Attachments of Regional Council Meeting

HBRC 2014-15 Annual Plan - Part 1 Introduction

Attachment 2

Chairman and Chief Executive’s Comments

P1020915

Fenton Wilson Liz Lambert

Chairman Interim Chief Executive

We’re now approaching the final three-year phase of the Long Term Plan developed in 2012 and we’re comfortable with the progress being made, delivering against key initiatives set out for this decade.

As we move into the 2014-15 Annual Plan, Hawke’s Bay Regional Council has started a strategic planning process for the 2015 – 2025 Long Term Plan, to which councillors, numerous sector groups, community groups and individuals will no doubt contribute.

Let’s be clear, HBRC is in the business of:

· Natural resource knowledge and management;

· Natural hazard assessment and management;

· Regional strategic planning (including provision of statutory plans such as the regional policy statement); and

· The provision and assessment of regional scale infrastructure and services, notably flood risk assets, regional logistics facilities such as Napier Port, and water storage.

In this Annual Plan, we identify areas that differ significantly from those laid out in the current Long Term Plan or previous Annual Plan.

Please take a moment to read this introduction and the parts of this Annual Plan which relate to you.

Year Three of the Long Term Plan

We are progressing in a number of areas based on our Long Term Plan or LTP, which include, but are not limited to:

· Catchment based planning – The Tukituki Catchment Plan Change sits alongside the Ruataniwha Water Storage (RWS) scheme and is our best option to improve summer flows and water quality, enhance water security for users and provide for sustainable economic development. We want to maintain or enhance aquatic habitats, maintain safe contact recreation and reduce the effects of algae and slime for recreational users. Following the Government’s Environmental Protection Authority process, guidance on policies and new limits will be finalised by June 2014.

· Science-informed land management - A pilot project working with farmers in the Papanui sub-catchment of the Tukituki has been established with positive community buy-in. An ideal outcome of this project will be the use of advice, information, nutrient management plans, riparian planting, etc, to reduce nutrients entering the catchment. If successful, this pilot programme will be extended to other water use areas.

· Ruataniwha Water Storage (RWS) – The RWS is a key part of the Tukituki Catchment Proposal that is designed to provide greater environmental protection for fresh water in the catchment, and provide opportunities for economic growth. The RWS has gained resource consent approvals from the Environmental Protection Authority, however the workability of these consents is still being determined at the time of this plan being finalised. If the consents are not workable and the scheme is not built, HBRC will need to closely manage the subsequent reductions for existing water takes.

· Air Quality/ HeatSmart - 2014 is a phase-out year for non-compliant fires installed before 1996 in urban areas. As anticipated, the demand for clean heat and insulation support has increased and the programme continues to perform above the targets set to meet national emission standards by 2020.

· Passenger Transport – The urban passenger bus service continues to grow in popularity and reflects the significant investment made by HBRC on behalf of the communities of Napier and Hastings. Total passenger trips reached another record high of 789,277 in 2013; an increase of 8.7% on 2012. During 2013 more than 3,000 bikes were carried free-of-charge on the goBay network.

· Biodiversity – The Biodiversity Strategy is developing under the guidance of a Steering Group which includes representatives from the broader community. An Accord is being drafted to allow agencies, businesses and individuals to ‘sign up’ and commit to the strategy’s outcomes. The detail of an entity to deliver the Strategy into the future is also under design. HBRC expects to conclude the Strategy in mid 2015.

· Regional Parks Network Plan – The move to recognise HBRC open spaces as Regional Parks was adopted by Council in November 2013. This plan also recognises a consistent management approach for Hawke’s Bay Trails.

· Napier Leasehold Land – HBRC has negotiated a financial agreement with the Accident Compensation Corporation (ACC) which transfers rental income associated with the leasehold land it owns in Napier to ACC for a period of 50 years. In exchange, HBRC received an upfront cash payment while retaining ownership of the properties. There is no change for the lessees or to the lease conditions under this arrangement. The initiative was outlined in HBRC’s LTP 2012-22 and is part of Council’s long term strategy to free up capital that will allow us to invest in significant infrastructure projects that create jobs and benefit the Hawke’s Bay natural environment.

There are some areas under this Annual Plan where HBRC is altering our programme to accommodate changes in factors since our Long Term Plan decisions. These changes are summarised as:

· Hill Country Afforestation – HBRC is assessing high UMF (Unique Manuka Factor) Manuka as a soil conservation method on steep, erodible land and has planted 140 ha in Tūtira Regional Park. The growth and performance of this new option is being closely monitored.

· Ngaruroro Water Storage - The feasibility stage for Ngaruroro Water Storage investigations will commence in 2014-15, having focused resources on completion of the Ruataniwha Water Storage process.

· Hydraulic Fracturing – The Parliamentary Commissioner for the Environment has released her second report on hydraulic fracturing. In response to her recommendations HBRC is proposing to make financial provision to consult with the public and prepare a Plan Change addressing oil and gas development, including the management of fracking.

· Identification of Outstanding Freshwater Bodies – The National Policy Statement (2011) for Freshwater Management requires the protection of Outstanding Freshwater Bodies. This is detailed in the Implementation Plan adopted in September 2012. A collaborative process is has been proposed.

No other ‘right debate’ changes are planned other than what we set out and adopted in the 2012-22 Long Term Plan.

Rating

Council’s rating programme funds the expenditure for its Groups of Activities set out in Part 2 of this Plan. Due to the continuing recessionary climate in 2013-14, a 4% total rate rise forecast in the Long Term Plan was cut back to 2.8%.

For the 2014-15 year Council reduced expenditure by $174,000 from what was indicated in the Long Term Plan by cutting overheads and external costs. However, to maintain the delivery of our current services – and bearing in mind lower than expected market interest rate returns which offset rating charges – a rate increase of 5.8% has been set for the 2014-15 year.

In dollar terms the total annual rates are expected to rise:

· Between $5 - $11 per property in urban areas, depending on the mix of rates on those properties;

· Between $12 - $15 per rural property with a capital value under $500,000, and over $100 per property with a capital value over $3,000,000 depending on the mix of rates on those properties.

Napier Gisborne Railway – Proposal

HBRC’s ongoing investment strategy is to improve financial, economic and environmental benefits for the whole region by investing in sound regional infrastructure assets.

One potential infrastructure investment is the re-establishment of the Napier-Gisborne rail line as a viable alternative to the transport of freight by road. HBRC, in conjunction with private sector partners, has considered investing in the operation of a rail business carrying freight on the line. A critical component of any such investment is the agreement by KiwiRail and the Government to reopen the rail line and for them to fully fund its return and that of associated infrastructure in a good ‘fit for purpose’ condition.

The proposal from the Napier Gisborne Rail Establishment Group (NGR) aimed to:

· Establish and operate a rail freight service between Napier and Gisborne on the existing rail line once it was returned to full operational status by the Government and KiwiRail;

· Lease locomotives and the line from KiwiRail, purchase appropriate rolling stock from KiwiRail, or elsewhere, to operate the service;

· Carry freight, largely logs, fruit and vegetable produce;

· Anticipate financial losses in the first three years of operation, returning to profit in year 4 and generating significant returns to shareholders as log volumes increased – anticipated in year 6, and

· See HBRC become a 51% shareholder in the venture, with businesses and investors in Hawke’s Bay and Gisborne District holding the remaining 49% of shares in the operating company set up for this purpose.

The proposal has claimed to benefit Hawke’s Bay with social, economic, and employment gains; improve transport infrastructure with price competitiveness and efficiency over road and rail land transport modes; safety and cost benefits through reduced heavy traffic on SH2 between Gisborne and Napier; increase volumes of exports through Napier Port; and secure an alternative transport route to road in the event of a disaster.

The NGR Group has estimated that investor funding to finance capital and operating budgets of $10.7million will comprise:

Purchase of rolling stock, plant, equipment etc $ 5.3m

Working capital $ 2.4m

Disaster Contingency Reserve $ 3.0m

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Total Investor Funds Required $10.7m

A 51% shareholding investment from HBRC would be approximately $5.46m of the Total Investor Funds required over the 2014-15 to 2018-19 financial years. An initial investment of $3.9million would be required from HBRC for the 2014-15 year.

HBRC investment in the NGR is conditional on:

· The Government and/or KiwiRail fully funding the return of the rail line and associated infrastructure to a “good fit for purpose” operating condition;

· Leases of the line and locomotives from KiwiRail on terms satisfactory to NGR

· Suitable offtake agreements being concluded between NGR and customers for the freight of logs, fruit and vegetable produce over the period up to and beyond 2020 to ensure the long term viability of the service;

· NGR’s business case being tested and accepted as satisfactory, and

· The return to HBRC over the long-term is to cover Council’s cost of funding.

HBRC investor funds would initially be sourced from investment reserves, but ultimately would require refinancing from HBRC’s borrowing programme.

In excess of 100 submissions were received on the Napier/Gisborne Railway proposal and, while 70% were supportive of Council’s continued involvement/investment in a Napier to Gisborne rail link, 15% were opposed to any future Council involvement with the remaining 15% of submitters recommending that Council investigate alternative uses for the rail corridor, specifically tourism related uses.

In response to these submissions Council resolved to retain in principle, the investing in the restoration of the Napier/Gisborne rail line, and indicated it would consider a revised proposal and business case from the NGR establishment group, such a business case would be subject to independent peer review before Council considered investment in the line. Council further resolved that it would be prepared to participate in a feasibility study on the best use of the Napier/Gisborne rail corridor going forward.

Investments Proposed in the LTP 2012-22

The Hawke’s Bay Regional Council determined in the LTP that investment capital would be used for long term investment, mainly in infrastructure assets to further build the region’s economic base, enhance the performance of the regional supply chain, or specifically increase production in rural-based industries where it is believed Hawke’s Bay has its greatest economic potential.

These investments will also deliver environmental benefits and, in the medium term, will provide HBRC with a reasonable rate of return on funds invested. The investment opportunities set out in the LTP are:

Investments managed through the Hawke’s Bay Regional Investment Company (HBRIC Ltd)

Ruataniwha Water Scheme (RWS)

Should the required conditions precedent be met, it is expected that HBRC will maintain its proposed equity stake at up to $80 million, as stated in HBRC’s Long Term Plan. Following the receipt of a recommendation from HBRIC Ltd on 26 March 2014 and public input via a Special Consultative Process during May and early June 2014, HBRC will decide whether or not to commit to this investment. [this will be updated prior to going to print].

The investment is subject to a sustainable investment and funding model being approved by HBRC and the uptake to purchase water by the farming community being at a level that ensures a viable business case.

If these criteria are met this plan provides for an advance of $22.2m to HBRIC Ltd in the 2014-15 financial year for investment in the RWS. The funding will be sourced from HBRC’s reserves held for investment. This plan also assumes that there would be additional dividend cash flows received from HBRIC Ltd to cover the interest that would have been received by HBRC if current investments in bank deposits were maintained.

Ngaruroro Water Scheme (NWS)

The LTP proposed to invest $27m in an equity stake in NWS, however, the development of this scheme to a full feasibility stage has been delayed in order to ensure that the emphasis in planning is focussed on RWS. It is proposed that in the 2014-15 year an initial on-farm economic assessment of the storage option be completed prior to committing to a full feasibility study, also potentially programmed to commence in the 2014-15 year.

Whakatu Road/ Rail Hub

The proposal for further investment in the supply chain – at an appropriate time – helps to secure the future of Napier Port as it increasingly competes with others drawing cargo from the central and southern North Island. However, the timing of this proposal has been reassessed and HBRC is not considering contributing capital to this project in 2014-15.

Investments Managed by HBRC

Hill Country Afforestation

The LTP proposed to fund the establishment of forestry blocks on erodible hill country land. This investment requires a risk management approach covering carbon price, carbon trading mechanisms and a robust operational plan. At the time of writing this plan, the carbon price is approximately $3 per tonne, in comparison to the $20 per tonne that drove the viable business case forward during the development of the 2012-2025 LTP. Accordingly, it is not proposed to proceed with this investment during the 2014-15 Annual Plan period.

HBRC will continue to evaluate forestry plantings in subsequent years. However the decision to proceed will be conditional upon strengthening carbon prices or the availability of alternative funding sources. HBRC plans to proceed with this investment as soon as practicable as it considers this project to be an important means to achieve environmental benefits.

The investments proposed above, specifically the RWS, will provide medium to long term significant growth and value which will, over the period of the LTP, substantially increase the value of both the HBRIC Ltd and HBRC balance sheets.

Funding Strategy for Investments as Outlined in the LTP 2012-22

At the start of the 2014-15 Annual Plan period, we estimate that HBRC has available funds of $72m to fund proposed investments. This has been achieved by HBRC’s strategy to sell-down low-performing investment assets, specifically our investment in Napier leasehold land, thus freeing up funding for investments in projects that will provide financial and economic gain for the region.

In July 2011 HBRC approved significant discounts on the purchase price of leasehold property for lessees who wished to freehold. This initiative was strongly supported by lessees and resulted in 378 lessees taking the opportunity to freehold at the discounted prices. HBRC has received $27.4m from these sales.

As forecast in the LTP, the cash flows generated from the remaining portfolio of Napier leasehold properties have been sold to the Accident Compensation Corporation and a sum of $37m has been realised for investment. The LTP also proposed that HBRC’s investment in leasehold property in Wellington be sold, however this is on hold given the high level of return being achieved on this investment.

Other Changes

It is not possible to do justice to all of HBRC’s work in this brief introduction – we continue to carry out important operational activities to ensure that public services, infrastructure, and regulation are delivered efficiently and effectively. Changes to these operational activities can be found in Part 2 of this Plan, while Part 3 of this Plan identifies changes to our charges for resource management activities.

Last Words

We continue to focus on our relationships in the region and with our national partners – at a one-to-one through to a collaborative and strategic level – and encourage your ongoing interaction with HBRC through face-to-face contact, phone calls, meetings, our newsletters, website and social media channels.

Liz Lambert, Interim Chief Executive Fenton Wilson, Chairman

Financial Overview

Annual Plan in Brief

What we will do in 2014-15

The 2014-15 Annual Plan has been prepared using the 2012-22 LTP as its base.

Details of the HBRC’s work programmes are contained within the “Groups of Activities” Part 2 of this Plan.

HBRC intends to spend $78.93 million in 2014-15. This expenditure consists of:

Annual Plan Highlights

This Plan forecasts a $423,000 deficit compared with a $127,000 surplus estimated in the LTP for the 2014-15 financial year. This includes carried forward items from the 2013-14 year of $400,000.

The total 2014-15 increase in rates of 3.9%, as proposed in the LTP, is now proposed to be 5.9%.

This increase consists of:

· 5.6% increase as a necessity to restore rates to LTP levels after a 1.3% reduction in the increase of rates in the 2013-14 year.

· 0.1% increase for the proposed targeted rates for the Opoho flood and drainage scheme (3 ratepayers).

· 0.2% increase for extra economic development of Wairoa primary sector opportunities and Oil and Gas Multi Stakeholder group initiatives.

There have been some significant changes to revenue assumptions from those used in the LTP which have affected HBRC income streams. Briefly, these are:

· Interest - the LTP assumed an interest rate of 5.75% on investment income for the 2014-15 year. Due to the slow increase in the Official Cash Rate (OCR) HBRC has revised this figure to 5.1%. This drop in interest rates combined with large investment balances has seen a sizable drop in interest revenue.

· Returns on investments – the LTP assumed returns on investment activities for the Ruataniwha Water Scheme (RWS), Ngaruroro Water Scheme (NWS), Whakatu Road/ Rail Hub and Hill Country Afforestation. There have been some changes to the timing and level of returns in these investments.

· Napier leasehold free-holding and rentals - HBRC approved the free-holding to lessees of Napier leasehold land at a discount to provide funds for other investments. This programme of sell down exceeded LTP expectations and there have also been an increased number of freeholdings even after the discount expired. This has had the effect of there being fewer Napier leasehold properties owned by HBRC than estimated in the LTP.

· Wellington leasehold land - The LTP also assumed the sale of the Wellington leasehold land owned by HBRC. This has not yet taken place due to the good returns received from these investments compared to market interest rates.

· Forestry Income - The LTP proposed to fund the establishment of forestry blocks on erodible hill country land and assumed a carbon price of $20 per tonne to justify a viable business. Carbon prices are now much lower than expected and HBRC has resolved not to proceed with the forestry investment during 2014-15.

· Subvention payments - The LTP assumed a number of targeted assistance grants would be paid over the first three years of the LTP. There were a number of delays in finalising the projects that qualified for targeted assistance. Accordingly the majority of the proposed grants will be paid out during the 2013-14 financial year. This will give rise to a substantial increase in the subvention payments during 2014-15 which were offset by a substantial decrease in 2013-14.

· Dividends - The dividends received from Napier Port via HBRIC have been increased by the payment of a special dividend to cover reduced returns on other investments.

· Napier - Gisborne Rail – HBRC has proposed to invest $3.9 million in the Napier-Gisborne Rail project with a proposed return reflecting Council’s cost of funding. This project was not included in the LTP.

Other highlights include:

· The LTP allowed for HBRC to provide the Bovine TB Vector Control programmes on behalf of the Animal Health Board; however from 1 July 2013 the Animal Health Board will be undertaking these programmes themselves.

· HBRC agreed to proceed with the remedial work on the Dalton Street building. There was $1 million provided for in the LTP for this project but after detailed analysis this cost estimate increased to $2 million. Work was completed in the 2013-14 year and was funded from a combination of internal and external loans. The legal proceedings against the contractors are ongoing with compensation used to reduce those borrowings.

· The Clean Heat Scheme has been a huge success with good participation from the public. The LTP assumed that homeowners would take up the clean heat loans rather than the clean heat grants. This has turned out to be the opposite, which means that HBRC has borrowed less to fund these loans than initially anticipated.

Analysis of Total Expenditure and Funding

Assets and Liabilities

HBRC has a strong balance sheet with assets greatly exceeding liabilities.

As at 30 June 2015 infrastructure assets are projected to total $160 million however, because of the nature of these assets (e.g. stopbanks), there are restrictions on their use and saleability.

HRBC also holds significant investments estimated to be $359 million at 30 June 2015. Included in these investments is HBRC’s investment in HBRIC Ltd, made up of:

· Napier Port ($187.9 million)

· Ruataniwha Water Scheme ($31.6 million)

HBRC also has:

· Cash balances on deposit awaiting payment to HBRIC Ltd for HBRC’s investment initiatives – the amount estimated to be held on deposit for these purposes is $41 million at 30 June 2015.

· $51 million of Napier Leasehold endowment land and $12 million of Wellington Leasehold property.

· $3.9 million proposed to be invested in the Napier – Gisborne Rail project.

· $4.9 million of Forestry investments.

The chart below shows analysis of the investments projected to total $359 million at 30 June 2015.

HBRC has a policy of raising loans to fund certain types of capital expenditure such as the construction of river control and flood protection assets. These loans are taken out on behalf of certain river control and flood protection scheme ratepayers and will be fully repaid by them during the period covered by the term of the loan.

Loan funding achieves intergenerational equity by ensuring that a portion of the cost of the major projects is paid for by the beneficiaries of the service over the year to which the benefit applies.

In this plan the HBRC proposes to borrow up to $8.2 million in the 2014-15 financial year. Of that sum, $4.5 million will fund advances to homeowners who require assistance to insulate and provide clean heat to their homes, $0.6 million to fund advances to homeowners who want to establish solar water heating in their homes; $1.7 million for public good capital projects; $0.6 million for Operations Group and Wairoa office extensions; and $0.7 million for computer system integration. These amounts include $2.3 million of loans included in the 2013-14 Annual Plan that were not drawn down and have been carried forward to the 2014-15 year.

The Annual Plan estimate is that at 30 June 2015 external loans outstanding will be $24.9 million. An analysis of these loans is shown in the chart below.

Additional liability related to funding of HBRC investments

The cash flows for a period of 50 years ending 30 June 2063 generated from the portfolio of Napier leasehold properties (after the free-holding initiative to lessees) were sold to secure a lump sum payment from the Accident Compensation Corporation (ACC) of $37 million which was included in the financial assets to be used to fund investment activity.

HBRC 2014-15 Annual Plan - Part 1 Introduction

Attachment 2

Comparison of Rural Rates in Three Districts

Comparison of Rural Rates on Specific Properties in Three Districts
Description of rates	Rating Basis	Central Hawke’s Bay		Hastings		Wairoa
		2013-14	2014-15	2013-14	2014-15	2013-14	2014-15
Details for comparison
Capital Value ($)	CV	2,025,000	2,025,000	2,889,000	2,890,000	470,000	470,000
Land Value ($)	LV	1,570,000	1,570,000	2,305,000	2,310.000	370,000	370,000
Area (Hectares)	Area	276.3567	276.3567	610.8591	610.8591	32.9742	32.9742

Rates ($)
General Rate	LV	119.95	137.69	163.66	193.81	28.30	31.38
UAGC Fixed Amount	Fixed	25.54	28.41	25.54	28.41	25.54	28.41
General Funded Rates ($)		145.49	166.10	189.20	222.22	53.84	59.79

HPFCS F2 Indirect	CV			78.29	82.36
Central Stream/Drains	CV	19.01	18.32	24.55	25.40
Plant Pest	Area	121.23	126.07	267.98	278.67	14.47	15.04
Animal Pest Rate	Area	399.22	413.90	882.45	914.88	47.63	49.39
Bovine TB	Area	158.40	163.96	350.14	362.42	18.90	19.56
Wairoa River	CV					46.63	48.93
Upper Tukituki River	LV	97.61	102.52
Economic Development	Fixed	16.64	17.53	16.64	17.53	13.00	14.00
Emergency Management	Fixed	14.63	14.84	14.63	14.84	14.63	14.84
Targeted Rate ($)		826.74	857.14	1634.68	1696.10	155.26	161.76

*Total Rates ($)*		972.23	1023.24	1823.88	1918.32	209.10	221.55

Dollar Increase			51.01		94.44		12.45
Percentage Increase			5.25%		5.18%		5.95%

Comparison of Rates on Specific Urban Properties

Comparison of Rates on Specific Urban Properties
Description of rates	Rating Basis	Napier Hill		Napier South		Flaxmere		Havelock North
Description of rates	Rating Basis	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15
Details for comparison
Capital Value ($)	CV	680,000	680,000	225,000	225,000	175,000	170,000	660,000	660,000
Land Value ($)	LV	220,000	220,000	147,000	147,000	67,000	64,000	255,000	255,000
Area (Hectares)	Area	0.0745	0.0745	0.0668	0.0668	0.0607	0.0607	0.0777	0.0777

General Rate	LV	15.73	18.15	10.51	12.13	4.76	5.37	18.11	21.39
UAGC Fixed Amount	Fixed	25.54	28.41	25.54	28.41	25.54	28.41	25.54	28.41
General Funded Rates ($)		41.27	46.56	36.05	40.54	30.30	33.78	43.65	49.80
HPFCS F1Direct	CV			24.38	26.17	19.36	19.87
HPFCS F2 Indirect	CV	18.90	19.31	5.98	6.39	4.74	4.85	17.90	18.81
HPFCS Drainage	LV			39.20	41.17	23.21	23.46
Public Transport	LV	57.31	57.90	38.29	38.69	17.33	17.14	66.97	68.28
Central Stream/Drains	CV	5.92	5.95	1.87	1.97	1.49	1.49	5.61	5.80
Karamu Maintenance	Fixed							10.00	10.55
Karamu Enhancement	Fixed							9.39	9.86
Clean Heat/Healthy Homes	LV	19.51	18.90	13.04	12.63	5.79	5.59	22.02	22.28
Economic Development	Fixed	16.64	17.53	16.64	17.53	16.64	17.53	16.64	17.53
Emergency Management	Fixed	14.63	14.84	14.63	14.84	14.63	14.84	14.63	14.84
Targeted Rates ($)		132.91	134.43	154.03	159.39	103.19	104.77	163.16	167.95

*Total Rates ($)*		174.18	180.99	190.08	199.93	133.49	138.55	206.81	217.75

Dollar Increase			6.81		9.85		5.06		10.94
Percentage Increase ¹			3.91%		5.18%		3.79%		5.29%

Comparison of Rates on Specific Urban Properties

Comparison of Rates on Specific Urban Properties
Description of rates	Rating Basis	Taradale		Hastings		Wairoa		Central HB
Description of rates	Rating Basis	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15
Details for comparison
Capital Value ($)	CV	415,000	415,000	390,000	390,000	230,000	230,000	300,000	300,000
Land Value ($)	LV	220,000	220,000	160,000	160,000	63,000	63,000	120,000	120,000
Area (Hectares)	Area	0.1105	0.1105	0.1012	0.1012	0.1213	0.1213	0.1495	0.1495

General Rate	LV	15.75	18.15	11.36	13.42	4.83	5.34	9.18	10.52
UAGC Fixed Amount	Fixed	25.54	28.41	25.54	28.41	25.54	28.41	25.54	28.41
General Funded Rates ($)		41.29	46.56	36.90	41.83	30.37	33.75	34.72	38.93
HPFCS F1Direct	CV	47.06	48.26	43.13	45.59
HPFCS F2 Indirect	CV	11.54	11.79	10.56	11.11
HPFCS Drainage	LV			59.45	58.57
Public Transport	LV	57.31	57.90	41.39	42.84
Central Stream/Drains	CV	3.61	3.63	3.31	3.42			2.67	2.72
Wairoa Rivers/Streams	CV					22.77	23.94
U.T.T.F.C.S.	LV							7.45	7.83
Clean Heat/Healthy Homes	LV	19.14	18.90	13.82	13.98
Economic Development	Fixed	16.64	17.53	16.64	17.53	13.00	14.00	16.64	17.53
Emergency Management	Fixed	14.63	14.84	14.63	14.84	14.63	14.84	14.63	14.84
Targeted Rates ($)		169.93	172.85	202.93	207.88	50.40	52.78	41.39	42.92

*Total Rates ($)*		211.22	219.41	239.83	249.71	80.77	86.53	76.11	81.85

Dollar Increase			8.19		9.88		5.76		5.74
Percentage Increase ¹			3.88%		4.12%		7.13%		7.54%

Comparison of Rates on Specific Commercial Properties

Comparison of Rates on Specific Commercial Properties
Description of rates	Rating Basis	Napier Hotel		Emerson St Napier		Hastings Shops		Hastings Motel		Waipukurau Office		Wairoa Shops
Description of rates	Rating Basis	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15	2013-14	2014-15
Details for Comparison
Capital Value ($)	CV	3,250,000	3,250,000	1,475,000	1,475,000	1,000,000	970,000	910,000	910,000	205,000	205,000	255,000	255,000
Land Value ($)	LV	1,875,000	1,875,000	420,000	420,000	385,000	385,000	670,000	670,000	40,000	40,000	50,000	50,000
Area (Hectares)	Area	0.3025	0.3025	0.0506	0.0506	0.1097	0.1097	0.3254	0.3254	0.0717	0.0717	0.2022	0.2022


General Rate	LV	134.06	154.69	30.03	34.65	27.33	32.30	47.57	56.21	3.06	3.51	3.82	4.24
UAGC Fixed Amount	Fixed	25.54	28.41	25.54	28.41	25.54	28.41	25.54	28.41	25.54	28.41	25.54	28.41

General Funded Rates		159.60	183.10	55.57	63.06	52.87	60.71	73.11	84.62	28.60	31.92	29.36	32.65

HPFCS F1Direct	CV			167.27	171.54	110.60	113.39	100.65	106.38
HPFCS F2 Indirect	CV	90.35	92.30	41.00	41.89	27.10	27.65	24.66	25.94
HPFCS Drainage	LV					133.36	141.10	232.09	245.55
Public Transport	LV	488.44	493.50	109.41	110.54	99.60	103.10	173.33	179.43
Central Stream/Drains	CV	27.63	28.44	12.84	12.90	8.50	8.53	7.74	8.00	1.80	1.86
Clean Heat/Healthy Homes	LV	166.31	161.06	36.54	36.07	33.26	33.64	57.89	58.56
Economic Development	CV	411.77	425.10	186.88	192.93	125.90	127.55	114.57	119.67	27.76	27.74	41.72	40.60
Upper Tukituki Scheme	LV									2.48	2.61
Wairoa River Scheme	CV											25.25	26.55
Emergency Management	Fixed	14.63	14.84	14.63	14.84	14.63	14.84	14.63	14.84	14.63	14.84	14.63	14.84
Targeted Rates ($)		1199.13	1215.24	568.57	580.71	552.95	569.80	725.56	758.37	46.67	47.05	81.60	81.99

*Total Rates ($)*		1358.73	1398.34	624.14	643.77	605.82	630.51	798.67	842.99	75.27	78.97	110.96	114.64

Dollar Increase			39.61		19.63		24.69		44.32		3.70		3.68
Percentage Increase ²			2.92%		3.15%		4.08%		5.55%		4.92%		3.32%

Financial Comparatives between Year 3 of the Long Term Plan (LTP) 2012-22 and Annual Plan 2014-15

Explanatory Notes of Changes between Year 3 of the LTP 2012-22 and Annual Plan 2014-15

Significant variations between the 2012-22 LTP and the 2014-15 Annual Plan are outlined below.

Prospective Comprehensive Income Statement (Part 3, Pg 16)

Revenue from activities (Note 1, Part 3, Pg 20)

The LTP assumed that the Bovine TB Regional Vector Control Programmes for the Animal Health Board (AHB) would continue to be delivered by HBRC Biosecurity staff undertaking the work. Subsequent to the compilation of the LTP a decision was made by the AHB that they would assume responsibility for running the Bovine TB Regional Vector Control Programmes from 1 July 2013. Accordingly the costs associated with this programme have been reduced from Hawke’s Bay Regional Council (HBRC) expenditure along with the revenue received from the AHB in relation to this service.

Revenue from rates (Note 2, Part 3, Pg 21)

Overall, rates (excluding GST) proposed for the first 3 years of the LTP, up to 30 June 2015 are $15,665,000 against $15,563,000 proposed in the LTP. This is an increase of 0.66% from the LTP rating level. This includes the increases in targeted rates for the Makara and Opoho schemes:

· Makara Scheme: In May 2012 it was identified that there was a sinkhole in the dam protecting the Makara Valley. In order to reinstate the level of protection provided by the dam it was proposed to repair the dam at an estimated cost of $1,200,000. This was to be funded through use of the HBRC’s regional disaster reserve, scheme disaster reserves, scheme depreciation reserves and an external loan of $220,000. In order to fund this external loan and increased maintenance a rate increase of approximately $52,000 was proposed for the 2013-14 year. This has been continued in the 2014-15 year with the effect of increasing the targeted rates for this scheme from $32,416 in the LTP to $86,237.

· Opoho Scheme: Its management had previously been administered through direct billing for actual work. To give certainty of the amount to be charged to the land owners it is proposed to introduce a flood and drainage scheme into the targeted rate programme in the 2014-15 Annual Plan. This has the effect of increasing the targeted rates by $18,328. This scheme affects three landowners. (refer to Amendments to Long Term Plan (LTP) 2012-22, Part 1, Pg 19).

Revenue from grants (Part 3, Pg 16)

Grants income is forecast to be $494,000 less in the Annual Plan than in the LTP. The major change is in the calculation of funding from the New Zealand Transport Association (NZTA) for the Regional Land Transport Strategy projects.

Other revenue (Note 3, Part 3, Pg 21)

There are a number of revenue streams under “Other Revenue”. The movements in each are shown below.

Dividends (+$963,000)

The LTP forecast to receive $6.6 million in dividends from the Hawke’s Bay Regional Investment Company Limited (HBRIC Ltd) for the 2014-15 year. This dividend level has been increased to $7.56 million as a result of discussions between HBRIC and its major subsidiary, Napier Port. This revised level includes $700,000 to part fund the cost of capital proposed for the RWS.

Interest (-$3,213,000)

Interest Rate Changes

The economic data available to HBRC when compiling the LTP indicated that the Official Cash Rate (OCR) would increase to 4.5% by June 2015. This justified an interest rate of 5.75% on HBRC deposits to be used for the 2014-15 financial year.

Current economic data shows that the OCR remained at 2.5% and is only estimated to increase to 3.5% by June 2015. Therefore the interest rate for the 2014-15 year has been revised to the lower level of 5.1%.

At the commencement of the 2014-15 Annual Plan year HBRC will still have a high level of cash deposits on hand for investment ($70 million) and will also have deposits representing special purpose reserves ($18 million). The effect of the adjustment on interest rates results in approximately $580,000 in reduced interest income.

Returns on Investment

For the 2014-15 year the LTP 2012-22, estimated returns on funds invested at:

· Ruataniwha Water Scheme (RWS) ($638,000);

· Ngaruroro Water Scheme (NWS) ($352,000);

· Whakatu Road/ Rail Hub ($1,727,000);

· Forestry Investments ($812,000).

The proposed Annual Plan 2014/14 shows the following adjustments:

· RWS – HBRC has resolved to not require a return on funds invested during the feasibility stage. This plan does show a payment from HBRIC for RWS funding costs and this is by way of dividends.

· NWS – the implementation of this scheme has been deferred while feasibility studies are prepared.

· Whakatu Road/Rail Hub – this scheme has been discarded because its major backers, the Napier Port has decided not to go ahead and therefore HBRC will not be asked to contribute.

· HBRC has a number of forestry investments including forests at Central Hawke’s Bay, Mahia, Waihapua and Tutira. The LTP assumed a return of 7.5% on HBRC’s investment in these forests. As HBRC’s cost to funds has decreased due to decreasing interest rates, the return on forests has been revised to 5%, a reduction of $130,000 from the LTP.

Leasehold rentals (+$266,000)

The LTP provided for the sell down of Napier leasehold properties in order to provide cash for other investments. This programme exceeded expectations and the LTP sell down estimate of $15 million has increased to a sell down of $27 million. Accordingly, the rental revenue from Napier leaseholds reflects the reduced number of remaining properties and is less than shown in the LTP.

Offsetting this is that the LTP proposed the sale of the Wellington leasehold properties. These funds have not been required and so the rental from these properties has continued.

Forestry income (-$211,000)

Hill Country Afforestation - the proposal in the LTP to fund the establishment of forestry blocks on erodible hill country land assumed a carbon price of $20 per tonne to justify a viable business. As the carbon price at the time of writing this Plan is around $3 per tonne, HBRC resolved not to proceed with the forestry investment on hill country erodible land during 2014-15.

Subvention payments (+$224,000)

The LTP assumed a number of targeted assistance grants would be paid during the 2012/13 financial year. There were a number of delays in finalising the projects that requested targeted assistance and most of these grants were paid out during the 2013-14 financial year. This will result in a substantial increase in the subvention payments during 2014-15.

Napier – Gisborne Railway Returns (+$117,000)

As mentioned in the Chairman and Chief Executive comments, it has been proposed that HBRC invest in the Napier – Gisborne Railway. An initial investment of $3.9million would be required from HBRC for the 2014-15 year with a return that is reflective of HBRC’s funding costs.

Fair value gains on investments (Note 7, Part 3, Pg 25)

The LTP forecasts $2.5 million of fair value gains on investment property. However, due to an increase in the sell down of leasehold land the value of the investment portfolio has decreased and therefore the fair value gains have reduced by $715,000 in the 2014-15 Annual Plan.

Expenditure from activities (Note 1, Part 3, Pg 20)

There is a reduction of $396,000 on expenditure in activities. These are mainly due to the following areas:

· The LTP allowed for HBRC to provide the Bovine TB Vector Control programmes on behalf of the Animal Health Board, however from 1 July 2013 the Animal Health Board will be directly undertaking these programmes. Expenditure allowed for in the LTP of $620,000 for these programmes are no longer included in the Annual Plan.

·
Regional income collection expenditure has reduced from the LTP level of $3.4 million to $2.0 million. This is due to a reduction of $350,000 in the costs associated with Hill Country Afforestation which has been deferred. A $770,000 reduction in the amount required to pay the Accident Compensation Corporation for the Napier leasehold cash flow sell down due to selling more properties before the deal took place. A reduction of $300,000 for reduced rate collection costs and disaster insurance premiums.

· There were substantial unspent expenses of $1,425,000 that were carried forward from 2013-14 to 2014-15 for projects yet to be completed. These costs have been added to the expenditure on activities.

Finance Costs (Note 1, Part 3, Pg 20)

Included in the LTP finance costs are not only the interest on borrowings, but also the payment/fees associated with the transfer of Napier leasehold cash flows to the Accident Compensation Corporation. Since the HBRC’s programme of freeholding to lessees has exceeded expectations, the value of remaining cash flows to be sold on was substantially reduced and therefore the payments/fees have also substantially reduced.

Property, plant and equipment (Note 5, Part 3, Pg 24)

Expenditure on property, plant and equipment including intangible assets are proposed to be $2,742,000 more in the Annual Plan than in the LTP. The major reason for this is that intangible assets include $1,666,000 for the feasibility costs for the NWS project. In the LTP these costs had been incorporated in the advances to HBRIC Ltd but HBRC is proposing to treat these feasibility costs in the same way as the RWS and keep them as a HBRC project until such time that these are sold to HBRIC Ltd. Other intangible assets were increased by $180,000 for systems integration projects for regulatory software.

Motor Vehicles and Plant have increased by $219,000 due to $140,000 excavator required by HBRC Works Group and timing on fleet replacements have changed since the LTP. These have been offset by a $100,000 increase in expected proceeds for disposals. There were also capital expenditure carry forwards from the 2013-14 year of $621,000 for the Operations Group and Wairoa Office improvements and $10,000 for science technical equipment.

Forestry assets (Part 3, Page 16)

Expenditure on forestry assets are proposed to be $3.2 million less in the Annual Plan than in the LTP. This is because of the postponement of the Hill Country planting project which is no longer viable due to the low carbon credit price.

Solar and Clean Heat – net lending from reserves (Part 3, Page 16)

The LTP proposed to lend $3.5 million in relation to solar and clean heat advances under the Healthy Homes initiatives. Due to the continual deferral of the solar scheme and the higher than forecast take up of clean heat grants rather than loans these advances are now proposed to be $2.5 million in the Annual Plan.

Advances to HBRIC Ltd (Part 3, Page 16)

The LTP proposed to advance funds of $33.2 million to HBRIC Ltd in the 2014-15, however the Annual Plan has reduced this by $11.0 million to an advance of $22.2 million. The reasons for this change are:

· Investment in the RWS – The LTP provided for a $12.0 million advance to HBRIC Ltd for investment in the RWS. This has now been revised to $22.2 million due to the timing of required funds being earlier than the LTP assumptions.

· Investment in the NWS – The LTP provided for a $4.2 million advance to HBRIC Ltd for the NWS. This Plan now assumes that HBRC will perform the feasibility process and $1.7 million has been proposed for this in the Plan. Therefore the $4.2 million will not be required by HBRIC Ltd in the 2014-15 year.

· Investment in the Whakatu Road and Rail Hub – The LTP had provided for a $17.0 million advance to HBRIC Ltd for the Whakatu Road and Rail Hub. Funding is no longer required for this project in the 2014-15 year.

Advances to Napier – Gisborne Railway (Part 3, Page 16)

This is a new proposal and so not included in the LTP. A projected $3.9 million has been allocated for this venture in the 2014-15 year.

Reserve and public debt funding (Part 3, Page 16)

The Annual Plan shows reserve funding of $9.2 million less than that set out in the LTP. This refers, for the most part, to reduced advances to HBRIC Ltd, Forestry Assets and Solar Heat.

Public debt funding has increased from $5.3 million in the LTP to $8.2 million in the Annual Plan an increase of $2.9 million. This is due to $2.3 million carried forward from the 2013-14 year for loans that have yet to be drawn down, an increase in System Integration loans of $0.2 million and an increase in Heat Smart loans of $1.7 million offset by a $1.3 million reduction in funding for Solar Heat.

Changes to prospective cash flows (Part 3, Page 19)

The Prospective Cash Flow Statements show that the overall net change in cash and cash equivalents has decreased from ($33.9) million as estimated in the LTP, to ($26.0) million in the Annual Plan. This results in a forecast year end (30 June 2015) cash and cash equivalents balance of $52.8 million. This closing balance represents the cash on hand for operating and investment activities and is a combination of financial assets and cash and cash equivalents in the balance sheet.

Net cash flows from operating activities is forecast to be $2.3 million less in the Annual Plan than forecast in the LTP mainly due to the carry forward of expenses for the Te Mata Park Visitor Centre and Wairoa Community Centre which are offset by loan funding as well as lower income (refer to comments on the Prospective Comprehensive Income Statement).

Net cash outflows from investing activities are forecast to increase by $7.2 million due to less capital expenditure on investments and HBRIC advances (refer to comments on Capital Expenditure).

Changes to significant forecasting assumptions

The following material changes have been made to the significant forecasting assumptions incorporated in the LTP:

Interest Rates

The interest rate on investment income in the LTP was assumed at 5.75%. In the 2014-15 Annual Plan the interest rate used for deposits is 5.1% which reflects the changing circumstances in the financial markets which has seen the Official Cash Rate (OCR) remain at lower levels than forecast in the LTP.

Cost Adjustors

The LTP provided for cost adjusters to reflect increases in costs, specifically in external expenditure of 6.5% cumulative for the 2013-14 and 2014-15 years. In the Annual Plan external expenditure has not been increased by the full amount to reflect the effects of inflation on these costs.

Investments

· The LTP assumed investment in forestry planting on erodible hill country. However, as the carbon market price has dropped to unworkable levels, HBRC has resolved that this initiative be deferred until there is improvement in the carbon price.

· The LTP set out continual investment in the NWS, however, HBRC has resolved that its resources needed to be devoted to the RWS and work on the NWS was deferred until the 2014-15 year

Insurance of infrastructure assets

· HBRC resolved in January 2013 to rescind the notice of intention to withdraw from the Local Authority Protection Programme (LAPP). Therefore LAPP will continue to cover 40% of the damage caused by natural disasters to infrastructure assets.

· HBRC holds funds in a Regional Disaster Reserve which had a balance of $3.3m at 28 February 2014. The LTP assumed that this reserve would not be drawn on during the 10 year LTP period. However, HBRC resolved to contribute $768,370 from this fund to assist in the remediation works required in the Makara Flood and Drainage scheme which will be completed before the end of the 2013-14 financial year.

Activity 2 – Strategy and Planning

At all times there is a regional plan in force for the HB coastal marine area

New Zealand Coastal Policy Statement (NZCPS) put into action in accordance with statutory requirements

Service Levels and Performance Targets

Activity 2 –Strategy and Planning

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve

Performance Targets

HBRC will help the community prepare for the future

Number of Embracing Futures Thinking events held

Embracing Futures Thinking Breakfasts held over last three years

Each year

Host at least 1 Embracing Futures Thinking (Strategic Planning) event as part of Long Term Plan development

Project manage event

Trends review completed

Social, technological, Economic, Environmental and political trend report completed in 2009 and summarised in HB2050: Land River Us report

2014-15

Refresh the Trends and Environmental Scan analysis

Engage consultants to undertake trend and environmental scans

Agreement reached on Spatial Planning Framework

Individual strategies are in place that would support spatial planning e.g. Heretaunga Plains Urban Development Strategy, Regional Land Transport Strategy

2014-15

Reach agreement on regional and lower North Island spatial planning framework (On hold pending outcome of Local Government reorganisation processes under way in Hawke’s Bay and Wellington)

Engage with Lower North Island Regional Councils and other agencies such as New Zealand Transport Agency (on hold)

HBRC will integrate land and water and biodiversity management to deliver environmental, economic, social and cultural outcomes

Action plans and monitoring prepared for:

- Land and Water Management Strategy

- National Policy Statement for Freshwater Management

To date, two Land and Water symposiums have been held

Each year

Prepare report on implementation of National Policy Statement for Freshwater Management

Stocktake of Land and Water Management Strategy undertaken in March 2014, consider as part of Long Term Plan development

Report on NPSFM implementation Plan progress through the Annual Report

Regional Biodiversity Strategy completed

No current biodiversity strategy in place

2014-15: Prepare final Regional Biodiversity Strategy and prepare programme of work relevant to HBRC for inclusion in the next Long Term Plan

Project manage the preparation of a Regional Biodiversity Strategy in conjunction with key stakeholders

HBRC will establish and maintain clear and appropriate policy in a responsive and timely manner that will enable sustainable management of the region’s natural and physical resources

Status of Resource Management Plans and Policy Statements.

No more than 2 years elapse from notification of a plan change to decisions on submissions being issued

Plan changes in process

RPS Change 5: Land and Freshwater Management

Plan Change 6: Tukituki Catchment

Policy under development in following catchments

Taharua and Mohaka

Heretaunga Zone (Clive/Karamu, Ngaruroro, Tutaekuri, Ahuriri, Heretaunga Plains aquifer)

2014-15

- Appeals on Change 5 (Land and Freshwater Management) are resolved

- Plan change for Taharua /Upper Mohaka catchment publicly notified Dec 2014

- Initiate community engagement on oil and gas exploration policy development

2015-16

Plan change for outstanding freshwater bodies publicly notified July 2016

2016-17

Plan change for Heretaunga Zone publicly notified December 2016

Project manage the development of policy for inclusion in the Regional Resource Management Plan and Regional Policy Statement including:

· Coordinate and integrate all the necessary inputs into the planning processes

· Coordinate and undertake the required stakeholder community engagement before notification

Regional Natural Hazards Strategy and Implementation Plan prepared

2014-15

Plan change for Natural Hazards publicly notified July 2015

Regional Coastal Environment Plan

Plan Change 1- Geographical Coverage of Regional Resource Management Plan:

Appeals resolved, awaiting Minister of Conservation approval

2014-15

Start review of coastal hazard zones for coastline between Tangoio and Clifton, as part of preparation of a hazard management strategy for that coastline (see Project 322)

- Develop plan change(s) to give effect to 2010 NZCPS

Project manage the development of policy in the Regional Coastal Environment Plan that gives effect to the 2010 NZCPS including:

· Coordinate and integrate the necessary expert and legal advice inputs into planning processes

· Coordinate and undertake the required stakeholder community engagement prior to notification

Activity 1a, b, c – Flood Protection and Drainage Schemes

Service Levels and Performance Targets

Activity 1a – Flood Protection & Drainage Schemes: Heretaunga Plains Scheme

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve

Performance Targets

HBRC will maintain an effective flood control network that provides protection from frequent river flooding to communities and productive land within the Heretaunga Plains Scheme

The level of protection in technical terms is to convey a flood discharge with a 1% probability of being exceeded in any one year (1%AEP) safely to the sea

A full assessment of the capacity and integrity of flood control works is completed every twelve years by a chartered professional engineer with interim audits undertaken annually

Full initial assessments have been made for the following rivers:

Tutaekuri 2009-10

Ngaruroro 2010-11

Lower Tukituki 2011-12

2013-15

Review of the current level of service (LOS) provided by the Heretaunga Plains Scheme to determine whether they are still appropriate or should be increased. Take into account potential impact of climate change in this review.

Ongoing

Ongoing maintenance and gravel extraction to maintain the channel capacity and integrity of the flood protection assets

Monitoring of flood events in accordance with the Flood Manual

Annual asset audit by a chartered professional engineer, and full assessment of each of the major rivers every twelve years

Ongoing sawfly damage monitoring and alternative species planting

The level of service will be reported as:

Kilometres and percentage of floodway that provide the design level of service

Audits in past years indicate the following levels of service:

Tutaekuri: 100% (23.6km of river channel)

Ngaruroro: 100% (39km of river channel)

Lower Tukituki: 100%(10.2km of river channel)

2012-22

Tutaekuri, Ngaruroro & Lower Tukituki Audits: No change

HBRC will maintain an effective drainage network that provides protection from frequent flooding from smaller watercourses to communities and productive land within the Heretaunga Plains Scheme

A full assessment of the capacity and integrity of the drainage network within each drainage catchment is completed every twelve years by a chartered professional engineer with interim audits undertaken annually

The historic level of service based on rainfall runoff is no longer considered appropriate given modern design techniques

New measures will be developed as part of the level of service review to be completed over the next three years

2013-14 and 2014-15

Review the current level of service provided by the scheme and determine new level of service measures and targets

Ongoing

Monitoring, operation and maintenance

Annual asset audit by a chartered professional engineer

HBRC will protect and enhance the scheme’s riparian land and associated waterways administered by the Regional Council for public enjoyment and increased biodiversity

The level of service will be reported as the length of scheme riparian land enhanced. (Each side of a waterway measured separately and includes new planting and inter-planting)

Completed to date:

Tutaekuri (left bank): 6km

Tukituki (left bank): 3.4km

(right bank): 3.4km

Ngaruroro (left bank): 4.5 km

Ongoing

0.5km of riparian land enhanced a year (on average)

2013-20

Develop Rivers Environmental Concept Plans

Ongoing

Implement annual programme from Environmental Strategy

Service Levels and Performance Targets

Activity 1b – Flood Protection & Drainage Schemes: Upper Tukituki Scheme

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve

Performance Targets

HBRC will maintain an effective flood control network that provides protection from frequent river flooding to communities and productive land within the Upper Tukituki Scheme

The level of protection in technical terms is to convey a flood discharge with a 1% probability of being exceeded in any one year (1%AEP) safely to the sea

A full assessment of the capacity and integrity of flood control works is completed every twelve years by a chartered professional engineer with interim audits undertaken annually

Full initial assessments have been made for each of the rivers in the flowing years:

Upper Tukituki 2009-12

Waipawa 2011-12

Full Scheme Reviews

Upper Tukituki: Start Date 2013/14; completion date 2014/15. Take into account potential impact of climate change in this review.

Routine 2013-22

Ongoing maintenance and gravel extraction to maintain the channel capacity and integrity of the flood protection assets

Monitoring of flood events in accordance with the Flood Manual

Annual asset audit by a chartered professional engineer, and full assessment of each of the major rivers every twelve years

Ongoing sawfly damage monitoring

Investigate options for increasing gravel extraction from Upper Tukituki Scheme Rivers.

Review Scheme classification to determine whether it remains fit for purpose.

The level of service will be reported as:

Kilometres and percentage of floodway that provide the design level of service

Past audits indicate the following levels of service:

Upper Tukituki: 34.4km, 95%

Waipawa: 26.5km, 95%

2015-16

River View Edge Risk: Review of the current level of service provided by the Scheme to determine whether they are still appropriate or should be increased

HBRC will protect and enhance its scheme riparian land and associated waterways for public enjoyment and increased biodiversity

The length of Scheme riparian land enhanced by inter-planting with alternative native and exotic species (each side of a waterway measured separately)

Completed to date:

Waipawa (Left Bank): 1.5km

Tukituki River (Right Bank): 2km

Ongoing

0.5km of riparian land enhanced a year (on average)

2013-19

Implement annual programme from Environmental Strategy

Service Levels and Performance Targets

Activity 1c – Flood Protection & Drainage Schemes: Other Schemes

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve

Performance Targets

HBRC will maintain an effective flood control and drainage network that provides protection from frequent flooding to communities and productive land within designated Scheme areas. These schemes include:

Makara Flood Control

Paeroa Drainage

Porangahau Flood Control

Ohuia – Whakaki Drainage

Esk River

Whirinaki Drainage

Maraetotara

Te Ngarue

Kopuawhara Flood Control

Poukawa Drainage

Kairakau (proposed)

Waimarama (proposed)

A full assessment of the capacity and integrity of flood control works is completed every twelve years by a chartered professional engineer with interim audits undertaken annually

The level of service will be reported as:

Percentage of assets that provide the design level of service

Estimated at 95%

2013-15

Kairakau and Waimarama Flood Protection Schemes accepted by community and operation phase begun

No change to other schemes

Ongoing

Ongoing maintenance to preserve channel capacity and integrity of flood protection and drainage assets

Monitoring of flood events in accordance with the Flood Manual

Consult with Waimarama community regarding the possibility of establishing a flood control scheme to fund improved management of the waterways and flood channels flowing through the community

HBRC 2014-15 Annual Plan - Part 2 Activivities

Attachment 3

Activity 1 – Land Management

Service Levels and Performance Targets

Activity 1–Land Management

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve

Performance Targets

Viable and resilient farming systems are being achieved through sustainable land use

Annually reporting on research project outputs and how they have contributed to sustainable land management outcomes

Research and extension projects are currently active including the following:

Creating a climate for success – Huatokitoki community project. (MPI, HBRC, Hatuma, Landcorp, Beef and Lamb, Massey, Landcare)

Wairoa sediment reduction initiative. (MPI, HBRC)

Alternative grassland species (Landcare, MPI, HBRC, Beef and Lamb)

Ongoing

Continue a programme of research and extension to investigate and field trial issues relevant to sustainable land management in Hawke’s Bay

Actively seek collaboration with primary product organisations undertaking research relevant to HB

Ongoing

Finalise the development of a research strategy in collaboration with Primary Sector industry groups and commence its implementation

Initiate at least one new research or research extension initiative annually

Outputs achieved through HBRC Regional Landcare Scheme

Sample of approx outputs from Regional Landcare Scheme since its inception in 1995

Total HBRC investment: $7.13M

Number of poplar and willow poles planted for soil erosion: 440,000

Clients: 744

Projects: 2450

Ongoing

Regional Landcare Scheme (RLS) reviewed outcomes to be implemented by June 2014

Report in the operation plan how RLS activity directly contributes to sustainable land management

Annual output targets delivered from the RLS investment to be established and implemented as part of the annual operating plan

Ongoing

Utilise RLS funding in accordance with priorities and processes established

Annual operating plan to be developed and presented to Council before the start of each financial year

The operational plan will show the focus of Regional Landcare Scheme activity and alignment with the Regional Afforestation programme and the intensification of land use

Regional Landcare Scheme subsidies are assessed on the basis of region wide criteria

A portion of Regional Landcare Scheme subsidy will be targeted, and the level of subsidy varied, to encourage initiatives that more effectively respond to environmental change

Service Levels and Performance Targets

Activity 1–Land Management

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve

Performance Targets

HBRC will increase its knowledge of the region’s land, soil and terrestrial habitats so it is aware of any current and likely future issues that may arise

This knowledge will allow for a timely and effective response that enables land sustainability for future generations

Regional baseline hill country erosion monitoring

Baseline hill country erosion survey

2013-14

Erosion monitoring repeated (about every 5 years but contingent on any major regional storm event)

Erosion/sediment model for the Tukituki catchment to be commissioned with the option of extending into other catchments in the future

Integrated catchment management including staged computer modelling & monitoring of the:

Mohaka

Heretaunga/Ahuriri catchments

Tukituki

Currently Land and water monitoring of the Taharua and upper Mohaka Rivers

Computer modelling of the entire Mohaka catchment is underway

Heretaunga/Ahuriri (TANK) catchments are next in line to be investigated

Tukituki model (TRIM) developed

2013-15

Catchment models developed for Taharua and the entire Mohaka catchment

Catchment model for TANK catchments developed

Refinement and upgrades of Tukituki TRIM model

Development of TANK catchments model or models

Update TRIM into new modelling software

Scenarios run using Taharua/Mohaka catchment model

Hawke’s Bay’s land resource is maintained for future generations

Area of erosion prone land with tree cover

Baseline erosion monitoring

Much of Hawke’s Bay’s pastoral hill country needs more vegetative cover to minimise erosion and improve productivity

Proposed Regional Afforestation Scheme was withdrawn by Council due to low carbon price

Investigate potential for High UMF manuka plantings

Report on data gathered from high UMF Manuka plantation on Tutira Regional Park

HBRC 2014-15 Annual Plan - Part 2 Activivities

Attachment 3

Activity 3 – Water Management

Service Levels and Performance Targets

Activity 3–Water Management

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve

Performance Targets

HBRC will increase its knowledge of the region’s water resources in terms of quantity, quality and habitats so that a policy framework can be developed to sustainably manage the water and land resources within Hawke’s Bay

State of the Environment monitoring programme for:

Climate

River flows

Groundwater levels

Surface water quality

Groundwater water quality

Aquatic ecosystems

State of the Environment monitoring network review:

· Climate - 2008

· River flows - 2009

· Groundwater levels - 2008

· Surface water quality - 2009

· Groundwater water quality - 2008

· Aquatic ecosystems - 2009

Gaps were identified in climate and rainfall

2013-15

Establish one climate station a year in response to identified requirement

Monitoring undertaken in accordance with State of the Environment monitoring strategy (reviewed in 2013/14 to reflect national reporting and regional consistency)

Upgrade rainfall sites as required to maintain level of service

Annual Monitoring Performance Reports

Achieve Quality Management System targets

Knowledge available to inform environmental flow and allocatable volume review of the following river catchments and groundwater basins:

Tukituki River; Ngaruroro River; Karamu Stream; Tutaekuri River; Ruataniwha Plains ; Heretaunga Plains

Information used to determine minimum flows needs updating to ensure habitat protection. Single factor assessments to determine environmental flows are no longer appropriate

Groundwater allocation regime proposed for Ruataniwha

Minimum flows required to maintain identified values, including aquatic habitat, proposed for Tukituki

Groundwater use estimated for Ruataniwha basin

Draft groundwater use report prepared for Karamu Stream catchment

2013-15

Groundwater abstraction and allocation report prepared for Heretaunga Plains

Environmental flow, and allocation reports prepared for the:

· Karamu Stream, Tutaekuri River, Ngaruroro River and inflows to the Ahuriri Estuary

Coupled surface-groundwater model built and running scenarios for Heretaunga

Undertake Catchment Sensitivity Analysis

Increase IFIM surveys

Increase gauging

Groundwater/surface water interaction gauging

Determine methodology for in-stream assessment

Groundwater model development for Heretaunga

Knowledge available to inform review of water quality objectives and setting limits

Water quality objectives and guidelines are contained in the Regional Resource Management Plan

Water quality limits required to maintain identified values, including aquatic habitat, established for Plan Change 6 (Tukituki River catchment)

2013-15

Review of water quality guidelines and objectives completed and reported

Water quality requirements identified for recognised values, including aquatic habitat, established for Heretaunga Plan Change catchments (Tutaekuri and Ngaruroro Rivers, Ahuriri and Karamu Streams) and the Mohaka Plan Change catchment

Undertake catchment sensitivity analysis

Review existing plan guidelines

Knowledge available to manage nutrient inputs to rivers

The effects of nutrient inputs is known but information is needed on their source and quantity.

Nutrient sources, loads and fates determined for the Tukituki River catchment

2013-15

Report on Nutrient limits: Ngaruroro River, Tutaekuri River, Karamu Stream

Develop monitoring programmes for selected catchments

Undertake catchment load analysis and limits based on regional and community values

HBRC will encourage efficient and effective water use to maximise the benefits of the water allocated

Number of active water user groups

Implementation of water efficiency tools by Water User Groups

Water User Groups:

· Three formally established and facilitated

· One potential group under development

Ngaruroro, Ruataniwha and Twyford Water User Groups engaged in efficiency projects i.e. rationing and rostering and tree and vine calculator

Knowledge transfer through meetings, Council presentations, and one on one assistance

2013-22

Continue to establish and facilitate Water User Groups on a catchment priority basis

In conjunction with Water User Groups, investigate and apply for research grants relating to water use and resource allocation efficiency

Continue to transfer latest water efficiency and allocation information to Water User Groups

Establish and facilitate Water User Groups

Investigate and apply for water efficiency and allocation research grants

Water User Group facilitators to:

· keep up to date with latest water related information from science and other council departments and forward onto water user groups

· Ensure meetings are held to transfer knowledge

Number of consent holders with water meters operating using telemetry or web/text systems

Water Information Unit Established

Water metering web/text water use web page developed

749 consents using web entry system

507 consents reporting water use via telemetry

2014-2019

Cumulative total of 1200 consents using telemetry or a web entry system

Coordinate the implementation of water metering across Hawke’s Bay

Establish and maintain web entry and telemetry systems that encourage consent holders to accurately report their water

Carry out communication with the Hawke’s Bay irrigators to ensure a high level of understanding of water metering requirements

Continue roll out of verification programme of water meters in accordance with government regulations

Hawke’s Bay’s water resource is available for future generations

Allocation limits and water quality limits

Implementation of National Policy Statement for Freshwater Management

Regional Resource Management Plan contains limits for some catchments. Limits in catchments under resource pressure are currently being reviewed. Some catchments are over allocated and some parts of the region have degraded water quality and habitats

Refer to other performance targets listed within this table

Annual Reporting against National Policy Statement for Freshwater Management and Implementation Plan

Activity 4 – Coastal Management

Service Levels and Performance Targets

Activity 4–Coastal Management

Level of Service Statement

Level of Service Measure

Current Performance

Performance Targets

2014-15

Required Actions to Achieve Performance Targets

HBRC will measure water quality at key recreation sites and make the results available to ensure public health and safety

Recreational water quality monitoring programme and website management

Weekly sampling undertaken at 30 recreational water sites, information available on website within 2 days of results being available

Faecal source tracking at bathing sites that regularly exceed guidelines

Ongoing

Weekly monitoring of key recreational sites as per recreational water quality monitoring plan

Recreational water information available on website and social network site within 2 days of results being available

Identification of pollution sources for sites that regularly exceed guidelines

Undertaken recreational water quality monitoring in accordance with monitoring plan and national guidelines

Regular monitoring of key recreational sites

Undertake faecal source tracking when sites exceed guideline values, communication with Land Management, TLA and Public Health teams when results are obtained

HBRC will continue to monitor, research and investigate coastal processes to inform coastal planning including climate change and coastal hazards

Annual coastal monitoring and investigation programme including:

Beach profiling

Storm monitoring

Sediment transport and processes investigation and modelling

Hazard prediction including tsunami, inundation, erosion, storm surge

Coastal monitoring has been undertaken for at least 11 years

A research and investigation programme was implemented in 2004

Ongoing

Annual monitoring and investigation programme completed and reported each year

Prepare, implement and report on coastal monitoring and investigation programme

HBRC will provide long term, relevant and specific information on Hawke’s Bay’s coastal ecosystems, so that it and the community can remain engaged with, and informed of, the current state and potential threats to the health of coastal environments

Identify the state and health of selected regional beaches, reefs and estuaries

Identify the state and health of near-shore coastal waters and coastal sediments

Maintain an operative and relevant Coastal Monitoring Strategy

Monitoring undertaken according to the Coastal Monitoring Strategy (2006)

Annual reporting on the state of regional estuaries and sandy beaches

6-weekly monitoring of near-shore coastal water quality

Ongoing

Monitoring undertaken in accordance with State of the Environment Monitoring Strategy (2006) and reported on annually

2014-15

Five-year State of the Environment report compiled

Implement and report on monitoring as specified in the Coastal Monitoring Strategy (2006)

Comprehensive State of the Environment reports compiled every five years

HBRC will increase its knowledge of coastal ecosystems through targeted research and investigations so that it is better able to understand and respond to the effects of activities on the coastal environment

Undertaking specific investigation and/or research, and reporting on these outcomes where appropriate

Clive/Karamu –Waitangi estuary and Ahuriri estuary/Taipo stream identified as sites of special interest

Targeted investigations into coastal receiving environments receiving stormwater discharges

Saline transition zones in Wairoa, Waitangi, Ahuriri and Mohaka estuaries will be investigated (weather dependent)

Develop a work programme to assess the effects of stormwater on coastal ecosystems

Describe the seasonal movement of the saline wedge at a variety of HB rivers/estuaries

		Allocation of Expenditure		Funding Tools
		Public	Private	Public	Private
Other Schemes	Opoho	10%	90%	Investment Income	Differential Rate

Strategic goal	Resilient Ecosystems			Resilient Economy		Resilient Communities
Focus Areas	Land	Water Quality	Water Allocation	Water security	Natural Hazards and infrastructure	People and Communities
Strategic Outcome	Viable and resilient farming systems are being achieved through sustainable land use	There is proactive integrated management of land and water.	Water supply and ecosystem needs are optimised for sustainable growth.	Water supply and demand for sustainable growth are optimised.	People and businesses feel safe and are willing to invest in Hawke’s Bay.	Comprehensive, relevant and quality services continue to be delivered by HBRC to enable a connected and healthy community.
Strategic Implementation	- Hill Country Afforestation Proposal - Improving the Focus of the Regional Landcare Scheme - Biodiversity Strategy - Papanui Catchment Pilot Study - Water User Groups			Ruataniwha Water Storage Ngaruroro Water Storage Heretaunga Plains Flood Control Scheme: Level of Service Regional Economic Development Strategy Port of Napier Investment		Heat Smart Programme Public Transport GMO-Free Hawke’s Bay Civil Defence & Emergency Management: Funding and Targeted Rates Webcasting of Council and Committee Meetings Solar Hot Water Scheme Hydraulic Fracturing

	Fenton Wilson, Wairoa - Chairman Fenton has represented the Wairoa constituency since 2009. He is Chairman of the Wairoa Community Development Trust and also serves on the Smedley Station Advisory Board. 141 Maromauku Road, Wairoa 4196 \| 06 835 9200 027 4984 483 \| chairman@hbrc.govt.nz
	Alan Dick, QSO, Napier Alan represents the Napier constituency, having been elected to Council in 2004. Alan has a Business Degree (MBA) and is a Fellow of the New Zealand Institute of Management. 3 Newbury Place, Taradale 4112 \| 06 844 4645 027 224 0012 \| alizdick@xtra.co.nz
	Dave Pipe, Napier Dave is a newly elected Councillor with a background in community involvement, having served five terms on Napier City Council. Dave was also on the HB Environmental Awards Committee for ten years, five as its Chair. He is a former trustee of Pukemokimoki Marae Trust and is founding Chair of Napier Community House Trust, the Manager/Coordinator for St Mary’s Parish Taradale, and a qualified Independent Civil Celebrant. 25 Vigor Brown Street, Napier 4110 \| 06 835 3380 027 247 9979 \| davepipe2012@gmail.com
	Christine Scott, Napier - Deputy Chairman Christine has represented the Napier constituency since 2001. Christine has served on a number of community trusts and chaired the Waiapu Diocesan Finance advisory group. She is currently a director of Anglican Care (Waiapu) Ltd. 43 Napier Terrace, Napier 4110 \| 06 835 6950 0274 469 367 \| chscott@inspire.net.nz
	Peter Beaven, Ngaruroro Peter Beaven is a newly elected Councillor who, for the past twenty years, has worked in various roles in horticulture. Peter graduated from Victoria University with LLB(Hons), is on the Board of Pipfruit NZ and current Chairman of the World Apple and Pears Association. 35A McHardy Street, Havelock North 4130 06 877 7823 \| 027 2355 322 \| pjbeaven@icloud.com
	Debbie Hewitt, Central Hawke’s Bay Waipukurau based, Debbie is a newly elected representative. Debbie has a Masters degree in Agribusiness Management and previous governance roles include three terms as grower-elected director of Horticulture New Zealand; chair of the Horticulture Industry Vision 10/2020 Taskforce; chair of the Ruataniwha Water Storage Stakeholder group; and director of Infracon Ltd. 227 Porangahau Road, Waipukurau 4200 \| 06 858 7265 027 405 2882 \| debbiehewitt@xtra.co.nz
	Rex Graham, Hastings Rex is a newly elected Councillor, a Company Director involved in horticulture management and investments in New Zealand and China. Rex is chairman of the U-Turn Charitable Trust, Deputy Chair of the HB Regional Sports Park Trust, a Trustee of Te Aranga Marae and a Director of Te Aranga Ltd. 232 St Georges Road North, Hastings 4172 \| 06 877 4122 021 424 972 \| rex@freshnz.co.nz
	Rick Barker, Hastings Rick was elected in October 2013. He was previously a Member of Parliament for 18 years and is currently acting on behalf of the Minister for Treaty of Waitangi Negotiations as a Chief Crown Negotiator for two settlements in Taranaki. Rick completed a Masters Degree in Public Policy in 2012. 409 Burnett Street, Hastings 4156 \| 06 878 0010 027 444 2555 \| rickjbarker@gmail.com
	Tom Belford, Hastings Tom is a newly elected representative. His professional expertise is in marketing and communications and he is editor and publisher of BayBuzz magazine. Tom is a co-founder of Transparent Hawke’s Bay and A Better Hawke’s Bay. He has served on various groups advising our local councils on water and economic development matters. He holds a master’s degree in political philosophy from Georgetown University. 40 Raratu Road, Havelock North 4295 \| 06 874 7937 027 3070 315 \| tom@baybuzz.co.nz

Service Levels and Performance Targets Activity 5–Gravel Management
Level of Service Statement	Level of Service Measure	Current Performance	Performance Targets 2014-15	Required Actions to Achieve Performance Targets
HBRC will monitor and manage river-bed sediment to ensure flood protection schemes work as expected	River surveys (3-6 yearly) show all scheme rivers have sufficient capacity	Refer to Heretaunga Plains Scheme and Upper Tukituki Scheme sections	Ongoing No decline in river flood capacity	Ongoing Undertake gravel monitoring, assessment and extraction programmes as desired in Regional Resource Management Plan
	The average riverbed level where gravel extracted is managed within +/- 200mm of the design grade line	Average riverbed within design grade range	Ongoing Average riverbed within design grade range	Ongoing Undertake river surveys every 3-6 years
	No incidences of erosion or flooding as a result of undesirable gravel levels	No incidences	Ongoing No incidences	Ongoing Progress a review of gravel issues
River-bed gravel is equitably allocated to gravel extractors	The gravel allocation process complies with the Regional Resource Management Plan	No compliance issues	Ongoing No compliance issues with gravel extraction	Ongoing Undertake gravel allocation process as proposed in the Regional Resource Management Plan
River gravel management activities have no significant adverse effects on river ecology and water quality	No reported incidences of adverse impacts following gravel extraction or beach raking activities	No reported incidences	Ongoing No reported incidences of adverse impacts following gravel extraction or beach raking activities	Ongoing Undertake gravel management activities in compliance with Regional Resource Management Plan, Ecological Management Plans and River Environment Code of Practice
Knowledge necessary for sustainable management of riverbed gravel is improved	Completion of investigation and research work recommended in riverbed gravel scoping study	Scoping study completed in 2010. Investigation and research programme	Ongoing Annual Programme of work completed	Ongoing Undertake investigations and research programmes