Agenda of Corporate and Strategic Committee

Follow-ups from Previous Corporate & Strategic Committee meetings

Attachment 1

Follow-ups from Corporate and Strategic Committee Meetings

12 March 2014

	Agenda Item	Follow-up / Request	Person Responsible	Due Date	Status Comment
1	Conflict of Interest Declarations	Councillors to confirm Declaration of Interests and return signed forms to the Chief Executive for circulation to all councillors	Councillors & E Lambert	Immed
2	Matters Arising from 11Dec minutes	HBRIC Ltd constitution amendments Advise Councillors when completed and new Constitution in effect	E Lambert
3	Strategic Planning Process for 2015-25 Long Term Plan	Updated Meeting Planner to be confirmed and distributed to Councillors	L Hooper	Immed	Updated schedule posted 20 March
4	Strategic Planning Process for 2015-25 Long Term Plan	Calendar of dates for field trips to be circulated to Councillors for feedback as to which dates suit and suggested destinations/ topics	M Adye		Memo with dates and some suggested topics posted 2 April requesting Councillor feedback
5	Top 10 Corporate Risks	Review and amend to reflect agreed updates from the meeting	M Adye		Updated Risk Issues presented at 26 March Council meeting. Further amendment will be ongoing, through continued monitoring and updating as well as through the LTP process
6	HBRC Appointment and Remuneration of Directors Policy	Councillors invited to submit names of potential members of Appointments Committee to CE	Councillors & E Lambert	Immed	No names submitted as of 26 March Council meeting, so invitation re-extended to submit names by 11 April to enable appointments at 30 April Council meeting
7	Nga Marae o Heretaunga - Presentation	Further staff engagement with Nga Marae o Heretaunga to assist development of a proposal for Council’s consideration through 2014-15 Annual Plan process	E Lambert
8	Provisional Timelines – RWSS Consultation	timelines for the consultation, submissions and hearings processes leading to Council’s decision to be included on updated Meeting Planner for distribution to Councillors	L Hooper		Updated schedule posted 20 March
9	HBRC Health and Safety	Schedule of reporting on H&S to Council to be developed and implemented	V Moule
10	HBRC Health and Safety	HBRC’s H&S policy to be put on its website	V Moule
11	Local Governance Statement	Maori Charter Distribute to all Councillors and Maori Committee members Publish on HBRC website	L Hooper A Gouder	Immed	Dropbox link provided to Councillors 13 March and loaded onto HBRC website 14 March Copies provided to Maori Committee members at 25 February committee meeting

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 16 April 2014

SUBJECT: Primary Producer's Roundtable - Councillor Representative

Reason for Report

1. The Hawke’s Bay Primary Producer’s Round Table is a group that was inadvertently omitted from the list of groups that Council considered at its meeting on 6 November 2013 with respect to appointment of Councillors.

2. This paper asks the Committee to consider the councillor appointment to this group.

Discussion

3. The group arose from a request from the Heretaunga Plains primary sector groups during the 2009-19 Long Term Plan, to both the Hastings District Council and the Hawke’s Bay Regional Council, to engage with the primary sector on the sustainable development of the district’s productive land resources.

4. In response Hastings District Council initiated the Hawke’s Bay Primary Producers Round Table and provides administrative support to the group. It is chaired by Mayor Yule.

5. Both HBRC Councillors and staff have been involved with meetings which are generally held quarterly. Two councillors are to be appointed, one of which is the HBRC Chairman. From staff, HBRC is usually represented by the Chief Executive and the Group Manager Strategic Development.

6. It is a useful forum for the primary sector to keep in touch with various planning processes, to focus on strategic, long term issues impacting the primary sector and to get an update of the current issues or state of the various primary sectors. It is not recommended that HBRC should not be represented on this group.

7. There are no financial or resource implications.

Decision Making Process

8. 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:

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

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

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

8.4. The persons affected by this decision are all persons with an interest in the management of regional resources.

8.5. Options that have been considered include not making any appointment to the Hawke’s Bay Primary Producers Round Table.

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

8.7. 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. Appoints two Councillor representatives to the Hawke’s Bay Primary Producers Round Table; being Councillors.....

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 16 April 2014

SUBJECT: RWSS Evaluation - Operating Position and Rates Impacts

Reason for Report

1. The report to Hawke’s Bay Regional Council (HBRC) on 18 December 2013 outlined a process for evaluating a proposal from Hawke’s Bay Regional Investment Company Limited (HBRIC Ltd) to HBRC to invest in the Ruataniwha Water Storage Scheme (RWSS).

2. As noted in Section 12.2 of the 18 December 2013 report, one element of the evaluation is evaluating the potential impacts of the investment on HBRC’s future balance sheet, operating position and rates.

3. This report contains the required evaluation.

Background

4. There are three elements to the evaluation, which are:

4.1. How the proposed investment in RWSS impacts on HBRC’s future balance sheet

4.2. Whether and to what extent the RWSS investment affects HBRC’s operating position as compared with the forecasts of LTP2012-2022

4.3. Whether and to what extent any affect on the operating position could require support from rates.

Initial HBRC Investment Funding

5. LTP2012-2022 assumed HBRC would:

5.1. invest up to $80million in RWSS comprising $55million of capital subscribed and advances to the water storage operating entity (Waterco) and $25million of holding interest over the term of the LTP

5.2. receive 6%pa return on the investment during the period of LTP2012-2022, which was the expected long term cash return assumed in the LTP

5.3. fund the investment from the proceeds from sales of Napier leasehold land to lessees; capitalisation of residual cash flows and use of cash held in bank deposits at the commencement of the plan.

6. Subsequent to the publication of LTP2012-2022 HBRC recognised that the $80million provided for the RWSS investment in the water storage would need to be invested in the operating entity itself and further, recognised that no interest or cash return from the investment could be expected by HBRIC Ltd/HBRC until well after the commencement of the operation of the scheme.

7. In the absence of any other action these decisions would have caused a reduction in HBRC’s revenue of around $4million in each of the 2016/2017 and later financial years compared with LTP 2012-2022 forecasts. However Napier Port’s improved financial performance and position has been such that it is able to pay higher dividends (through HBRIC Ltd) over the period of LTP2012-2022 at levels sufficient to offset this loss.

8. Consequently HBRC’s operating position would be unaffected by changing the RWSS investments from cash–generating investments to non-cash generating long term growth investment in RWSS and no call for support from the rates take was therefore expected to occur.

Current Situation

9. However HBRIC Ltd recently brought forward the timing of draw downs of HBRC’s cash investments for investment in RWSS from the levels assumed in February 2013 as shown in the following table.

*

*

· * Majority of draw down is within the first three months

· of the financial year.

10. The effect of these proposed earlier draw downs is to reduce the interest revenue HBRC would have received from its holdings of cash investments in the 2014/2015 financial year of approximately $450,000 and $2.75million in the 2015/2016 financial year (cumulatively $3.2million), with a consequential adverse impact on HBRC’s operating position if not covered by HBRIC Ltd.

11. HBRIC Ltd holds the view that these cash flow differences for HBRC in 2014-15 and 2015-16 cannot be prudently met by HBRIC Ltd requiring a higher level of dividend than is currently projected in Napier Port’s Statement of Corporate Intent, particularly in 2015-16. In their opinion to do so would jeopardise Napier Port’s ability to fund its business development expenditure, which is required in order to grow the business and generate future cash flows and dividends for its ultimate shareholder.

12. A letter dated 8 April 2014 has been received from HBRIC Ltd (refer attachment 1) which proposes a solution for ensuring HBRC’s investment in the RWSS is cash neutral. The proposal would require HBRC to borrow (or pay out of investment reserves) $450,000 in 2014‑15 and a further $2,750,000 in the 2015-16 financial years to part fund HBRC’s required cost of funds for the draw downs required for investment in RWSS. Under this proposal these funds would constitute an advance to HBRIC Ltd, interest at market rates would be payable on this advance as required by section 63 of the Local Government Act (interest to be paid at market rates by a Council controlled trading organisation to the local authority that advances the loan), and that the by the end of 2018-19 HBRIC Ltd would make a further distribution to enable the advance to be fully repaid to HBRC. HBRIC Ltd has attached a spreadsheet to their letter which establishes the proposed level of dividends from HBRIC Ltd to HBRC through the remaining period of HBRC’s 2012-22 LTP to ensure that HBRC’s funding costs are covered.

13. Therefore in the absence of further information as to timing from HBRIC Ltd, at the present time it is proposed HBRC advances approximately $3.2million to HBRIC Ltd to enable it to fund additional dividend distributions to HBRC offsetting the losses of revenue arising from HBRIC Ltd’s rescheduling of cash draw downs required for RWSS from HBRC, provided the cost of funds of doing so, (market rate of interest as required by the Local Government Act), is also met by HBRIC Ltd and repayment is made by 2018/2019.

Commercial Feasibility and Associated Risks

14. Commercial feasibility (eg water uptake, investor commitment and returns etc) and the impact (if any) on HBRC’s operating position, balance sheet and rates take are being separately assessed by Deloitte in the course of their Peer Review of HBRIC Ltd’s Business Case and will be separately reported to HBRC.

Conclusions

15. The proposals outlined above remain consistent with the provisions contained in LTP2012‑2022 for providing the total capital investment in RWSS will be no more than $80million. This means their impact on HBRC’s balance sheet will not result in a materially different financial position for HBRC from that forecast in LTP2012-2022, namely reduction in cash held in bank deposits then invested through HBRIC Ltd in RWSS infrastructure.

16. The understanding/commitments now in place between Napier Port and HBRIC Ltd for the payment of additional dividends from Napier Port and the proposed arrangement for HBRC to advance approximately $3.2million to HBRIC Ltd, the details of which have been outlined in this paper, will ensure HBRC’s operating position remains unaffected for the proposed investment and equity in RWSS of $71.5million, as set out in the RWSS business and investment case presented to HBRC on 26 March 2014.

17. The proposal for HBRC to advance $3.2million to HBRIC Ltd is subject to an opinion from Audit New Zealand (HBRC and HBRIC Ltd’s auditors) and has been confirmed by legal opinion dated 9 April 2014 (refer attachment 2).

Decision Making Process

18. HBRC 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

That the Corporate and Strategic Committee receives the report and notes that:

1. Understandings/commitments by HBRIC Ltd, culminating in the letter of 8 April 2014 and financial attachments, support the conclusion that the proposed investment in equity in RWSS of $71.5m (as set out in the RWSS business and investment case presented to HBRC on 26 March 2014), will be cost neutral to HBRC and, by implication, the ratepayer.

2. This position of cost neutrality to HBRC is made possible by an increase in dividends from Napier Port which are proposed to increase substantially by 2016-17, and a proposed advance of approximately $3.2m from HBRC to HBRIC Ltd to part fund the cost of funding required in RWSS for the years 2014-15 and 2015-16, as HBRIC Ltd has advised in the business case that shortfalls in these years cannot be prudently met by further drawing on Napier Port.

3. The proposal to provide an advance of $3.2m from HBRC to HBRIC Ltd, the increase in HBRIC Ltd dividends during 2014-15 and 2015-16 of an equivalent amount, the servicing of the advance and the repayment of this advance is subject to a review from a legal perspective and also a review from Audit New Zealand from an accounting/ legislative perspective.

4. Any requirement for additional investment in RWSS over the currently proposed figure of $71.5m in HBRIC Ltd equity, up to $80m as proposed in the LTP 2012-22, should only be made if HBRIC Ltd is able to meet the cost of funds thus ensuring the investment in the RWSS is cash neutral for HBRC and will not have an effect on HBRC’s level of rates.

5. HBRIC Ltd has provided financial information and a commitment to pay interest at HBRC’s cost of capital and repay, by 2018-19, the proposed advance of approximately $3.2m from HBRC to HBRIC Ltd.

6. Deloitte will report, as part of the review of the business and investment case, on the potential impacts (if any) of any other commercial risk, specifically as it relates to HBRC, as identified by them or included in the RWSS business investment case.

Paul Drury

Group Manager Corporate Services

Liz Lambert

Chief Executive

Attachment/s

1 View	HBRIC Ltd Letter to HBRC dated 8 April 2014 confirming arrangements for temporary funding.
2 View	Legal opinion on HBRIC Ltd funding proposal

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 16 April 2014

SUBJECT: Deloitte Peer Review of HBRIC Ltd RWSS Business Case - Interim Report

Reason for Report

1. Deloitte is some way toward producing its final Business Case Peer Review report and will present the interim findings from their report for Council’s consideration. Alan Dent and David Morgan will make a verbal presentation on their review at the meeting.

2. Where the presentation and discussions relate to aspects of the financial case that remain, for now, commercially sensitive these issues may need to be discussed in a public excluded session. A separate paper has been developed to provide for this to occur, should it be needed.

Background

3. To assist Council with the decision making process surrounding the possible investment in the Ruataniwha Water Storage Scheme, Deloitte was commissioned to perform an independent peer review of the HBRIC Ltd RWSS Business Case.

4. The key issues for the Council in evaluating HBRIC’s business case are:

4.1. Financial feasibility – is the Council’s investment supported by a sound business case? What are the strengths and weaknesses of the business case?

4.2. Returns on investment – what financial returns can the Council expect from its investment and over what time period are these expected to occur?

4.3. Business Risks – what risks does the company face and how will these be managed or mitigated?

5. These issues are expected to be addressed by Deloitte reviewing the business case projections, their underlying assumptions and its assessment of impacts of changes in a range of market, management and financial variables, including:

5.1. Market demand, including projected farmer take up and on farm profitability

5.2. Pricing of services and sensitivity of revenue to price changes

5.3. Financial projections including revenues, margins, expenses, operating position and free cash flow

5.4. Financial position/balance sheet of the new company including the financing plan, debt/equity structure and conditions (if any) required by shareholders that will/may affect profitability and application of free cash flows

5.5. Risk identification, evaluation, management and mitigation both in respect of the initial capital investment and ongoing operations

5.6. Returns to shareholders

5.7. Planned application of free cash flows

5.8. Management model.

6. The Peer Review is in the nature of an “audit” of the HBRIC prepared business case, but should include assessment of the critical business case factors, including all assumptions underlying it, and key elements such as the market for water storage and distribution services, projected demand by farmers and others, the resources required to establish and operate the business and the company’s projected operating and financial performance and financial position over time.

7. It should include review of the impacts and sensitivities (if any) of assumptions and information available about:

7.1. Market Demand - Farmer/Irrigators

7.1.1. Projected farmer demand/take-up

7.1.2. Projected on-farm investment, future farm production, farmer profitability and their ability to pay water distribution charges

7.1.3. Projected demand from other users and for other services (e.g. for supply of hydro power)

7.1.4. Terms of sale of water storage and distribution services to farmers (for 35 years or lesser periods).

7.2. Management Model

7.2.1. Proposed management structure

7.2.2. Proposed use of external advisors/consultants.

7.3. Governance Model

7.3.1. Size of Board

7.3.2. Board membership

7.3.3. Chairperson.

7.4. Financial projections

7.4.1. All revenues, whether from distribution service charges or other sources, and operating expenditures, including discussion of major issues of insurance, repairs & maintenance and environmental controls

7.4.2. Gross margins and gross profit and their sensitivity to service price changes

7.4.3. Operating surplus

7.4.4. Cost of funds

7.4.5. EBIT and EBITDA

7.4.6. Depreciation and amortisation

7.4.7. Income tax position

7.4.8. Net profit after tax

7.4.9. Capital expenditure

7.4.10. Free cash flow.

7.5. Funding model

7.5.1. How the invested funds are to be used

7.5.2. Funding Structure (equity & debt components)

7.5.3. Provision of working capital requirements for ongoing operations

7.5.4. Funding compensation for acquisition of existing consent holders right to their consents (if any)

7.5.5. Sensitivity of funding model to varying cash flows as a result of changes in farmer uptake and water distribution price improving over time

7.5.6. Long term capital management plans

7.5.7. Provision (if any) for contingencies, especially during the construction stage.

7.6. Investment Returns

7.6.1. Sustainability of returns over the long term

7.6.2. Projected distributions of net profits and proposed dividend policy.

7.7. Ownership Model

7.7.1. What implications there may be for the operation of the business from the structure of the shareholding partnership in the new company – who the partners are (CIIL, Ngai Tahu Holdings, other private investors), what their class of investment and respective rights to dividends (e.g. ordinary shareholders or preference shareholders), fees, dividends and other payments are and what the relationships will be (such as shareholder agreement on pre-emptive acquisition rights, and board membership)?

7.7.2. What effect (if any) will arise from pre-emptive acquisition rights in the new company planned for customers and other stakeholders?

7.7.3. Relative returns to shareholders and rationale/justification for any differences as between shareholders

7.7.4. Impact of shareholder’s planned exit requirements/strategies.

7.8. Business Case Risks including risk identification and evaluation, mitigation plans, and management and control plans arising from:

7.8.1. market demand and famer uptake

7.8.2. project completion

7.8.3. business operation

7.8.4. variations in farmers ability to pay water distribution prices over time

7.8.5. regional environmental issues, especially from possible adverse effects on the Ruataniwha Plains

7.8.6. funding and financial structures, costs and obligations

7.8.7. uncompleted contracts or agreements, including farmer’s contractual obligations to make payments over the 35 years of water distribution contracts

7.8.8. external environment (economy, legislative etc).

7.9. Non-business financial issues

7.9.1. Significance of recreational functions (if any) from using the reservoir

7.9.2. Costs to be incurred by the new company (if any) for establishing and maintaining recreational facilities and access to them.

8. The final Peer Review report will be available for the Council meeting on 30 April.

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 “Deloitte Peer Review of the HBRIC Ltd RWSS Business Case” verbal interim report.

Liz Lambert

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 16 April 2014

SUBJECT: Draft Ruataniwha Water Storage Scheme Investment Statement of Proposal

Reason for Report

1. The Council’s evaluation of HBRIC Ltd’s proposal for Council to invest in the Ruataniwha Water Storage Scheme is being carried out in five major steps which are:

1.1. Testing the financial feasibility of the scheme by commissioning an independent Peer Review of the RWSS Business Case (the Deloitte report)

1.2. Evaluating the potential impacts of the investment on Council’s future balance sheet, operating position and rates (being considered as a separate paper in this agenda).

1.3. Identifying, evaluating and comparing options for alternative investment of the funds now held for the RWSS investment as required by the Local Government Act 2002, including assessment of their economic and financial benefits and costs (the Nimmo-Bell report, presented at the Environment and Services Committee meeting of 9 April).

1.4. Strategic Evaluation of investment in RWSS or alternatives addressing matters such as fit with Council’s LTP objectives and economic development strategy, equity between ratepayers and risk management (assessed as part of the Statement of Proposal).

1.5. Public Consultation on Council’s Provisional Decision using a special consultative process as provided for by the Local Government Act 2002 and final decision by Council following consideration of the evaluation and results of the special consultative process (Statement of Proposal).

2. This report initiates nos. 1.4 and 1.5 through consideration of a draft Statement of Proposal (SoP). A final version of the Statement of Proposal and the Summary of the Statement of Proposal set out the information to be provided to the public as part of the consultation on investment of up to $80 million in the Ruataniwha Water Storage Scheme (RWSS).

3. The decision on Council’s preferred option on investment is scheduled to be at the Council meeting on 30 April. This paper provides a draft Statement of Proposal that sets out the format and provisional contents of the document, and, in doing so, identifies a preferred option as the basis for public consultation.

4. The reasoning for this is:

4.1. It will allow for double debate of the two options identified in the draft SoP – both at the Committee meeting and again at the Council meeting.

4.2. If recommended, it will allow for the preparation of a summary of proposal to be prepared for adoption at the Council meeting.

4.3. The alternative option is the status quo, which is not to invest, so no further consultation would be required. In other words if Council’s decision is to not invest then there will be no need to issue a Statement of Proposal.

4.4. The identification of a preferred option at the draft stage allows for the finalisation of a more complete Statement of Proposal for inclusion on the Council agenda.

4.5. The passing of a recommendation at this meeting does not preclude a different outcome at the Council meeting.

Special Consultative Procedure

5. At its meeting on 31 October 2012 Council resolved that if it decided to continue investing in the RWSS project following a recommendation from HBRIC Ltd, then Council’s decision would be subject to a further special consultative procedure.

6. The Special Consultative Procedure (predominantly set out in sections 83 to 89 of the Local Government Act 2002) consists of the following steps.

6.1. Prepare a statement of proposal and a summary - Council must prepare a description of the proposed decision or course of action. This should include the problem or issue the proposal intends to address and a summary of options considered. The statement of proposal must be included on an agenda for a Council meeting. Council must also prepare a full and fair summary of the proposal, which must be distributed as widely as it considers to be reasonably practicable.

6.2. Public notification - Council must publish a notice in one or more daily newspapers, or in other newspapers of equivalent circulation, of the proposal and of the consultation being undertaken. The statement must be available for distribution throughout the community and must be available for inspection at the main Council office and may be made available elsewhere, e.g. community libraries.

6.3. Receipt of submissions - Council must acknowledge all written submissions and offer submitters a reasonable opportunity to make an oral submission, i.e. to speak in support of their written submission. Council must allow at least one month (from the date of the notice) for people to make written submissions.

6.4. Public deliberation - All meetings where Council deliberates on the proposal or hears submissions must be open to the public, unless there is some reason to exclude the public under the Local Government Official Information Meetings Act 1987. Similarly, all submissions must be made available to the public unless there is reason to withhold them under the Act.

7. The proposed consultation programme for the final Statement of Proposal is presented in a separate paper on this agenda.

Draft Statement of Proposal

8. The draft Statement of Proposal has been prepared based on the following assumptions:

8.1. The Board of Inquiry will issue the required resource consents for the RWSS;

8.2. The peer review final report by Deloitte will confirm that the HBRIC business case meets satisfactory outcomes in terms of financial feasibility, returns on investment and business risks; and that the underlying business case projections and their assumptions are confirmed.

9. The Draft SoP follows a standard format for these types of documents. It covers:

9.1. Introduction –setting out the background to the investment proposal

9.2. A summary of the Proposal

9.3. Council’s objectives for the investment

9.4. The nature and scope of the activities proposed

9.5. Details of the Proposal

9.6. An analysis of the options considered

9.7. Conditions precedent

9.8. Preferred option

9.9. Reasons

9.10. Other information

10. The Draft Statement of Proposal concludes with a preferred option to invest in the Ruataniwha Water Storage Scheme and the reasons for this. The Summary Statement of Proposal would be an abridged version of the final SoP, however copies of both documents would be made available as part of the consultation process.

Decision Making Process

11. The recommendations in this paper cover the proposal to carry out a special consultative process for the establishment of the proposed Investment Company. This special consultative process is in accordance with the provisions of the Local Government Act 2002.

Recommendations

The Corporate and Strategic Committee recommends that Council:

2. Approves the content of the Statement of Proposal covering the proposed investment in the Ruataniwha Water Storage Scheme, subject to receipt of a satisfactory business case independent review report and subject to any additions and amendments sought at the Corporate and Strategic Committee meeting.

Paul Drury

Group Manager

Corporate Services

Liz Lambert

Chief Executive

Attachment/s

1 View

Statement of Proposal re Investing in RWSS

Statement of Proposal re Investing in RWSS

Attachment 1

STATEMENT OF PROPOSAL –

INVESTING IN THE RUATANIWHA WATER STORAGE SCHEME

1. INTRODUCTION

Hawke’s Bay Regional Investment Company Limited (HBRIC Ltd) has developed a business plan to invest in the Ruataniwha Water Storage Scheme (RWSS). It has recommended to its owner, Hawke’s Bay Regional Council (HBRC) that HBRC invest up to $80 million in accordance with its intention to do so as announced in its Long Term Plan 2012-2022 (LTP 2012-2022).

The RWSS involves:

· Constructing a reservoir and dam in the Tukituki Catchment in Central Hawke’s Bay to collect and store water.

· Developing and implementing a system to distribute water to farm gates and other supply points to irrigate land in Central Hawkes Bay.

· Operating the distribution system to deliver stored water to farmers and other users on a commercial basis (i.e. customers pay a price for distribution that makes the system financially viable).

Investment in RWSS should generate both short and long term social, cultural and economic benefits for the Hawke’s Bay region and improve long term returns from HBRC’s investment portfolio.

LTP 2012-2022 included a proposal that HBRC invest up to $80 million in RWSS, (including its initial investment in feasibility studies) in partnership with other public and private sector investors and subject to full evaluation of the proposal.

Following public consultation on the LTP 2012-2022 and the establishment of HBRIC Ltd, HBRC transferred its initial investment in feasibility and other studies on the RWSS to HBRIC Ltd, assigning it the task of taking the proposed investment through technical and financial evaluation; applying for consents required under the RMA and managing the consenting process; commissioning contractors to build the reservoir and dam and distribution system and formulating a robust plan for funding the investment in conjunction with iwi, interested investors, farmers, iwi and others. HBRIC Ltd has completed these tasks and, supported by a Business Case, sought HBRC’s approval for its investment proposition and funding sufficient to enable HBRIC Ltd to acquire an approximately one-third share in the entity owning the RWSS.

Public meetings to discuss the issue of potentially investing in the RWSS were held as part of the LTP 2012‑2022 consultation process. Following this, and in the consideration of comments and submissions received from the public, HBRC resolved to undertake a process of special consultation under the Local Government Act with the intention of enabling HBRC to hear submissions and make appropriate decisions in 2014.

The Special Consultative Procedure (SCP) involves releasing a proposal for public comment. HBRC has now begun the procedure by adopting this Statement of Proposal as a statement of its intent. HBRC wishes to invest in RWSS and this Statement of Proposal provides an evaluation of the proposed course of action.

2. SUMMARY OF PROPOSAL

The RWSS is a long-term sustainable water storage infrastructure investment intended to help unlock high value agricultural production in the Ruataniwha Plains by collecting, storing and distributing water in an efficient and effective way to irrigate around 25,000ha of agricultural land on the Ruataniwha Plains.

Invested funds will be used to construct a dam and reservoir on the upper Makaroro River and an associated distribution system to store high winter water flows for irrigation use during summer when the pressure on water available in the Tukituki catchment is highest, as well as generating hydro electricity.

As a consequence RWSS will help mitigate environmental degradation of the Tukituki catchment, while providing the opportunity to generate significant regional economic and social benefits by providing a stable and reliable source of water through irrigation to enable more productive and higher value farming on the Ruataniwha Plains.

HBRC, through HBRIC Ltd, will establish and invest in the Ruataniwha Water Limited Partnership (RWLP) to own and operate the RWSS. HBRC (through HBRIC Ltd) currently proposes to invest up to $71.5 million (as required in HBRIC Ltd’s Business Case) to own approximately one-third share of RWLP. HBRIC Ltd’s business case states that the eventual investment required from HBRC could be up to $80 million. Other shareholders who will own the remaining two-thirds of RWLP are expected to include Ngai Tahu Holdings Limited, CHB farmers and other institutional and interested infrastructure investors.

In addition Crown Irrigation Investments Limited, a Crown-entity company under the Crown Entities Act 2004, established by the Government to make bridging investments in development of irrigation schemes (and other regional water infrastructure), is expected to provide debt funding to RWLP on favourable terms, and any other financing required will be borrowed on normal commercial terms.

The project cost is expected to be in the vicinity of $275 million and construction of the dam, reservoir and distribution system will take around three years from the date of receiving all regulatory consents. Assuming approvals are received by mid 2014, it is expected operations will commence in the third quarter of 2017.

2.1 Objectives

HBRC’s objectives for this investment are to:

· Help achieve its strategic development objectives for the Hawke’s Bay Region as a whole through establishing and managing a key infrastructure resource to improve agricultural production and productivity while enhancing environmental management of the Tukituki catchment;

· Encourage and enable increased private sector investment in the region’s export oriented agricultural sector;

· Generate economic, social and cultural benefits in the region;

· Help improve management and control of environmental risks over the long term, especially those relating to water quantity and water quality;

· Generate satisfactory tax paid returns to HBRC from the financial performance of the invested assets;

· Ring-fence particular investment risks

2.2 Nature and Scope of Activities

The nature and scope of RWLP’s activities will be to:

· Own and manage the constructed dam and reservoir together with the land on which they are built, the distribution pipelines, pumps and stations carrying water to farm gates and any other supply points and all other assets and liabilities necessary to operate the RWSS effectively and profitably;

· Raise funds for working capital and development as required by selling bonds, mortgages, preference shares and other debt instruments;

· Assist any subsidiary and associated companies to increase shareholder value and regional prosperity through growth and investment;

· Apply best practice governance procedures within the RWLP and any subsidiaries and other investments it may have now or in the future; and,

· Help achieve HBRC’s regional strategic economic development objectives by investing in assets that will benefit the Hawke’s Bay Region as a whole.

3. DETAILS OF THE PROPOSAL

3.1 rwss

RWSS will consist of an 83 metre high concrete dam on the Makaroro River in the Tukituki Catchment with a reservoir having a maximum storage capacity of approximately 90 million m³, which would be used to irrigate up to 25,000 hectares delivered through a mixed and open canal and piped distribution system to farmers and other users in Central Hawkes Bay. The dam and reservoir system will also include an approximately 6.5kw hydro-electric power station.

As a result of a comprehensive recruitment and selection process OHL/Hawkins joint venture was appointed the preferred design and construction consortium for the RWSS. OHL is a listed Spanish construction company with international operations and Hawkins Infrastructure Limited is New Zealand’s largest privately owned construction company.

It is intended RWSS will eventually deliver approximately 104 million cubic metres of water each year to five zones located across SH2 between Waipukurau in the south and Te Aute in the north.

The following Figure 1 shows the proposed location of the dam and reservoir for RWSS and production land use areas (Zones A to M) that are expected to be able to utilise irrigation water supplied by the Scheme.

Statement of Proposal re Investing in RWSS

Attachment 1

It is important to note that without HBRC’s investment, RWSS would not proceed. RWSS is a regional infrastructure investment, initiated by HBRC and developed through HBRIC Ltd in partnership with iwi, the private sector and central government agencies and crown entities. The partnership and structure rests upon the participation of HBRC through HBRIC Ltd.

Although the investment sought by HBRIC Ltd at $71.5 million is less than the $80 million provided for under LTP 2012-2022, it is possible HBRC will be asked to eventually increase its funding to the level proposed in LTP 2012-2022 (i.e. $80 million) to ensure completion of RWSS.

3.3 GOVERNANCE

The RWLP Board will consist of five or six directors, two of whom will be independent of the owners, and one of those appointed will be Chairperson. Two directors will be appointed by HBRIC Ltd and others appointed by the other shareholders in proportion to their respective equity investments in RWSS.

3.4 Management

The RWLP will have its own operating management, independent of any owner. The Chief Executive of RWLP will be recruited and appointed by the Board of RWLP.

3.5 ANTICIPATED Operating Performance

RWLP will derive revenues principally from fees paid by users for the distribution of water to them. Its resource consent caps the total amount of contracted water at 104 million cubic metres per annum. In addition RWLP will enter into a concession deed with HBRC to ensure reliability of supply is preserved. The majority of revenue will be controlled by these requirements. RWLP will be contractually committed to supply water volumes and quality to irrigators, and it should also earn some revenue from the sale of electricity generated by a proposed hydro electric power station.

3.6 risks

Like all investments, RWLP has risks. In this case the risks include:

· Design and construction risks

· Establishment risks, such as:

o uptake by farmers

o response by investors

· Operational risks in course of day-to-day business such as:

o environmental – weather

o regulatory

· External risks, such as:

o unforeseen changes in the international and New Zealand economies, especially those affecting prices for agricultural produce

o changes in the agricultural sector

o changes in government policies

o changes in New Zealand’s business environment

HBRIC Ltd has addressed these risks through a combination of conditions precedent and HBRIC Ltd financial risk minimisation plans and environmental mitigation programme and an Irrigation Management Plan (binding on farmers).

HBRC commissioned Deloitte to undertake a peer review of the HBRIC Ltd Business Case and associated business and financing risks.

A summary of Deloitte findings will be included in this section

4. ANALYSIS OF OPTIONS

The options for achieving the objectives outlined above were evaluated in reaching the conclusion that investing in RWSS is the most efficient and effective way of achieving them. These are:

· Invest in the RWSS as proposed; or,

· Status Quo: no investment in RWSS.

The advantages and disadvantages on investing in RWSS as compared with not investing are summarised below.

4.1 ADVANTAGES

1. Economic Benefits

Improving economic benefits through development of agriculture is particularly important for Hawke’s Bay region because its temperate climate and high sunshine hours give it a key competitive advantage in diversity, quality and availability of primary production and in processing food for export. Currently the region contributes 3.4% of New Zealand’s national GDP, however its contribution to the nation’s primary production and processing is 7%, more than double its overall contribution, reflecting the benefit of its competitive edge. This means the region gains relatively more form investment in primary production than do other regions in New Zealand.

Economic benefits from implementing the RWSS will occur as both one-off gains from the initial development and construction phases, and subsequently, annually, from increased production and productivity from farming operations. Independent assessment of these benefits was undertaken by Butcher Partners Limited, an economics research consultancy, and is summarised below.

Comment on Deloitte assessment of this will be included in this section

a. One-off construction and development benefits

Butcher Partners estimated there will be a one-off increase in the regions GDP of around $410 million as a result of the investments made by farmers in on-farm systems developed to use the water delivered by RWSS to their farm-gates and the construction of the RWSS dam, reservoir and distribution system. These investments are estimated to result in an addition of around $270 million to household incomes and around 4,700 job years of work during construction.

b. Ongoing annual benefits from farming and other operations

Benefits should arise from increased processing that may arise from conversions from livestock farming to fruit, vegetables and dairying. Although the extent of increased processing is very uncertain, Butcher Partners estimate the total combined increase in activity in the farming, processing and supporting industries could raise Regional GDP by approximately $250 million per year, including an additional $125 million per year in household income, and create a total of 2,520 extra on-going jobs in the region.

The estimated annual benefits are summarised in the following Table 5.

Table 5: Estimated Economic Benefits at Full Development of RWSS

Sources: Butcher Partners, Hawke’s Bay Regional Council, March 2014

These benefits would not arise if RWSS was not implemented as a result of HBRC failing to invest in it.

2. Environmental Benefits

Currently the Tukituki catchment suffers from a nutrient imbalance when river flows are lowest in the summer months. This results in excessive phosphorus in the water generating slime and algae growth. This effect is compounded by further reduced water flows and warming of the river as a result of draw off of water under current water allocations to farmers, which exceed Regional Plan limits. These low flows reduce habitat for trout and various taonga species and the slime and algae growth impacts on the recreational value of the river.

HBRC has addressed these issues by proposing Tukituki Plan Change 6 which will set minimum flow levels and set appropriate nutrient levels which will improve environmental outcomes as a result. However imposition of these requirements on their own will reduce agriculture production and productivity and consequently impact adversely on the region’s economy.

Commentary on Board of Inquiry draft decision will be included in this section once received.

Implementation of RWSS will enable improvement of water quality (lower nutrient levels) and minimum flows while off-setting the economic impacts of Plan Change 6.

Moreover RWSS will help the regional economy offset the predicted effects of climate change. This is especially important for Hawke’s Bay in the light of NIWA and other forecasts suggesting a drying trend with more droughts in the future.

3. Social Benefits

RWSS is expected to have the following social benefits:

a. Short term boosts to the local, district and regional economy during the construction phase, leading into long term gains in employment relating to farming and farming services in particular;

b. opportunities to change farming practices and increase resilience to droughts;

c. reduced unemployment and increased opportunities for youth, revive vitality amongst local communities, and reduce dependency on welfare benefits;

d. improved career opportunities for college and high school students;

e. water allocation rationalised;

f. new amenity values for reservoir lake;

g. potential for enhanced agricultural and horticultural training in support of land use changes;

h. improved opportunities for technology development and transfer on farms as a result of new farming systems and environmental management practices;

i. improved education, health, sports and recreation and other services;

j. increased demand for farm services based in Waipukurau and Waipawa as well as enhanced business activity in retail and other areas;

k. improvements in quality of life (housing, sports and community activity and services) as a result of flow-on from increased employment, population and improved household incomes; and,

l. strengthening community groups and organisations as a result of increased population and household incomes.

4. Cultural Benefits

HBRC has a key ongoing partnership with Maori in the Hawke’s Bay Region, who make up nearly 25% (Census 2013) of the total Hawke’s Bay population. This relationship together with the requirements of the RMA has resulted in HBRC and HBRIC Ltd including tangata whenua representatives in all stages of the RWSS project development. This has resulted in a number of benefits from RWSS as summarised below:

a. Execution of memoranda by Ngati Kahungunu Iwi Authority, Te Taiwhenua o Tamatea, HBRC , HBRC and a number of Heretaunga hapu to cover cultural value monitoring, preservation of native fish passage, base line and effects monitoring for the Lower Tukituki river as well as new implementation policy in Plan Change 6 which includes cultural values monitoring as part of the wider HBRC Tukituki catchment monitoring;

b. Agreement between Te Taiwhenua o Tamatea and HBRIC Ltd formalising their relationship and providing, amongst other matters:

i. First right of refusal to Te Taiwhenua o Tamatea to contract for work arising from the biodiversity mitigation package proposed to be implemented with RWSS;

ii. Active pursuit of local and tangata whenua employment opportunities as part of the RWSS Design and Construction programme; and,

iii. $50,000 annually will be set aside for education scholarships for tangata whenua with links to the Ruataniwha district.

c. Establishment of a “Kaitiaki Runanga”, whose role is to review, report and recommend in relation to cultural and environmental monitoring during construction and the initial stages of the project, as part of the RWSS resource conditions.

d. He Toa Takitini (the Tamatea and Heretaunga Treaty Settlement Group) has expressed interest in a potential equity stake in the scheme as part of its upcoming settlement with the Crown (see Figure 2 above).

5. Security of supply for users

RWSS provides users with security of supply of water, irrespective of weather, climate and environment conditions, that is not available without the RWSS.

6. Improved Returns on HBRC’s investment portfolio

Over the long term the financial return from investment in RWSS should be shown in both increased value of the investment and an ongoing stream of dividends.

Although there is no guarantee of returns, HBRC’s Long Term Plan 2012-2022 assumes that RWSS will eventually generate dividends alone at the rate of at least 6% on its investment.

7. Impact on rates

HBRC has structured its proposed investment in RWSS of $71.5 million to be accomplished without requiring any support from its rates income and therefore no rates increases should occur in the future as a result of the investment in RWSS.

This will be achieved by distributions from HBRIC Ltd derived from other investments meeting the cost of funds of the RWSS investment.

Any requirement for investment over the currently proposed figure of $71.5 million, up to $80 million, as proposed in lTP2012-2022, will only be made if HBRIC Ltd is able to meet the cost of funds of the additional investment on the same terms as already applies to the currently proposed investment of $71.5 million.

8. Monitoring and Evaluation

This structure should enhance monitoring and evaluation tools to assess the performance of the RWLP against its objectives and HBRC’s strategic economic objectives while achieving a satisfactory return on the portfolio as a whole. It will ensure:

a. Investments can still be managed, monitored and evaluated on their own individual merits.

b. Any cross-subsidies from one investment to another can be clearly identified and evaluated.

c. Effects of investment decisions made to assist HBRC’s strategic economic development objectives can be identified, monitored and evaluated.

4.2 DISADVANTAGES

1. Environmental Impacts

A very comprehensive mitigation programme has been developed to offset a range of adverse environmental effects that could result from implementation of RWSS unless otherwise addressed. These adverse effects relate to terrestrial ecological effects on the land flooded for the proposed reservoir and effects on the river environment associated with the establishment and structure of the scheme and its ongoing operation.

Although the programme of six projects and implementation of an overall Irrigation Environment Management Plan (“IEMP”), which is binding on farmers and their operations, are expected to fully offset the projected impacts of RWSS and enable the implementation of Plan Change 6 with minimal adverse impact on the regional economy, it is possible the administration or effect of this programme may not deliver the full benefits of mitigation all the time.

Nevertheless the comprehensive nature of the mitigation programme and the IEMP should ensure very little, if any, adverse environmental impact occurs as a result of RWSS.

2. Social Costs

RWSS could also result in social costs including:

a. some loss in amenity values in the valley flooded to accommodate the reservoir;

b. increased health and safety risks from intensified production from dairy and horticulture

c. increased traffic risks from movement of heavy and other vehicles on local roads;

d. increased cost of maintaining local roads;

e. possible values conflicts between existing members of the communities and new entrants attracted by jobs and opportunities; and

f. short term demand for rental housing during the construction phase may put pressure on rents and availability of housing for other renters.

3. Restricted Access to HBRC’s Investment during its establishment phase

HBRC will be unable to realise its investment in RWSS, should it wish to do so, until it is fully established and operating profitably. In effect HBRC’s investment will be “locked away” for at least 10 years.

5. CONDITIONS PRECEDENT

The following conditions precedent need to be satisfied before the HBRC provides any funding to HBRIC Ltd:

1. The EPA granting satisfactory resource consent conditions for RWSS infrastructure and operations, which in turn are recommended as being workable by all investors;

2. Agreements to purchase a minimum of 40 million cubic metres of water contracts (Water User Agreements);

3. Securing the funding required to build and operate the RWSS infrastructure;

4. Obtaining a bankable construction contract which adequately addresses construction risk allocation through a fixed-time, fixed-cost arrangement.

In the event these conditions are not met to the satisfaction of HBRC, no investment will be made in RWSS in this form at this time.

6. preferred option

HBRC believes investment as proposed in the RWSS will realise significant long term social cultural, environmental and economic benefits for the region, while also generating financial returns to HBRC which will help sustain its services to the community in the future.

HBRC therefore recommends investment in RWSS of up to $80 million proceed as outlined in this Statement of Proposal for the following reasons outlined in “7” below.

7. REASONS

Investment in RWSS is a key initiative in helping to deliver HBRC’s strategic development objectives which focus on active management of sustainable natural resources and strengthening the regional economy. In particular:

· RWSS is part of HBRC’s integrated approach to managing the Tukituki catchment with the consequential environmental benefits of minimising the adverse economic impacts of Plan Change 6 as a result of implementing minimum flow restrictions and setting limits on nutrient discharge into the river;

· RWSS is expected to help realise the significant agriculture potential of the Tukituki catchment by providing a reliable supply of water for irrigation

· This should result in significant additions to the regional economy in terms of additional jobs, and add to regional household income and GDP once the scheme becomes fully operational;

· It is a development partnership of private and public sector parties, including HBRC (through HBRIC Ltd), iwi, other Hawke’s Bay investors and central government investing in key infrastructure to support the region and the nation over the long-term; and,

· It will achieve commercial viability and generate value for its shareholders over time.

8. Other information

HBRC has chosen to follow the special consultative procedure set out in the Local Government Act for the investment in RWSS.

HBRC is releasing this proposal on 1 May 2014. Written submissions will be received until 3 June 2014.

HBRC will meet to consider submissions on the proposal on 16 June 2014.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 16 April 2014

SUBJECT: Ruataniwha Water Storage Proposition Consultation

Reason for Report

1. Council will potentially embark on a Special Consultative Process for the Ruataniwha Water Storage Investment Proposition on 1 May 2014.

2. The proposed consultation period will run for a month from Thursday 1 May until Tuesday 3 June 2014.

3. This item outlines how Council proposes to further inform people in the region about the scheme and encourage their submissions, to assist Council’s decision on whether or not to invest up to $80 million in the scheme.

4. The preparation of this item is not intended to assume a particular outcome on 30 April, but it is important that adequate preparations are made to enter a Special Consultative Process on 1 May 2014, should Council agree to do so at its meeting on 30 April.

Background

5. HBRC has maintained a steady public communication programme on the Ruataniwha Water Storage Scheme (RWSS) since 2011. The process has previously included two rounds of public consultation (both in 2012). Public also had the opportunity to submit during the resource consent application stage led by the government’s Environmental Protection Authority (in 2013).

6. Council wishes to conduct a substantial consultation round, asking public to inform the decision-making process, in advance of public hearings in June, and before Council makes its final decision on investment in the scheme, tentatively scheduled for Wednesday 25 June 2014.

Key Messages

7. If Council decides on 30 April that its preferred option for public consultation is to invest up to $80M in the RWSS then the following will be the key messages:

7.1. Hawke’s Bay Regional Council has a big decision to make on behalf of the regional community. We believe that water storage means environmental and economic wins for Hawke’s Bay. Simply put, the question we’re putting to the regional community is whether or not to invest up to $80 million in the scheme.

7.2. Water storage will allow HBRC to improve water quality and summer flows in the Tukituki River. It can also unlock secure water supply to irrigate 25-30,000 hectares of land, create around 2,500 new jobs and generate up to $250 million in year in ongoing benefits for Hawke’s Bay.

7.3. The effects of a Plan Change on the Tukituki River, without water storage, will mean higher minimum flows for current and future water use, no ability to influence minimum and flushing flows in dry periods, no contribution to regional economic development, no related employment opportunities and no household income benefits.

Better to Know

8. HBRC needs to present information about RWSS in a non-partisan and non-emotional way. However the information should be engaging – rather than overly technical – and allow people to draw their own conclusions.

9. Book-ending communications with ‘You need to know’ and ‘Better to know’ will reinforce the delivery of information from which personal opinions can be formed.

10. www.bettertoknow.co.nz will lead to new content embedded in HBRC’s website.

Consultation Outline

11. Consultation is based on HBRC’s statement of proposal for investment in the Ruataniwha Water Storage Scheme.

12. The objective is to reach the widest possible audience in the region using a range of media, to inform and encourage submissions.

13. Planned elements include a personally addressed stakeholder letter, RWSS brochure, media releases, press, print and radio advertisements, and consultation packs for the eight libraries in the region and two main HBRC offices.

14. Additional planned support will take the shape of a standardised PowerPoint presentation, video case studies, associated with new online content at hbrc.govt.nz and accessible via bettertoknow.co.nz.

15. Social media will also be used to inform and encourage submissions in addition to GiggleTV (viewed in fast food outlets, petrol stations, bars, gyms and retail outlets).

16. The RWSS Investment Proposition will also be a key element of HBRC’s stand at the Better Home and Living Expo. This occurs at Pettigrew Green Arena, from Friday 16 May to Sunday 18 May 2014.

Public Meetings

17. Staff propose a significant round of public meetings to enable as many people as possible to be informed and ask questions concerning HBRC’s potential decision to invest. Where possible, a standard PowerPoint presentation will be used to lead consultation.

14-May	12.30 pm	CHB Municipal Theatre – Chambers, Waipawa	CHB
14-May	5.15 pm	Town Hall, Ongaonga	CHB
15-May	12.30 pm	Civic Theatre, Waipukurau	CHB
15-May	5.15 pm	Town Hall, Takapau	CHB
20-May	TBC	Rakautatahi Marae, Nancy Street, Takapau	CHB
22-May	5.30 pm	Duke of Edinburgh Hotel, Porangahau	CHB
15-May	12.30 pm	Baptist Church, Auditorium, Lyndon Road	Hastings
15-May	5.15 pm	Baptist Church, Auditorium, Lyndon Road	Hastings
20-May	12.30 pm	Havelock Nth Community Centre, Lantern Gallery	Hastings
20-May	5.15 pm	Havelock Nth Community Centre, Lantern Gallery	Hastings
15-May	12.30 pm	War Memorial, Room 2, Marine Parade	Napier
15-May	5.15 pm	Taradale Town Hall	Napier
15-May	12.30 pm	Taradale Town Hall	Napier
15-May	5.15 pm	War Memorial, Room 2, Marine Parade	Napier
13-May	5.30 pm	Waikare Hotel, Putorino	Wairoa
14-May	5.30 pm	Wairoa Community Centre	Wairoa
15-May	5.30 pm	Morere Hall at Nuhaka School	Wairoa

Presentations to Groups

18. Staff will draft a letter to be mailed/ emailed to key stakeholders and groups within the region, offering the opportunity to present the RWSS Investment Proposition. The letter will be distributed in the week commencing 5 May 2014.

Staff

19. Staff will be fully briefed on this proposed consultation plan and associated RWSS timing.

Financial and Resource Implications

20. The estimated external costs for RWSS consultation is $80,000. A contingency fund of $50,000 is available annually to provide support for projects that arise during the financial year, but have not been included in the Annual Plan. No money has been expended from this fund in the financial year to date. It is recommended that the $50,000 be used to fund the public consultation costs that are not covered by existing budgets in order to undertake the significant region-wide public consultation that this project would merit.

Decision Making Process

21. 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:

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

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

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

21.4. The persons affected by this decision are elected representatives, Council staff and members of the public attending Council meetings.

21.5. Options that have been considered are outlined in this paper.

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

21.7. 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.

Recommendation

The Corporate and Strategic Committee:

1. Receives the “Ruataniwha Water Storage Proposition Consultation” report and provides feedback on the schedule of events to staff.

The Corporate and Strategic Committee recommends that Council:

2. 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.

3. Approves the expenditure of $50,000 from Project 876 (Unspecified Projects) for the Ruataniwha Water Storage Proposition Consultation.

rew Broadley

Community Engagement and Communications Manager

Liz Lambert

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 16 April 2014

SUBJECT: Review of Standing Orders

Reason for Report

1. Given that Councillors have now had six months to become familiar with the Standing Orders (SOs), as adopted at Council’s First Ordinary Meeting on 6 November 2013, and gained practical experience of their application in meetings, this report seeks Council’s confirmation, or otherwise, of its desire for staff to embark on a review of the SOs with the intention of creating a specific set of HBRC standing orders.

Background

2. The Local Government Act 2002 (Schedule 7, Part 1, Sec 27) requires that “(1) A local authority must adopt a set of standing orders for the conduct of its meetings and those of its committees” and further, states:

“(2) The standing orders of a local authority must not contravene this Act, the Local Government Official Information and Meetings Act 1987, or any other Act.

(3) After the adoption of the first standing orders of the local authority, an amendment of the standing orders or the adoption of a new set of standing orders requires, in every case, a vote of not less than 75% of the members present.”

3. The SOs adopted 6 November 2013 include amendments made by this and previous Councils to the New Zealand Standard NZS 9202:2003 Model Standing Orders for meetings of Local Authorities and Community Boards (the Standard). These amendments were made in order to provide clarity around specific HBRC business and meeting processes, simplify language and enable specific HBRC consideration of Maori input and discussion in meetings.

Considerations

4. Because the Standard was developed specifically to meet the requirements of the LGA and LGOIMA all Councils in New Zealand use the Standard, with or without amendments. Several district councils have developed ‘their own’ SOs, however these are merely the Standard with amendments included then published with the Council’s branding. For example, Auckland Council’s SOs include specific provisions to provide for the Mayor’s legislated powers and provisions in the Local Government (Auckland Council) Act 2009 relating to delegations to Local Boards.

5. Staff consider the options are:

5.1. Council continues to amend SOs as required, on an ongoing basis, with resulting amendments manually inserted into the Standard (status quo)

5.2. Commence a complete review, initiated with a ‘conversion’ of the Standard to incorporate amendments to date followed by a series of proposed amendments to specific clauses signalled by Council as requiring review.

6. The status quo is based on the premise that amendments are only actioned if there is a specific need and reason why the SO is not working for Council.

7. The requirement that “any amendment of the standing orders or the adoption of a new set of standing orders requires, in every case, a vote of not less than 75% of the members present” it is envisaged that the new HBRC SOs and amended clauses could be dealt with through a series of resolutions (as was done with the adoption of the current SOs at the meeting on 6 November). This would enable Council to adopt the ‘overall’ document and then consider each amendment on its own merits.

Financial and Resource Implications

8. If a complete review of the SOs is to be undertaken it is expected that, due to the current workload commitments of both Councillors and HBRC staff in respect of the Draft Annual Plan and the Ruataniwha Water Storage Scheme, that this review should commence in July 2014.

Decision Making Process

9. 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:

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

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

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

9.4. The persons affected by this decision are elected representatives, Council staff and members of the public attending Council meetings.

9.5. Options that have been considered are outlined in this paper.

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

9.7. 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. Continues to amend the New Zealand Standard NZS 9202:2003 Model Standing Orders for meetings of Local Authorities and Community Boards as the need arises

2. Initiates a complete review of the New Zealand Standard NZS 9202:2003 Model Standing Orders for meetings of Local Authorities and Community Boards in the development of a set of HBRC Standing Orders.

Leeanne Hooper

Governance & Corporate Administration Manager

Liz Lambert

Chief Executive

Attachment/s

There are no attachments for this report.

Item	Topic	Councillor / Staff
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