appropriate contribution, or any other works subject to Council approval.

3.4 The Regional Disaster Reserve

This reserve is to be managed such that the value of its investments (including any cash) remains within the range of $2.75m - $3.75m and that its investments exceed $3.75m in value and some investments may be sold and the proceeds credited to Council’s general funding operating account.

A return of 2.5% on average balance held by the reserve during the year will accrue as an increase in the value of the reserve, when the Reserve has a value in excess of $3M. The earnings in excess of the 2.5% per annum will be credited to Council’s general funding operating account.

The regional disaster reserve may, at Council discretion, provide for the following.

a. The cost of responding to and managing an event. This could include:

· Unbudgeted staff time

· Plant and equipment hire including helicopters

· Employment of unbudgeted external resource to support staff in the response.

b. The cost of reinstatement of any uninsured assets. This includes recreational assets that are not part of a flood protection and drainage Scheme, i.e. pathways and associated assets that are not constructed on a stopbank, and assets within open space areas.

c. Any difference between the deductable (excess) on any insurance or LAPP policy and the threshold for eligibility for central government assistance, which is unable to be funded through Scheme disaster Reserve or other funds.

d. Any unfunded reinstatement costs above the excess of any insurance policy and the threshold for eligibility for central government assistance because central government determines that HBRC is not eligible for central government assistance because the disaster does not trigger the criteria set out in the Guide to the National Civil Defence Plan, and/or LAPP is unable to provide cover for whatever reason.

e. The possibility of the cost of reinstating the level of service provided by the assets costs considerably more than their estimated replacement or optimised replacement value, and central government and/or HBRC’s insurers refuse to cover a portion of that cost.

f. The cost of any works that are considered betterment but are necessary to reinstate community protection, or because the community demands a higher level of protection.

g. Liability as a member of LAPP in the event that the LAPP fund is exhausted.

4. Criteria for the Build Up, Use and Maintenance of Disaster Damage Insurance Excess Reserves

· Reserves will always be a funding call of last resort e.g. if priorities can be re-established to cover the expenditure, or if unbudgeted income is received these sources of funds will be used.

· All efforts will be made to maximise any disaster recovery contributions from Central Government or any other sources.

5. Provision to Meet Disaster Damage Insurance Excesses and Commitments

5.1 Regional Disaster Reserve

The required reserve will be managed in accordance with HBRC’s investment policies.

5.2 Flood and Drainage Schemes

The Group Manager, Asset Management and Group Manager Corporate Services have delegated authority to manage the Small Scheme disaster reserve and the Heretaunga Plains Scheme Disaster reserve in accordance with HBRC’s investment policy.

6. Frequency of Disaster Damage Risk Management Reviews

Reviews will be carried out at least once every six years.

Mike Adye

Group Manager

Asset Management

Liz Lambert

Chief Executive

Attachment/s

1	Possible Levels of Damage		Under Separate Cover
2	Asset Value by Asset Description and Scheme		Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 March 2014

SUBJECT: HBRC Health and Safety

Reason for Report

1. This report provides an update on the proposed Health and Safety Reform Bill and potential implications for Council and Councillors and gives an overview of the present health and safety framework council provides for staff.

Background

2. Following on from the work done by the Independent Taskforce on Workplace Health and Safety in 2012/13 the Government, in August 2013, announced the Working Safer reform package. A key target is to reduce workplace injuries and death toll by 25% by 2020.

3. The present Health and Safety in Employment Act will be replaced by the Health and Safety at Work Act, which is to be introduced to Parliament shortly and become ‘operational’ in 2015.

4. The Worksafe New Zealand Act 2013 established the authority which replaces the old ‘OSH’ department which had been part of the Ministry of Business, Innovation and Employment. This authority will have increased resourcing and a wider scope to “secure the health and safety of workers and workplaces”. Worksafe NZ is already operational.

5. One significant aspect of the new legislation relates to the level of oversight an organisations’ board of directors are required to have of the health and safety management in their organisation.

6. The present draft legislation mirrors the Australian Model Work and Health and Safety Act in many aspects. The Australian legislation excludes elected member such as councillors from the level of liability required in the Act; it is unclear if the legislation to be presented to Parliament will follow suit.

7. Notwithstanding this, the measures in the proposed legislation should be considered “best practice” and implemented accordingly.

8. Some of the key aspects of this “best practice” is that directors of an organisation should:

8.1. Be aware of the organisation’s hazards and risks

8.2. Have an understanding of hazard control methods and systems so they can identify whether their organisation’s systems are of the required standard

8.3. Understand how to measure health and safety performance so they can understand whether systems are being implemented effectively.

9. These aspects are drawn from a MoBIE/Institute of Directors publication “Good Governance Practices Guideline for Managing Health and Safety Risks”. A copy of which will be made available to all councillors.

10. Another significant aspect of the legislation is that directors must exercise “a clear presumption in favour of safety ahead of cost” unless it is “grossly disproportionate” to the risk.

11. There are two other key aspects of the proposed legislation that define the difference with previous legislation.

12. Under the proposed Act the primary responsibility for health and safety will be with the ‘person conducting a business of undertaking’ (PCBU). So effectively from councillors (directors) down, all levels of management are considered PCBU’s for the sphere of operations they have and its impact on others. Effectively this would mean the Councillors have overall responsibility for the health and safety of those below them.

13. The wording around an organisation’s responsibility for dealing with workplace hazards has changed; “taking all practical steps” is the requirement under the present legislation, the new Act proposes that PCBU comply with their obligations “as far as is reasonably practicable”. While not significantly different from the current wording, “reasonably practicable” will come with a clearer definition and information regarding application. That definition includes:

13.1. The likelihood of the hazard or the risk concerned occurring; and

13.2. The degree of harm that might result from the hazard or the risk; and

13.3. What the person concerned knows, or ought reasonably to know, about

13.3.1. The hazard or the risk; and

13.3.2. Ways of eliminating or minimising the risk; and

13.4. The availability and suitability of ways to eliminate or minimise the risk; and

13.5. After assessing the extent of the risk and the available ways of eliminating or minimising the risk, the cost associated with available ways of eliminating or minimising the risk, including whether the cost is grossly disproportionate to the risk.

14. At the present time Council has a number of components for the management of health and safety. Significant emphasis has been placed on risk management and the identification of hazards.

15. Council has achieved the tertiary level in ACC’s ‘Workplace Safety Management Practices’ (WSMP) programme which rewards employers who put in place regularly audited policies and practices to reduce injuries, with discounted ACC levies. The tertiary level is the highest level in the programme.

16. The WSMP audit includes detailed scrutiny of the hazard identification process and measures taken to mitigate those hazards.

17. Council’s science section is ISO 9000 accredited and the annual audits for this process include a review health and safety requirements.

18. Council is also at the Enviro-Mark silver level and health and safety policies and practices are again a component of the auditing for this programme.

19. At the Council’s Works Group, where arguably our staff deal with significant hazards on a daily basis, the NZTA programme TQS1 is integral to the way they operate.

20. While these various programmes and audits associated with them provide a reasonable level of assurance that policies and procedures are in place to minimise the chance of injury or incidents with staff, the most important aspect of health and safety is heightened awareness of the importance of health and safety in the work place and implementation of good work practices.

21. Sensible risk management is about:

21.1. Ensuring staff and the public are properly protected

21.2. Providing overall benefit to society by balancing benefits and risks with a focus on reducing real risks – those that arise often and those that have serious consequences

21.3. Enabling innovation and learning, not stifling them

21.4. Ensuring that those who create risks manage them responsibly and understand that failure to manage real risks responsibly, is likely to lead to disciplinary action

21.5. Enabling individuals to understand that as well as the right to protection, they also have to exercise responsibility. Health and safety is everyone’s responsibility; not the responsibility of one person in an organisation.

22. It is not about:

22.1. Creating a totally risk free society or work place

22.2. Generating useless paperwork

22.3. Scaring people by exaggerating or publicising trivial risks

22.4. Stopping important recreational and learning activities for individuals where the risks are managed

22.5. Reducing protection of people from risks that cause real harm and suffering

22.6. According to (Health and Safety Executive – UK).

23. Council operates two health and safety committees, one for the town office and one for the Works Group. These committees meet regularly and have staff representatives on them.

24. Health and safety expert advice is out sourced to a company with extensive knowledge of Council’s work and who have been involved in a number of audits of council’s work. This company also assist sections of council to assess required documentation from contractors and undertake monitoring of the work undertaken by contractors. They also provide other health and safety advice as is required.

25. Health and safety requires constant vigilance and commitment. This paper provides a background to the proposed new legislation and an overview of what is presently provided by way of protecting council staff in the work place.

26. The reporting to Council on health and safety matters is done as a component of the annual human resources report presented to Council in the latter part of the year.

27. This paper is a starting point in an assessment of how Councillors want to have specific aspects of health and safety reported to them. A next step might be a further report to this committee to specifically address the aspects of health and safety outlined in paragraph 8 above, so that councillors have a clear picture of those particular issues relative to this Council.

Decision Making Process

28. 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 “HBRC Health and Safety” report.

Viv Moule

Human Resources Manager

Liz Lambert

Chief Executive

Attachment/s

Good Governance Practice Guideline for Managing Health & Safety Risks

Under Separate Cover

	Description of option	Discussion
1	HBRC staff and consultants only	Total staff numbers would be 5. Current office accommodation and storage space is adequate. No capital expenditure required. Annual rental income $5,625. Little requirement for separate meeting room.
2	HBRC and DoC staff only	Staff (including DoC) numbers would be 6. Current storage space is adequate, however DoC require a meeting room as they have frequent visits from managerial staff from Napier and Gisborne and need space for team discussions and for dealing with individual staff issues. Current tea room facilities are too small to house all staff and visitors. An estimated capital expenditure of $285,000 is required to meet these needs. Annual rental will increase to approx. $23,000.
3	HBRC, DoC staff and consultants	Total staff (including DoC and consultants) would be 8. Current storage space is adequate, however DoC require a meeting room as they have frequent visits from managerial staff from Napier and Gisborne and need space for team discussions and for dealing with individual staff issues. Current tea room facilities too small to house office occupants and visitors. Capital expenditure as for option 2 is required to meet these needs. Annual rental will increase to approx. $28,500.

Date	Activity
Wednesday 26 March 2014	Presentation of HBRIC Ltd Business Case to Hawke’s Bay Regional Council (as agenda item in open session)
Wednesday 26 March 2014	Presentation of Nimmo-Bell Alternative Investments report to Council (as agenda item in open session)
Tuesday 15 April 2014	Final date for Board of Inquiry draft decisions on Plan Change 6 and RWSS resource consents
Wednesday 16 April 2014 This is the date scheduled for a Regional Planning Committee meeting. It is proposed that this become a Corporate and Strategic Committee meeting instead, and the RPC meeting be moved to May	Presentation of Deloitte peer review of HBRIC Ltd business case (as agenda item in open session)
Date	Activity
Wednesday 16 April 2014	Presentation of draft Statement of Proposal for Council to consider (as agenda item in open session)
Wednesday 30 April 2014	Council adopts the Statement of Proposal, and Summary of Proposal, for public consultation (as agenda item in open session)
Thursday 1 May 2014	Public notice of Statement of Proposal, including notice of public meetings
5 May – 30 May 2014	Public meetings held throughout Hawke’s Bay
Wednesday 28 May 2014	Board of Inquiry issues final decisions no later than this date
Monday 3 June 2014	Submissions close
Week beginning Monday 16 June 2014	Hearings held
Wednesday 25 June 2014	HBRC final decision

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED	REASON FOR PASSING THIS RESOLUTION	GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION
Draft HBRIC Ltd Concession Deed	7(2)(b)(ii) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of that information is necessary to protect information which otherwise would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information.	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.