Agenda of Corporate and Strategic Committee

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

Subject: Bus Service Update and Review of Fares

Reason for Report

1. To update the Committee on the performance of the goBay bus service, the introduction of the new ticketing system and to review fares

Background

2. HBRC contracts GoBus Transport Ltd. to provide the goBay bus service in and between Napier, Hastings and surrounding districts.

3. The current contract commenced on 1 August 2016 and will run until 31 July 2025.

goBay Passenger Survey Results

4. The 2018 goBay Passenger Survey was conducted between 1-24 August, with a total of 635 people taking part (78% paper based, 22% online):

2.1 90% satisfaction with the overall trip

2.2 88% satisfaction with the public transport system

2.3 77% satisfied with service frequency

2.4 80% considered the service good value for money

2.5 90% satisfaction with personal safety

2.6 91% satisfaction with the ease of getting on/off the bus

2.7 90% satisfaction with the helpfulness and attitude of bus drivers

2.8 the top two main reasons for travel were ‘work’ and ‘school”.

5. Although these results are very good, there is still some room for improvement, particularly around service frequency and services running to time. The biggest decline in satisfaction since the 2016 survey related to information about service delays. HBRC is working to improve delays through some service and timetable adjustments, and information about service delays should be improved once the new goBay website goes live in early December.

6. Service features that mattered most to the community for them to recommend using goBay public transport were: ‘The bus being on time and keeping to timetable’, ‘How convenient it is to pay for public transport’ and ‘The travel time’.

7. Payment systems will be much improved once the new ticketing system is in place, and we are also working to improve travel times wherever possible, including with faster passenger loading once many passengers are using the tag-on, tag-off system.

Bus Ticketing System

8. The project to implement a new bus ticketing and smartcard system for nine regional councils across New Zealand is now well into the implementation phase. The provider is INIT, a company based in Germany but which has built such systems all over the world.

9. The system will allow all participating regional councils to continue with their own timetables and fares structures but the bus card will be able to be used in all nine regions. A clearing-house system will allocate fares to the correct region.

10. Passengers will be able to top up their cards online (currently this is only possible with cash on the bus), which will speed up bus loading times. However, cards can still be topped up with cash on the bus or at selected retail outlets by cash or EFTPOS.

11. Entry to the bus is via a tag-on system (the card is passed over an electronic reader) and passengers will be required to tag off when they leave the bus also. This will provide councils with detailed information (not currently available) about where people are getting on and off the bus and how far they travel.

12. People who travel with a concession fare will need to be registered with HBRC and the concession will then be pre-loaded onto their card. This will speed up loading times onto the buses considerably as there will be no need for drivers to verify concessions.

13. We will have special bulk upload processes for some of the concessions, which should make this registration process straightforward. However we are anticipating that some people will need assistance to apply for their concessions, and so we will have temporary staff placed in HBRC Reception and at Hastings Library to assist people with this.

14. One major change for SuperGold card bus users is that they will be required to have a bus card; currently users simply show their SuperGold card to board the bus. However, these will be provided free to all existing users. This is a national requirement and has already been implemented in Auckland.

15. All nine regions will have the new system in place by June 2019.

Bus Patronage and Cost

16. Diagram 1 shows the monthly passenger trips and the monthly average, July to October from 2012-13 to 2018-19.

Diagram 1 – Year to date monthly passenger trips, July to October.

17. During this period, patronage increased on most of the services between Napier and Hastings, while most of the suburban services declined, including Route 14 Napier-Maraenui and Route 20 Hastings-Flaxmere.

18. Although we can’t be sure of the reasons for this, we think that the recent increases in petrol prices have had an influence on the longer services. As the HB unemployment figures are down to 4.5%, more people may have access to a private vehicle, explaining why numbers on the suburban services continue to decline.

19. While the overall YTD patronage is still slightly down on last year, the total passenger-kilometres travelled has increased by 8% This is a reflection of passenger increases on the longer services.

20. Diagram 2 shows the annual net cost (after fares and excluding GST) of operating the goBay bus service for the year to date from 2012-13 to 2018-19.

Diagram 2 – Year to date net cost, July to October.

51% of this cost is met by the New Zealand Transport Agency)

21. Recent cost increases are largely due to inflationary pressure, as our bus contract is adjusted by an NZTA index reflecting fuel, labour and infrastructure prices. However, lower fare revenues have also played a part.

Fare Review

22. NZ Transport Agency conditions of funding require regional councils to undertake a fare review annually.

23. The last fare increase, of 3.6%, was implemented in September 2014. The NZTA Cost Index for Public Transport (which is used to adjust contract prices to account for inflation) increased by 5.8% from September 2014 to June 2018. However, since June there has been a significant increase in the fuel price and we are expecting that the September index will increase.

Table 1 - Current Fares and Zones

Single Trip Cash Fares

Adult

Tertiary Student/

Community Services Card

Child/High School Student/

Senior

1 Zone

$3.60

$2.40

$1.80

2 Zone

$4.20

$3.60

$3.00

Single Trip Smartcard Fares (approx. 20% cheaper than cash fares)

Adult

Tertiary Student/

Community Services Card

Child/High School Student/

Senior

1 Zone

$2.88

$1.90

$1.43

2 Zone

$3.65

$2.86

$2.14

Zones

1 Zone Trip	2 Zone Trip
Clive, Bayview, Napier, Tamatea, Taradale, and EIT	Bayview, Napier, Tamatea and Taradale (before EIT/Clive) to Hastings/Flaxmere/Havelock North
Clive, Hastings, Havelock North, Flaxmere and EIT	Hastings, Havelock North, Flaxmere to Taradale, Tamatea Napier/Bayview (after EIT/Clive),

Table 2 - Passenger Category Percentages 2017-2018

2017-2018	TRIPS	%
Adult	105,830	16
Child	200,718	30
Community Services Cardholder	88,708	13
DHB Appointment Cardholder	5,707	1
DHB Staff	6,904	1
Promo/10-trips (sold directly by HBRC)	10,463	2
Senior	14,877	2
SuperGold Cardholder	119,089	18
Tertiary Student	78,493	12
Transfer	35,176	5
TOTAL	666,127	100%

24. Concessionary Fare Categories are:

24.1. Children under 5 travel free of charge

24.2. Children over 5 and Students in uniform or with school ID pay a concessionary fare

24.3. EIT students pay only a one zone fare as EIT is the zone boundary. A single smartcard trip to/from EIT is very good value at just $1.90 (with EIT student ID).

24.4. SuperGold cardholders travel free between 9am and 3pm Monday to Friday and anytime on weekend/public holiday services. HBRC are reimbursed for these fares by the NZ Transport Agency. Before 9am and after 3pm SuperGold holders pay a ‘senior’ concessionary fare.

24.5. DHB patients travelling to/from Hawke’s Bay Hospital or the Napier Health Centre, travel free of charge on production of a valid DHB appointment card/letter.

24.6. DHB staff pay a reduced, subsidised smartcard fare, with the subsidy reimbursed by the organisation. HBRC has this month introduced the same scheme on a trial basis.

24.7. Community Services Cards are available to all people on a low income, and on production of a valid Community Services card the passenger pays a concessionary fare.

Table 2 - Passenger Category Percentages 2017-2018:

2017-2018	TRIPS	%
Adult	105,830	16
Child	200,718	30
Community Services Cardholder	88,708	13
DHB Appointment Cardholder	5,707	1
DHB Staff	6,904	1
Promo/10-trips (sold directly by HBRC)	10,463	2
Senior	14,877	2
SuperGold Cardholder	119,089	18
Tertiary Student	78,493	12
Transfer	35,176	5
TOTAL	666,127	100%

25. As seen in table 2, almost 82% of goBay fares are concessionary fares.

26. Table 3 shows fare recovery rates for other regions. Fare recovery is the portion of the total cost of the service that is covered by fares (including SuperGold payments from central government). It is not possible to directly compare fares across regions, due to differences in fare structures and zone sizes, but the fare recovery rate provides a suitable means of comparison.

27. Hawke’s Bay, while not among the highest of fare recovery rates, is similar to other comparable regions. The fare recovery has improved considerably, from 32% in 2011-12 to 37% in 2017-18.

Table 3: A comparison with other regions, 2016-17

Region/city	Fare Recovery
Auckland	47%
Bay of Plenty	32%
Canterbury	41%
Wellington	53%
*Hawke’s Bay*	39%
Horizons	34%
Southland	30%
Nelson	56%
Otago	49%
Taranaki	40%
Waikato	32%

Options Assessment

28. The following options are proposed for the committee’s consideration.

Option 1 - No change to fares, with a further review in November 2019

28.1. Advantages:

28.1.1. The cost of bus fares will compare increasingly favourably with the cost of driving as fuel and other prices increase, helping to encourage more people onto the bus, especially for longer trips.

28.1.2. Minimises the degree of change to take place in April 2019, when the new ticketing system will be introduced.

28.2. Disadvantages:

28.2.1. the fare recovery rate of the bus service could decline further if operational costs continue to increase without an increase in patronage, placing a higher burden on ratepayers and taxpayers.

Option 2 – a 3% increase on all fares in April 2019, followed by a further 3% increase in April 2020

28.3. This would see a ten cent increase per year on all cash fares, due to the need to round all fares.

28.4. For card fares, the following would apply.

Card Fares

	Current	Proposed 2019	Proposed 2020
Adult 1-zone	$2.88	$2.96	$3.05
2 zone	$3.65	$3.75	$3.87

Tertiary/CSC 1-zone	$1.90	$1.95	$2.02
2-zone	$2.86	$2.94	$3.03

Child/High School/Senior 1-zone	$1.43	$1.47	$1.51
2-zone	$2.14	$2.20	$2.27

28.5. Advantages:

28.5.1. A 3% increase for each of two years would equate to an increase in revenues of $91,000 over the two years, assuming that there is no effect on patronage (based on a 3% increase on all fares, excluding the SuperGold allocation from central government, which is fixed).

28.6. Disadvantages:

28.6.1. Fare increases can result in a patronage decline. Public transport planners use a generally accepted figure of a 2% decline for a 10% increase in fares. For a 6% fare increase we could possibly expect a decline of just over 1%, which would then reduce the amount of revenue collected.

Option 3 – a 3% increase in cash fares in April 2019 and April 2020, all smartcard fares held at current rates.

28.7. Advantages:

28.7.1. Increasing cash fares while holding card fares could encourage more people to use smartcards. This has significant benefits for the bus service, in that loading times are quicker; this will improve further when the new tag-on tag-off system comes into operation

28.7.2. There would be some benefit to revenues, although significantly less than for Option 2, as around 70% of our passengers use smartcards. We could expect an increase in revenue of approximately $36,000 over two years assuming no loss of patronage and the same number of cash ticket purchases.

28.8. Disadvantages:

28.8.1. New users often pay cash before deciding that they will continue to use the service and then invest in a smartcard. The increase could discourage some passengers from trying the bus service.

28.8.2. The overall benefit of this option to fare revenues is just over 3% over two years, which will not have a major impact on our fare recovery rate.

Other Regions

29. Over the past four years, Horizons Regional Council introduced fare increases on two of its services, these fare increases resulted in an almost instant decline in passenger trips on both services. Due to that decline, the fare increase on one of the services was reversed and passenger trips have since recovered. This illustrates how fare increases can impact negatively on public transport patronage.

30. Taranaki Regional Council has not increased fares for five years, with patronage static or declining on some routes, the decision has been made each year to maintain current fares, as it was considered likely an increase would reduce patronage.

31. Greater Wellington Regional Council implemented a general 3% increase in July but also introduced a substantial range of concessions and fare products that were not previously available.

Discussion

32. The options outlined above are examples only – there are of course many other possible permutations.

33. Although the cost of running the bus service is increasing, recent fuel price increases have driven more people to use the longer services, and we are hopeful that this will continue. A fare increase could affect this positive trend.

34. Unfortunately, most people only take parking and fuel costs into consideration when calculating the cost of driving vs. using the bus. Feedback from potential adult fare-paying passengers (i.e. with no concessions) is that the 1-zone fare does not compare favourably with the cost of driving and parking, especially with the amount of available free or cheap parking in both cities. If we are to increase the number of people using the bus for commuting to work, an increase in this fare would not be beneficial.

35. The fare recovery rate on our services could also be improved by reducing costs or increasing patronage. Through the review of the Regional Public Transport Plan (to be brought to Council for consideration in early 2019), we are considering a range of ways in which we can increase patronage and improve the efficiency of the services. Although there are no guarantees of success, we believe that maintaining fares at current levels will make the service more attractive and that people do weigh up the fare vs. the cost of driving, when deciding whether to take the bus or not. The success of the HBDHB staff scheme is evidence of this, with 115 % growth in patronage as the DHB has successively increased the subsidy rate for its staff. We therefore support Option 1 of maintaining fares at current levels, and trying to improve fare recovery rates through other means.

Decision Making Process

36. Council is required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

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

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

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

36.4. The persons affected by this decision are bus users in Napier-Hastings.

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

36.6. 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

1. That the Corporate and Strategic Committee receives and notes the “Annual Bus Fare Review” staff report.

2. The Corporate and Strategic Committee recommends that Council:

2.1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, and that Council can exercise its discretion and make decisions on this issue without conferring directly with the community.

2.2. Agrees to maintain bus fares at current levels, with a further review in November 2019.

Authored by:

Anne Redgrave

Transport Manager

Approved by:

Tom Skerman

Group Manager Strategic Planning

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

Subject: Regional Three Waters Review

Reason for Report

1. This report seeks Council approval to work with the region’s four territorial authorities to develop a regional business case assessing options to improve the management of drinking water, stormwater and wastewater (Three Waters) in the Hawke’s Bay region and in doing so, address Central Government concerns associated with these activities.

2. This review will develop recommendations for performance improvements to our Regional Three Waters systems with a view to guiding Central Government’s Three Waters strategy.

3. It should be noted that this review is specifically looking at the service delivery function of Three Waters and does not seek to review the regulatory framework.

Staff Recommendation

4. Staff recommend that Council agrees its support for development of a regional business case on Three Waters management as proposed in Option 1 of this report.

Background Summary

5. The Government is investigating options on how to improve the management of drinking water, stormwater and wastewater (three waters) to better support New Zealand’s prosperity, health, safety and environment. Local Government Minister Nanaia Mahuta has announced a reform programme to transform drinking, storm and wastewater. It is focused on the challenges facing the sector, including funding pressures, rising environmental standards, climate change, seasonal pressure from tourism, and the recommendations of the Havelock North Inquiry. The review is in its second stage.

5.1. Stage One – This stage explored the issues and opportunities with three waters services by gathering and analysing information. This was completed at the end of 2017.

5.2. Stage Two – This stage commenced in March 2018. It is looking at options for improving the three waters system, including the management, service delivery, funding, and regulatory arrangements.

6. Central government has advised that they will work closely with councils, Iwi and all stakeholders with an interest in three waters services in order to develop options and recommendations.

7. There is an opportunity to provide the Hawke’s Bay’s perspective into the Central Government review on developing options to address the key concerns on how we can improve the management of drinking water, storm water and wastewater (“Three Waters”) to better support our community’s prosperity, health, safety and environment.

8. The Minister has advised she is supportive of our region’s proposal to complete this review and how it may be adopted as part of the wider government review.

9. The purpose of the Hawke’s Bay review is to have developed recommendations for regional performance improvements to our Three Waters systems to help guide Central Governments thinking to deliver:

9.1. Safe, NZDWS compliant and reliable drinking water

9.2. Better environmental performance for our water services

9.3. Efficient, sustainable, resilient, and accountable water services

9.4. Achieving these aims in ways that are efficient and effective for our communities.

10. This review will need to address the following challenges for our water systems and communities:

10.1. Meeting community expectations for each of the Three Waters across quality, treatment and management

10.2. Meeting regulatory requirements for the Three Waters for quality, treatment and management

10.3. The ability to replace infrastructure as it ages, and or fund and manage new infrastructure to meet changing customer and regulatory requirements.

10.4. Declining rating bases in some areas, high growth in others

10.5. High seasonal demand in small tourism centres

10.6. Adapting for climate change and adverse natural events.

11. The review will identify and develops options for structure and governance models that:

11.1. Develops and confirms ‘Key Principles’ of approach that are shared and agreed by the respective council’s

11.2. Identifies service and delivery model opportunities through joint provision of all or some elements of the Three Waters services. In identifying a range of models these shall be compared to the status quo including clustering of sub-regional entities. The models must be flexible enough to future proof for the inclusion of private water suppliers.

11.3. Develops strategic capacity and resilience across the water network

11.4. Provides excellence in strategic and management capability to ensure safe, secure efficient drinking water, waste water and storm water service outcomes to our communities.

11.5. Provide economic value and be able to demonstrate how well and why the identified models meet each of the objectives including benefits analysis, cost of service delivery, funding requirements, how fees and charges are levied and where the costs are distributed, and processes.

11.6. Provides capital efficiency current and future Three Waters assets

11.7. Delivers operational and maintenance excellence through the most effective service delivery model

11.8. Improves customer service

11.9. Provides greater environmental, community and cultural focus

11.10. Recommend the next steps to enable the entire objectives to be met including a programme and cost/resource estimates to do this – this should also include transition plans/costs and timetables for such a transition.

12. Hawke’s Bay Regional Council’s service delivery functions of drainage and flood protection are not in scope of this review. However, the involvement of Hawke’s Bay Regional Council will keep us informed into possible direction of Three Waters delivery in Hawkes Bay. This is important in managing the interface between territorial authority and Regional Council drainage and stormwater schemes. It is also valuable for the Regional Council to be involved given our interests as regulator of Three Waters and the natural resources this infrastructure interacts with.

13. In order to undertake the review it will be necessary to engage the services of an external agency to support its delivery. We will be seeking a fixed cost engagement via our procurement process. It is proposed that costs will be attributed on the following basis:

13.1. NCC 35%

13.2. HDC 35%

13.3. HBRC 15%

13.4. WDC 7.5%

13.5. CHBC 7.5%.

Risk

14. Undertaking the review is considered the lowest strategic risk option. This option would contribute the Hawkes Bay regional perspective into the Central Government review on how we can improve the management of drinking water, stormwater and wastewater (Three Waters).

Options

Option 1 – Council confirms its support for the project

15. Financial and Resourcing Implications

15.1. Additional funding will not be required to complete the review. Re-allocation of funding from Drainage and River Control Consultancy Services budget will ensure no changes to overall budgets or LTP figures.

15.2. The review will be outsourced to an external consultancy to deliver the report, however the will be a moderate resourcing impact on council staff to provide information to complete the analysis and participate in workshops throughout the review process.

16. Risk Analysis

16.1. This option is considered the lowest strategic risk option. This option would contribute the Hawke’s Bay regional perspective into the Central Government review on how we can improve the management of drinking water, storm water and wastewater (Three Waters).

17. Promotion or Achievement of Community Outcomes

17.1. This review demonstrates our commitment to making sustainable investment in durable infrastructure that promotes smart growth and ensures we are environmentally responsible.

18. Statutory Responsibilities

18.1. The review will contribute towards meeting our statutory responsibilities through better territorial authority asset management and performance, and ultimately compliance.

19. Consistency with Policies and Plans

19.1. The project is not part of the latest LTP, and the budget available is from the existing budget provision.

20. Community Views and Preferences

20.1. This option has been identified as requiring specific engagement Maori. Any significant changes to activity arising from the review will involve future public engagement and consultation.

21. Advantages and Disadvantages

21.1. The advantages of this option are:

21.1.1. provision of the Hawke’’s Bay’s regional perspective into the Central Government review to shape their thinking

21.1.2. working together as a region to develop the best regional model to deliver a strategic and sustainable approach to Three Waters.

21.2. There are no perceived disadvantages of this option relative to option 2.

Option 2 – Council does not approve the project to complete the review and wait for Central Government outcome without considered Hawkes Bay regional input.

22. Financial and Resourcing Implications

22.1. There are no financial or resourcing implications in choosing to do nothing in the short term.

23. Risk Analysis

23.1. By doing nothing, the Government may mandate a new regime that does not consider the specific requirements and concerns of the Hawke’s Bay region & our communities.

24. Promotion or Achievement of Community Outcomes

24.1. The Council would continue progressing against its LTP plan whilst noting that the Government has a Three Waters review which is subject to change that plan.

25. Statutory Responsibilities

25.1. Not applicable - other than where territorial authorities may be in breach of meeting standards and consent obligations

26. Consistency with Policies and Plans

26.1. Not achieving our strategic plan objectives for improvements in water quality through poorer management of Three Waters infrastructure by territorial authorities.

27. Community Views and Preferences

27.1. This is an opportunity for the Hawke’s Bay to develop a regional approach and contribute to Central Government’s review process. If we act independently then the region may need to adhere to an alternative Central Government imposed regime. This alternative regime may cost significantly more than this combined regional approach to the review.

28. Advantages and Disadvantages

28.1. Disadvantages are potentially significant and preclude us from developing solutions for our region to deliver:

28.1.1. Safe, NZDWS compliant and reliable drinking water

28.1.2. Better environmental performance for our water services

28.1.3. Efficient, sustainable, resilient, and accountable water services

28.1.4. Achieving these aims in an affordable manner.

Next Steps

29. Should Option 1 be approved our next steps are as follows:

29.1. Commence procurement process for a suitable consultant to lead the review across the respective Councils with the expectation that this is completed in late December

29.2. Confirm scope and draft project & communications plan with a view to completing review by the end of June 2019.

29.3. Development of Preferred Option.

Decision Making Process

30. Council is required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

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

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

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

Recommendations

1. That the Corporate and Strategic Committee receives and notes the “Regional Three Waters Review” staff report.

2. The Corporate and Strategic Committee recommends that Council:

2.2. Having considered all matters raised in this report:

2.2.1. Confirms its support for HBRC participating in the development of a regional business case on 3 Waters management.

2.2.2. Notes the cost of the review is apportioned across the Hawke’s Bay councils as being 35% Napier City Council, 35% Hastings District Council, 15% Hawke’s Bay Regional Council, 7.5% Wairoa District Council, and 7.5% Central Hawke’s Bay District Council.

2.2.3. Agrees that HBRC’s funding contribution come from the Drainage and River Control Consultancy Services budget.

Authored by:

Chris Dolley

Group Manager Asset Management

Approved by:

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

Subject: HB Tourism Update

Reason for Report

1. This joint HB Tourism (HBT) and HBRC item provides the Corporate and Strategic Committee with:

1.1. The regular quarterly activities update (attached).

1.2. An update on investigations of alternative funding options for the long-term funding of Hawke’s Bay Tourism (HBT).

1.3. An outline of initiatives HB Tourism would like to further explore.

Executive Summary

2. The objectives of the Funding Review are:

2.1. To develop a long-term sustainable funding model for Hawke’s Bay Tourism that ensures those who benefit commercially from tourism contribute to the promotion and marketing of the region.

2.2. To lessen the burden on the Hawke’s Bay ratepayer.

3. The issue of tourism funding, for both infrastructure and tourism promotion, is a national issue and one for which there are multiple national and regional initiatives under active consideration and review.

4. While the current funding model can be improved to ensure better linkages between HBT funding and the beneficiaries and/or users of tourism activities, the complexities, and transaction costs of more targeted funding models, particularly at a regional level, should not be underestimated and perhaps point to the need to retain a degree of core community funding via the economic development rate.

5. There is no one-size fits all approach. A review of international case studies of peer-to-peer accommodation and how some councils in New Zealand treat peer-to-peer accommodation by HBT and council staff has confirmed the complexity of the issues.

6. The introduction of a local bed tax/visitor levy would require legislation meaning change could be slow. Discussions with the region’s Mayors and Chair indicated strong support for an all-of region approach to the development of a sustainable funding model and strategy that encompasses not only visitor attraction but also tourism infrastructure and event management.

7. Committee members are advised that the interim funding agreement between Hawke’s Bay Regional Council (HBRC) and HBT has been further extended from 30 October 2018 to 30 June 2019. This extension will allow more time to revise HBT’s KPI’s to align with the 2018-28 Long Term Plan resolutions and the outcomes of the funding review.

Background of Hawke’s Bay Tourism

8. HBT was formally established in July 2011 after Venture Hawke’s Bay, the region’s economic development agency was disestablished. The Hawke’s Bay Tourism Industry Association led this change and developed a strategy which HBRC adopted. It was based on a contribution from the private sector while retaining the allocated tourism funds from the economic development rate collected by HBRC.

9. HBT’s role is to grow the visitor economy by promoting Hawke’s Bay nationally and internationally. HBT believes visitors don’t just arrive here – they have been motivated by friends, seen ads, read magazine articles, found what they want online or they had a travel agent who knew about Hawke’s Bay. HBT’s role is to ensure that Hawke’s Bay’s marketing hit all of those channels on behalf of its 386 contributing members and the wider region.

Hawke’s Bay Tourism Funding from HBRC

10. HBRC is the sole local government funder of HBT. This is the result of agreement with the region’s territorial authorities; Napier, Hastings, Central Hawke’s Bay and Wairoa councils.

11. In 2014/15 HBT developed a regional strategy, in alignment with Tourism 2025 (the national tourism sector framework) to increase visitor expenditure by an average of 5% per year. To achieve this HBT developed a funding case to increase strategic marketing particularly around seasonal events. All councils supported the proposal and HBRC committed to a new three-year funding agreement which increased HBT’s funding from $920,000 to $1.82M over three years.

12. Council believes the investment outlined above has paid off and that the sector should have the momentum to sustain strong visitor numbers. Accordingly, through the 2018 – 28 Long Term Plan (LTP) process, HBRC consulted on reducing HBT’s funding back to $920,000pa.

13. Following consultation Council decided to support HBT at a rate of $1.52M per annum, for three years, with subsequent funding levels to be reviewed through the 2021-31 LTP process. HBRC also adjusted the economic development rating split. (Please see Attachment 1 for Council’s 2018-2028 LTP Resolutions.)

14. Funding for Hawke’s Bay Tourism comes through a targeted economic development rate. (This rate also contributes to Business Hawke’s Bay and other miscellaneous economic development opportunities). The economic development rate is charged out at two different rates; residential ratepayers via a Uniformed Annual Charge (UAC) and commercial/industrial ratepayers via Capital Value (CV).

15. This rating split between residential and commercial has changed from 70:30 to 50:50 this year (year 1) and will change again next year to 30:70 (year 2). The result of this change means that the commercial sector will predominantly fund the rate. Note that in both scenarios Wairoa District ratepayers’ contribution is limited to 5% of the total economic development rate.

16. Hawke’s Bay Tourism believes it is in a very positive space with widespread public, industry and political support. It has recorded a 6% annual growth rate in visitor spend for the past three years. According to MBIE’s latest Monthly Tourism Estimates visitors generated $646M into the Hawke’s Bay’s economy (year-end October 2018).

17. The table below provides an estimated breakdown of the $646M ($1.8M a day) visitor spend into categories as well as an attempt to match those categories with similar HBRC commercial rating codes. This allows a comparison between the industries receiving the tourist revenues and commercial/industrial ratepayer contributing to the (non-residential) funding of HBT.

18. Please note there may some differences between the compared categories, but where possible we have endeavoured to compare like with like.

MBIE Visitor Spend Category	$ spent & as a % of the $646m spend	HBRC Rating Category	$ collected for the Economic Development rate & as a % of HBT funding
Retail sales – other	$166m 26%	Commercial Retailing use -CR	$200,100 19%
Accommodation:	$80m 12%	Accommodation (such as motels and hotels) -CA	$55,100 5%
Retail sales – fuel and other automotive products	$65m 10%	Service Stations -CS	$14,200 1.0%
Other tourism products	$61m 9%	Tourist type attractions as well as other amenities with an emphasis on leisure activities of a non-sporting type - CT	$1,700 0.2%
Food and Beverage servicing services	$117m 18%	19. Liquor outlets, Taverns -CL	20. $11,000 1.0%
Retail sales alcohol, food and beverage	$84m 13%	19. Liquor outlets, Taverns -CL	20. $11,000 1.0%
Other passenger transport	$54m 8%
Cultural recreation and gambling	$19m 3%
Commercial -Resthomes, Health Operators Education, Motor Vehicle Sales, Office, Parking buildings, Vacant Land, Other			$315,000 29%
Industrial – Food processing, Light manufacturing, Services, Vacant Land, Other			$494,000 45%

21. Based on the above information, approximately 74% (right-hand column) of the commercial/industrial rating funding for tourism is sourced from industries not directly benefitting from the tourist industry. 66% of all spend (left-hand column) is with businesses not directly in the tourism industry, i.e. fuel. Please note MBIE record spend by visitors based on credit card use.

Hawke’s Bay Tourism Funding from Industry

22. Hawke’s Bay Tourism expects to collect about $120,000 this year through membership and support partners. It currently has 386 paying members, being:

22.1. 223 Web Listing members (each pay $100+GST per year)

22.2. 163 Tourism Operator members (each pay $300+GST per year)

22.3. 28 International marketing group members (each pay an additional $500+ GST per year)

22.4. HBT also has 16 support partners (each pay $300+GST per annum). These are businesses who aren’t tourism operators but who value and support tourism.

23. HBT also expects to secure around $345,500 from industry through advertising, event sponsorship and event registration.

24. In addition to the revenue outlined above HBT receives “in-kind support” from industry to support HBT activity. HBT hosts over 200 travel agents and journalists each year. Industry gives a significant amount of free or heavily discounted rooms, flights, meals and tours each year to offset HBT costs. HBT believes a conservative estimate of in-kind support is approximately $500,000pa.

25. While HBT acknowledges it could increase membership fees it believes there needs to be a balance – some members would absorb an increase, other smaller tourism businesses (particularly those in CHB or Wairoa) would struggle to pay more than the $100 per annum they pay now. HBT believes there are genuinely only a handful of tourism players who have the capacity to provide more revenue to Hawke’s Bay Tourism. These would be the same 15 – 20 businesses who back in 2011 contributed a further $120,000 per year for three years. This money was for re-establishing the RTO alongside HBRC. HBT is in discussions with the Hawke’s Bay Airport in terms of more direct support.

26. The tourism industry in the region is mainly made up of 1-2 person operations so the potential pool of funding would still be considerably small relative to what’s required to market the region. Margins are tight mainly because tourism is seasonal. The majority of visitors come to Hawke’s Bay November – May, therefore revenue made over summer also must sustain the business over the quieter months. HBT’s recommendation would be for a stakeholder survey to be conducted to ask the industry what they believe they can afford to contribute.

Hawke’s Bay Tourism’s Activities

27. Hawke’s Bay Tourism has an annual budget of $1,985,600. This excludes event ticketing revenue of $400k per annum:

27.1. Advertising and promotion - 47%

27.2. This includes digital advertising, print ads, search, billboards, creating content, digital video, www.hawkesbaynz.com, social media, public relations, hosting media, developing collateral, attending consumer shows, training travel agents, developing tourism product, and attending trade shows to promote Hawke’s Bay.

27.3. Salaries and expenses – 29% (In 2018 HBT employs 6.5 staff. In 2011 HBT employed 6 staff)

27.4. Event development, marketing and promotion - 13%

27.5. Overheads - 11%

28. HBT has led a Regional Events Strategy to build events in the shoulder seasons. The Hawke’s Bay Marathon (May), Winter & Summer F.A.W.C! (June and November), The Big & Little Easy events (Easter), The Spring Fling in CHB (September & October) are all examples of creating events that drive reasons for people to visit Hawke’s Bay. HBT also markets and supports a wide range of existing events including Art Deco Weekend, Horse of the Year and Triple Peaks.

Future Funding Models

29. HBT’s objective is to raise $2million per annum to fund the promotion of Hawke’s Bay and ensure a long-term sustainable approach to marketing of the region. This is in-line with HBT’s current revenue from all sources.

30. In order to achieve this it is proposing a model composing of three components:

30.1. Implementing a regional visitor tax/bed levy;

30.2. Retaining an element core funding from the Economic Development rate HBRC collects on behalf of the region’s councils; and

30.3. Maintaining the industry funding at current or higher levels.

Implementing a regional visitor tax/bed levy

31. This could include a regional tax/levy based on a percentage or fixed amount per night added to accommodation charges for both commercial and peer-to-peer accommodation providers. Collaboration with both the commercial accommodation sector and peer-to-peer platforms would be necessary.

32. Local Government New Zealand (LGNZ) are investigating the notion of a local visitor tax/bed levy and are investing in a piece of work to understands the costs/benefits and logistics of such a levy. A scope of work has been developed and an RFP is expected to be delivered by the end of the year. HBT is a trustee of Regional Tourism New Zealand and will be part of the working group providing input and feedback on this paper. It would make sense to closely follow this rather than duplicate the work they are doing. This is outlined in LGNZ’s submission on the proposed International Visitor Levy which provides an excellent overview of the issues under discussion: http://www.lgnz.co.nz/assets/Uploads/IVCTL-Final-submission.pdf

33. If HBT aims to raise $2M per annum to fund the promotion of Hawkes’ Bay a 2.5% regional tax/bed levy would be required on each night.

34. This is based on $80M spent on accommodation in the year-end October 2018. (If bookings were made in New Zealand the $80m would include revenue gained from the Airbnb sector.)

Retaining core funding via the Economic Development rate

35. This would include retaining funding through the economic development rate, but to a lesser extent as currently allocated. For example - If HBT retained HBRC funding of approximately $1.0M pa and used a regional tax/bed levy to raise a further $1.0M a 1.3% levy would be required.

Maintaining the industry funding at current or higher levels

36. This would see tourism operators continue to pay for membership, advertising charges and other partnership marketing contributions. As stated earlier HBT believes there are only a small number of tourism players who would have the capacity to contribute more to HBT. Its recommendation would be for a stakeholder survey to be conducted to ask the industry what they believe they can afford to contribute.

Considerations for future funding models

Component	Pros	Cons	Hawke’s Bay specific issues
A regional visitor tax/bed levy administered regionally but adopted nationally.	Same framework across all regions in NZ. Aims to create an even playing field by applying the levy on all providing paid accommodation.	Only targets accommodation sector which receives only 12% of tourism spend. Cost to administer to be determined – less for smaller entities but could be high cost for bigger operators. Difficulty in finding all in peer-to-peer category. Additional resources may be needed. Legislative change is needed so implementing such a levy could be a slow process.	Need to take into account all peer-to-peer properties. HBRC versus TLA collection.
Retain core funding from the economic development rate HBRC collects on behalf of the region’s councils.	Provides a means for sectors who are not accommodation providers but who benefit from tourism promotion to contribute. Depending on Council’s vision for the rate, could free up funding to be used for other sectors. Lessens the burden on the ratepayer.	Council feels the sector now has the momentum to sustain strong visitor numbers. Depending on the level, may effect Council’s aim of returning to focus on environmental priorities.
Maintaining industry funding at current or higher levels	This supports the principle of equity and the case for tourism operators to pay more than most other businesses, but not all tourism funding. Public perception - it is important that industry operators are seen to be paying their way.	The benefits of destination marketing and tourism development cannot be made exclusive to those who contribute to the Regional Tourism Organisation (RTO). This leads to freeloading where beneficiary businesses rely on others paying. This in-turn demotivates those who are paying, eroding sustainability of any funding achieved. Maintaining membership support is very time consuming to the detriment of destination marketing activity.	HBT already performs relatively well on this (Third highest of NZ’s RTOs which reported in 2016 survey. An updated survey is being undertaken in early 2019). Current contributions over and above financial contributions include approximately $500k in in-kind contributions to supporting HBT activity. Hawke’s Bay does not have many large-scale tourism businesses compared with other regions. This will improve if the public investment is made to grow existing and new businesses.

Component

Pros

Cons

Hawke’s Bay specific issues

A regional visitor tax/bed levy administered regionally but adopted nationally.

Same framework across all regions in NZ.

Aims to create an even playing field by applying the levy on all providing paid accommodation.

Only targets accommodation sector which receives only 12% of tourism spend.

Cost to administer to be determined – less for smaller entities but could be high cost for bigger operators.

Difficulty in finding all in peer-to-peer category.

Additional resources may be needed.

Legislative change is needed so implementing such a levy could be a slow process.

Need to take into account all peer-to-peer properties.

HBRC versus TLA collection.

Retain core funding from the economic development rate HBRC collects on behalf of the region’s councils.

Provides a means for sectors who are not accommodation providers but who benefit from tourism promotion to contribute.

Depending on Council’s vision for the rate, could free up funding to be used for other sectors.

Lessens the burden on the ratepayer.

Council feels the sector now has the momentum to sustain strong visitor numbers.

Depending on the level, may effect Council’s aim of returning to focus on environmental priorities.

Maintaining industry funding at current or higher levels

This supports the principle of equity and the case for tourism operators to pay more than most other businesses, but not all tourism funding.

Public perception - it is important that industry operators are seen to be paying their way.

The benefits of destination marketing and tourism development cannot be made exclusive to those who contribute to the Regional Tourism Organisation (RTO). This leads to freeloading where beneficiary businesses rely on others paying. This in-turn demotivates those who are paying, eroding sustainability of any funding achieved.

Maintaining membership support is very time consuming to the detriment of destination marketing activity.

HBT already performs relatively well on this (Third highest of NZ’s RTOs which reported in 2016 survey. An updated survey is being undertaken in early 2019).

Current contributions over and above financial contributions include approximately $500k in in-kind contributions to supporting HBT activity.

Hawke’s Bay does not have many large-scale tourism businesses compared with other regions. This will improve if the public investment is made to grow existing and new businesses.

Feedback from the Hawke’s Bay Local Government Leaders’ Forum

37. HBRC staff engaged with this forum on 3 December 2018 to ascertain support for a discussion about a regional visitor tax/bed levy. The forum was supportive of the funding review and would like potential funding secured through a bed levy to not focus solely on funding activities of HBT but more broadly focused on funding tourism activities generally, including infrastructure. The leaders agreed on the proposed next steps of:

37.1. Formally convene a Local Government workshop to progress the discussion

37.2. Closely track industry developments, particularly LGNZ’s work

37.3. Consider in parallel the development of an all-of-region Tourism Strategy, noting the possibility of Potential Growth Funding (PGF) for this.

National Context

38. HBRC’s review is coming at a time when the topic of how best to fund tourism in NZ is under significant scrutiny, in no small part due to the challenge of managing industry growth. The following sets out some of the national and regional discussions, initiatives and reviews currently in play.

Draft Aotearoa New Zealand Government Tourism Strategy

39. The draft strategy was released in November with submissions being accepted until 4 February 2019. It outlines government’s role in its aim to make sure tourism growth is productive, sustainable and inclusive. In the current environment of rapid visitor growth the strategy states government needs to take a stronger role in its stewardship of the tourism system, more actively partner with local government, iwi and other regional stakeholders on tourism development and dispersal, and better align its regional tourism-related investments and interventions.

40. Challenges that have been exacerbated or created by recent growth predominantly manifest at a local government level, which provides much of the infrastructure needed to support tourism.

41. The strategy identifies five outcomes with its overarching aim to “Enrich New Zealand through sustainable tourism growth”. Priority work areas include:

41.1. Support local government and the sector to identify and develop reliable funding streams

41.2. Work with regions to support them to take a strategic and coherent approach when deciding how they want to plan, manage, market and develop their destinations.

42. HBT intends to make a submission to the draft strategy and seek support from HBRC.

Productivity Commission’s Local Government Funding and Financing Inquiry

43. This is looking at improvements to the local authority funding and financing environment, including recommendations in response to tourism pressures. DOC is also thinking about how best we charge for facilities on public conservation lands, the Draft Aotearoa New Zealand Government Tourism Strategy states.

International Visitor Conservation and Tourism Levy

44. This levy will be set at $35 per visitor and is estimated to raise $80M a year, to be split between conservation projects and tourism infrastructure. It will be collected through visa fees and via the new Electronic Travel Authority fee. It was approved by Cabinet in September and legislation is due to be passed around mid-2019.

Local Government New Zealand – Local Tourist Levy

45. LGNZ is investing in a rigorous piece of economic work to understand the costs and benefits of a visitor tax/levy up and down the delivery chain. They believe this is the only way to have a credible conversation across all levels of government and across the tourism industry and more importantly the people who decide we do this – government and officials.

46. A scope of work has been developed and an RFP will be delivered by the end of the year. Hawke’s Bay Tourism is a trustee of Regional Tourism New Zealand and will be part of the working group providing input and feedback on this paper.

47. LGNZ made a submission to the International Visitor Conservation and Tourism Levy saying it supports a border levy but notes that it will only partially address the issue of funding mixed-use infrastructure used by tourists as a significant number of tourists will be exempt from the levy.

48. It says a local tourist levy would “assist councils to alleviate the unfair burden on local ratepayers from continuing to subsidise the tourism industry.”

49. It its submission LGNZ says throughout the world local tourism levies are a common way of meeting the costs that tourism creates in local communities, citing for example accommodation levies are commonly used throughout Europe, the United States and Canada. Currently New Zealand is an outlier in respect of local tourism funding, it says.

50. A great deal of work has already been done on this topic as a visitor tax debate started in 1974.

Next Steps

51. Formally convene a workshop early next year of the Hawke’s Bay councils to progress the discussion around a regional visitor tax/bed levy. The goal is to have a shared position for Hawke’s Bay before any further work is undertaken on this.

52. Progress the development of an all-of-region Tourism Strategy. This would include identifying who will lead this piece of work and the development of the scope of the strategy.

53. Closely track industry developments and report back to the Corporate and Strategic Committee when new information comes to light.

Decision Making Process

54. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendations

That the Corporate and Strategic Committee receives and notes the “HB Tourism Update” joint staff report.

Authored by:

Annie Dundas

General Manager Hawke's Bay Tourism

Mandy Sharpe

Project Manager

Approved by:

Tom Skerman

Group Manager Strategic Planning

Attachment/s

⇩1	LTP HB Tourism Resolutions
⇩2	HB Tourism October-December 2018 Quarterly Report

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

Subject: Report from the Finance Audit and Risk Sub-committee

Reason for Report

1. The following matters were considered by the Finance Audit and Risk Sub-committee meeting on 21 November 2018 and are now presented for the Committee’s information.

Agenda Items

2. Local Government Funding Agency Accession presented the documentation necessary to enable Council to execute legal documents required to implement its 27 June 2018 decision to join LGRA as an unrated guaranteeing Local Authority, with the sub-committee recommendations following adopted by Council without change on 28 November 2018.

2. The Finance, Audit and Risk Sub-committee recommends that Hawke’s Bay Regional Council:

2.1. Confirms Council’s intention to join the Local Government Funding Agency as an unrated guaranteeing Local Authority.

2.2. Delegates authority to the Chief Executive to execute the following documents for the purposes of recommendation 2.1. above.

2.2.1. Letter from Council to Computershare Investor Services Limited (to amend and restate Council’s 21 October 2009 Registrar and Paying Agent Services Agreement)

2.2.2. Security Stock Certificate (in relation to the Multi-Issuer Deed)

2.2.3. Security Stock Certificate (in relation to the Equity Commitment Deed)

2.2.4. Security Stock Certificate (in relation to the Guarantee); and

2.2.5. Stock Issuance Certificate (in relation to the documents noted at recommendation 2.2.2. – 2.2.4.).

2.3. Authorises Council’s elected members (Chairperson and Deputy Chairperson) to execute the following deeds for the purposes of recommendation 2.1 above:

2.3.1. Deed of Amendment and Restatement of Debenture Trust Deed

2.3.2. Accession Deed to Multi-Issuer Deed

2.3.3. Accession Deed to Notes Subscription Agreement

2.3.4. Accession Deed to Equity Commitment Deed, and

2.3.5. Accession Deed to Guarantee and Indemnity.

2.4. Delegates authority to the Chief Executive to execute such other documents and take such other steps on behalf of Council as the Chief Executive considers it is necessary or desirable to execute or take to give effect to recommendation 2.1 above.

3. Health & Safety Internal Audit Report provided the H&S Internal Audit report and findings as well as the proposed work programme for implementing and monitoring the recommendations. A follow-up report on implementation of the work programme including critical risks and the controls, processes and monitoring of these. In addition, the sub-committee requested that staff provide the Draft Strategic Plan, including Council’s overarching philosophical positioning, to its February 2019 meeting.

4. Internal Audit update provided a status report on the internal audit work programme and sought agreement from the sub-committee to either defer the Business Continuance Plan audit or note it as a follow up for a future financial year. The sub-committee requested that staff investigate, with Crowe Horwath, whether it is viable for any of the proposed future internal audits to be brought forward in the work programme and report back to the next FA&RS meeting. In relation to the ‘living wage’, the sub-committee was advised a small percentage of staff salaries that fell below the threshold were adjusted to align with Council’s recently adopted Living Wage Policy, and that a review of Council’s Procurement Policy, to include a weighting for contractors who comply with Council’s Living Wage Policy, will be reported to a future sub-committee meeting.

5. It is proposed to review the Procurement Policy to include a weighting for contractors who comply with Council’s Living Wage Policy and staff will prepare a report for a future sub-committee meeting

6. Treasury Update provided progress on the development of council’s diversified investment portfolio, advising that the process of transferring funds has taken longer than anticipated and may have an effect on the budgeted returns, and that staff will update Council on the effects and any mitigation that may be needed. Further, staff advised that the full transfer of funds is expected to be completed by the end of January 2019. A Treasury report (to the sub-committee and full Council) including forecast vs actual returns of all investments, will be prepared for the February 2019 sub-committee meeting.

7. Appointment of an Independent Member of the Finance, Audit & Risk Sub-committee following the recruitment and interview process, the sub-committee recommended an appointment to Council, which was agreed on 28 November 2018.

Decision Making Process

8. These matters have all been specifically considered at the Committee level except where specifically noted.

Recommendations

That the Corporate and Strategic Committee receives and notes the “Report from the 21 November 2018 Finance, Audit and Risk Sub-committee Meeting”

Authored by:

Leeanne Hooper

Principal Advisor Governance

Approved by:

Jessica Ellerm

Group Manager Corporate Services

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

SUBJECT: Annual Plan Progress Report for the First Four Months of the 2018-2019 Financial Year

Reason for Report

1. To provide Council with a financial progress report for the first four months of the 2018-2019 financial year to 31 October 2018.

Financial Summary to 31 October 2018

2. The financial results for the first four months of the 2018-19 financial year are tracking to budget. There are no significant concerns at the moment however a few pressure points outlined below will be monitored closely as the year progresses.

Our Port Consultation Costs

2.1. The 2018-28 Long Term Plan (LTP) included $100,000 funding for the development and communication of the Port consultation.

2.2. As the process has progressed this budget has been exceeded due to un-forecast expenses associated with procuring out of scope legal and other professional advice in addition to the planned costs for auditing of the LTP amendment, communications advice, postage and delivery.

2.3. Some of the above costs are yet to be finalised, but are estimated to total $250,000. A full update will be provided at the next financial report in the New Year. It is possible a significant amount of the over-spend can be absorbed within the phase 1 project budget approved for HBRIC.

Investment Income

2.4. The LTP provided for the transfer of $50 million previously set aside for the Ruataniwha Water Storage Scheme (RWSS) to a diversified managed investment fund in order to preserve the capital and grow investment income to help fund the increase in Council’s operating activities.

2.5. The process of selecting and then finalising arrangements with the appointed fund managers has taken longer than initially expected, exacerbated by a decision to appoint two fund managers. Full year forecast returns could be unachievable because of the delay in placing these funds which forecast a return of 4.5% compared to term deposit rates at around 3%. There is currently a $204,000 negative variance to budget assumptions which will fluctuate depending on the performance of funds in the next six months. Staff will continue to update Council on the overall performance of investment income and any mitigation that maybe required.

Reorganisation Costs

2.6. The 2018-28 LTP included a number of new roles to support the increase in operating activities. These positions were dependant on adoption of the LTP which was officially adopted in June 2018 creating a timing delay before they could be advertised. There have been some financial savings as a result in the timing delay in filling all of these roles. Currently 25 positions of the 32 new LTP roles have been filled.

2.7. The recent reorganisation of the corporate structure necessitated a refresh of Council building facilities in order to accommodate a number of new staff. These costs were factored into the LTP and this work is still being carried out and actual costs are not yet fully known. Staff will continue to be monitor these as the year progresses.

New Projects –Erosion Control Scheme, Farm Plans, Sustainable Homes

2.8. There were a number of significant new projects in the LTP which have required the development of new policy before they could begin operationally. The erosion control scheme, farm plans and sustainable homes scheme are three loan funded projects which have taken some time to setup. This will affect the amount of operational work and therefore the level of borrowing required this financial year. These projects will be reported on individually within the financial progress reports throughout the year. As represented by the 396k variance to budget in the Groups of Activities.

Additional Financial Information for Four Months to 31 October 2018

3. The usual financial information is attached, consisting of:

3.1. Section A – Operating Account

3.2. Section B – Balance Sheet.

3.3. Section C – Capital Activity

Decision Making Process

4. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendation

That Hawke’s Bay Regional Council receives and takes note of the “Annual Plan Progress Report for the First Three Months of the 2017-18 Financial Year”.

Authored by:

Manton Collings

Chief Financial Officer

Approved by:

Jessica Ellerm

Group Manager Corporate Services

Attachment/s

⇩1

Financial Reporting to 31 October 2018

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

Subject: Human Resources and Health & Safety 2017-18 Annual Reports

Reason for Report

1. To provide Councillors with an overview of the key human resource metrics recorded for the year 1 July 2017 to 1 July 2018, along with an update of key health and safety information for the same period. A copy of the HR Highlights document is attached.

Key Metrics

Staff Numbers (Previous year in brackets)

2. The number of roles provided in this report reflect the LTP and reorganization process undertaken this year. While all roles have not yet been filled, it does provide an accurate ‘snapshot’ of the new establishment moving forward. As at July 2018 237.06 FTE made up of 253 positions (200.5 FTE previous year).

2.1. Dalton Street (including Waipukurau and Wairoa): 207.56 FTE (171.24)

2.2. Works Group (Taradale and Waipukurau): 29.5 FTE (29)

3. Turnover for the year ending 30 June 2018 was 5.1% (8% in 2017). 12 staff left and 18 staff members were internally promoted to a new position during the year. While the internal promotions were largely due to a number of new roles being created by the reorganisation, it is a positive result and ensures we are able to offer career opportunities to a number of staff.

4. The Lawson Williams – HRINZ New Zealand Staff Turnover Survey indicated an average turnover of 16.9% for contributing organisations in 2017, and 12.3% for contributing local government organisations. Strategic Pay’s turnover figure for local government indicated a 14.8% level.

5. Exit interviews are held with all departing staff to get feedback on a range of issues related to their work while with Council and the reasons for leaving. For this past year that feedback has not indicated any concerning trends related to the reason for leaving. Specific information on this aspect is provided on page 2 in the attached highlights document.

6. Council employed 22 students during the 2017-18 summer period over a range of Council activities.

Staff Leave Usage

7. The average number of sick days used was 5.7, slightly up on the 2017 total of 5.5 days. There was an increase in the total number of sick days used, 1065 days compared to 986 in 2017 which in part reflects increased staff numbers. The number of staff taking more than the annual allocation of 10 days remained at 11% the same as 2017 - this is only possible where staff have accumulated sick leave over the term of their employment to use.

8. Annual leave usage remained constant at an average of 18.8 days per staff.

Average Age/Tenure/Workforce Composition

9. The average age of Dalton street staff was 45 and the average tenure 8 years.

10. For Works Group staff the average age was 52 with an average tenure of 11 years.

11. The aging workforce is an issue that will be of concern in the future and is not one that is easily or quickly resolved. It will require a concerted effort from the sector to address this aspect. As outlined below, the regional council HR sector group is presently working with the rivers engineering group to look at options we can promote.

12. The number of female staff employed by Council increased to 103 from 84 in 2017. In comparison, the number of males employed increased from 85 to 90. The number of females in manager or team leader roles has increased from 8 in 2017 to 19 in 2018 and compares to 33 males in supervisory roles. While an improvement, it still reflects an imbalance that requires attention. We have targeted more female staff to undertake leadership training as part of the annual training programme to assist with this issue.

Health and Safety

13. Dalton Street staff had 28 work related ‘incidents’ reported through the year. 9 were ‘near miss’ incidents (no injury). Just over 27 days were taken off as the result of 6 accidents. One accident accounted for 14 days of this total after a trip and fall in the Council car park.

14. Works Group reported 38 work related accidents/incidents this year, 23 were classed as ‘near misses’, mostly minor property damage. Of the balance, the majority required no time off work with only 14.68 days taken off for work related accidents, a reduction from 25 days in 2017.

15. Council’s ACC experience rating information is a useful benchmarking indicator to assess how we compare to others within our industry peer group. Our rehabilitation rate, which is the number of weekly compensation days for qualifying claims per $1 million liable earnings in the levy risk group, was, in the local government services category, 1.35 compared to the industry peer group score of 3.09. In the heavy and civil engineering category, which covers the Works Group staff, our rehabilitation rate was 0.90 compared to 23.02 for the industry peer group.

16. The joint approach by all five local councils to adopt Sitewise for contractor health and safety assessment has worked very well and had been adopted by a number of other Councils across the country.

17. While for some small ‘sole operator’ contractors the assessment process has been demanding, the majority have embraced the concept and accepted that it has improved their processes and helped them get a better focus on health and safety.

18. The recent Health and Safety audit by Crowe Horwath was presented to the Finance Audit and Risk Sub-Committee meeting on 21 November 2018 and made a number of recommendations which will be addressed over the next 12 months.

19. The critical risks, in no order of priority, for council staff are:

19.1. Vehicle use on both public roads and private property

19.2. Working with equipment and machinery

19.3. Working in isolated areas

19.4. Dealing with clients/public

19.5. A dynamic working environment, e.g. rivers, remote sites

19.6. Environmental aspects e.g. poisonous plants, insects, weather

19.7. Office based issues, e.g. work station, work pressure.

Staff Training and Qualifications

20. The training budget was 1.9% of the total salary budget which is a slight increase on last year’s 1.7%.

21. There has been a significant increase in the training budget for 2018/19 which will result in more training opportunities across the council.

22. The main focus for training has remained on leadership development and we have continued to identify appropriate staff to undertake the training programme developed for this purpose. Those that attend have indicated that the content and relevance has had a significant and positive impact on their work activities. A number of those staff that have attended this training have moved into leadership roles in the Council or were new to leadership roles.

23. The overall staff qualifications can be seen in the attached HR Highlights. Over 100 staff have a degree or above qualification, including 6 with PhDs and 28 with Masters. This reflects the level of experience and qualifications Council requires of its staff to undertake the variety and range of work undertaken.

24. It also reinforces the need to source and retain skilled and qualified staff who are appropriate to undertake the complex requirements of the Council’s work.

Industrial

25. All supervising staff are employed under individual employment agreements.

26. There are two current collective employment agreements, both are three year agreements and expire in 2020. The Dalton Street Collective Agreement covers under half the staff whose work is covered by this agreement; a majority have chosen individual agreements.

Further Commentary

27. The significant increase in staff, resulting from Council’s commitment to initiatives in the LTP, presented some challenges over the later few months of the last financial year and first few months of the new one. Accommodation became an issue and attracting suitable applicants to fill the range of roles and managing multiple recruitment processes, proved a significant challenge.

28. In the main, we have been able to secure some very good staff into the new roles, many through internal appointments, albeit it has taken us longer to fill a number of roles than we had hoped. Some roles have proved more difficult and reflect a national shortage of suitable candidates for certain roles, e.g river engineering and senior planning. Any delays in appointments also impacts on workloads and work time lines.

29. On a national level there are some initiatives in the early stages of development, to try and address shortages across a range of regional council roles commencing with river engineers. However, realistically it will be a few years before any tangible results are evident.

30. The actual average salary increase for the year was 3%. This average incorporates movements to the salary midpoint (100%), increases for staff on the pay spectrum, i.e. not at the 100% level and those paid a ‘merit’ payment i.e. over the 100% level.

31. A number of employers, including local government, pay ‘across the board’ increases that do not always recognise the ‘market rate’ and then they find themselves having to make significant adjustments to attract new staff.

32. While paying the ‘market rate’ can put pressure on salary budgets, in the longer term it is more effective in attracting new staff and satisfying the salary expectations of existing staff. It also moderates the need for a significant movement in salaries if they have not kept up with market rates which can happen when ‘across the board’ increases are applied to all roles.

33. The ‘living wage’ has been raised in Council in previous discussions. At present, all permanent and fixed term staff (excluding summer students) are paid above the current national ‘living wage’.

Decision Making Process

34. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendation

That the Corporate and Strategic Committee receives and notes the “Human Resources 2017-18 Annual Report”.

Authored by:

Viv Moule

Human Resources Manager

Approved by:

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

Attachment/s

⇩1

2018 Human Resources Highlights

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

Subject: Future Operational Performance ReportinG

Reason for Report

1. This report provides the Corporate and Strategic Committee with:

1.1. an update of the initial findings of investigations into how to significantly improve the performance reporting capability across all levels of the Council, and

1.2. the work underway to provide performance monitoring and reporting, including against the Annual and Long Term plans, which will support the Council, Chief Executive and Group Managers with timely data and analysis to oversee the organisation’s delivery of community outcomes.

Background

2. Council agreed to the establishment of the Office of the Chief Executive and Chair (OCEC) in the 2018-2028 LTP. In the LTP proposal, it was noted that greater focus and resource is needed to lead and drive whole of organisation performance.

3. Greater visibility and tracking of progress on Council projects, of core service delivery and risk monitoring at the organisation level needs to be improved in order for the Chief Executive to meet his responsibilities to Council. A key aspect of this visibility being optimal utilisation of its reporting tool.

4. Council introduced Opal3 in 2015 as a means of providing meaningful, timely and accurate performance reporting on projects and work streams in easily understood formats. It is an online reporting tool that has been previously used to provide information to Council such as the Annual Plan report and some of our statutory reporting eg the State of Environment and consent timeframes.

5. Anecdotal feedback from across the Council, is that there is room to enhance the quality of reporting so OCEC has commenced a project designed to ensure that performance reporting is improved significantly across all levels.

6. Opal3 is used extensively and successfully by other councils including Auckland Council, Taranaki Regional Council and Hamilton City and is also used by several central government entities including Maritime NZ. Each of these entities produces good-quality, timely reports. Two staff visited these councils to ascertain the approach they used when launching Opal3, and best practices utilised in operating the tool. Key features of what they report on and the way they report include:

6.1. Performance against non-financial and financial targets

6.2. Performance of Long Term Plan (LTP) and Business Plans (BP) activities

6.3. Trend reporting and analysis

6.4. Commentary on an exception basis where performance is beyond agreed tolerances.

7. Reports are mostly produced three-monthly and also include reporting on important non-LTP metrics such as:

7.1. Human resource functions (actual FTE versus 12 months previous, turnover, occupational health and safety statistics, training courses etc.)

7.2. Culture including results of staff surveys

7.3. LGOIMA statistics on numbers, time to resolve, performance against legislative requirements.

8. Extensive use of traffic light indicators provides a good visual display. Opal3 is able to produce these reports provided all fields are populated at the time new activities are introduced. In HBRC’s case, it is apparent accurate baselines and measurable metrics were not provided in some instances, hence negating the ability to provide good-quality reporting.

9. As evidenced from our visits to other users, Opal3 is fit-for-purpose as a reporting tool for Council. What we have commenced doing is revisiting the way all activities, projects and works streams are established and populated in Opal3.

10. A briefing paper was presented to the Executive Management Team (ELT) on 23 October 2018 on the initial findings of organisational performance monitoring and agreed to:

10.1. Continue using Opal3 as the Council’s reporting tool

10.2. Responsibility for Opal3 is transferred to OCEC from Corporate Services

10.3. We will continue the research of the ways other councils use Opal3

10.4. The appointment of staff champions of Opal 3 from each of the business groups.

Next Steps

11. The timeline below indicates we will be in a position to provide a half-year update by 22 February. This is most likely to come from a mix of Opal3 and manual reporting.

12. We have commenced consultation with staff and so far have consulted with group managers, project managers and/or staff who have been nominated by their group managers.

13. We are currently working through reloading all LTP activities into Opal3, a task we anticipate will take until 31 March 2019. This is because each activity requires development of clear and measurable metrics to allow for a baseline to measure the future performance against. We will also work with the responsible teams to coach them into providing meaningful commentary on results, especially where variances outside of tolerances are noted.

14. The full year results will be entirely Opal3 generated (no longer a mix with manual reporting as at the half year results) and consistent in appearance, with meaningful commentary that reflects the status of results. We will also develop snapshots of results and achievements designed to be useful tools for communication purposes to demonstrate results and achievements to a range of audiences.

15. After the half and full-year results are produced, we will check back in with staff and continue developing the quality of reports so we are able to offer more customisation and reporting options.

Timeline

Activity	Due Date
Presentation to Corporate and Strategic Committee	12 December 2018
Presentation to Council	19 December 2018
Provide half-year updates to ELT	11 February 2019
Produce half-year results and updates to Council	27 February 2019
Feedback and first phase customisation begins	31 March 2019
Full-year results and update produced	2 August 2019
Feedback and second phase customisation begins	16 August 2019

Costs

16. It is not anticipated any substantial costs will be associated with these improvements, except possible minor consultation costs with the Opal3 product owner if any immediate customisation is identified in the current phase of work.

Decision Making Process

17. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendation

That Hawke’s Bay Regional Council receives and notes the “Future Operational Performance Reporting” staff report.

Authored by:

Peter Wallwork

Principal Advisor - Organisational Performance

Joanne Lawrence

Group Manager Office of the Chief Executive and Chair

Approved by:

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 12 December 2018

Subject: PMO Pilot Update and Project Status Report

Reason for Report

1. To provide the Corporate and Strategic Committee with a status report on the 19 pilot projects being actively supported by the Project Management Office (PMO).

2. This paper also provides a general update of the progress of the roll-out of the PMO.

Background

3. As a result of the recent reorganisation, a PMO was established to act as a centre of excellence for project management. This is the first time that HBRC has had dedicated resources to implement a consistent best practice project management (PM) framework across the whole of the organisation in a structured and supported manner.

4. At the last Corporate and Strategic meeting (3 October) we informed the committee of the establishment of the PMO, its key roles, the project management framework we are implementing, identified the 19 pilot projects and our intention to provide quarterly status reports. This report is the first of those reports.

5. As previously noted the pilot projects were selected and approved by the Executive Team as a mix of size, type, phase and cross-function across the organisation. The pilot is to road test the project management framework, tools, templates and training.

Status of the 19 pilot projects

6. Attached to this report is a summary table of the 19 pilot projects for the November reporting period. The purpose of the summary status report is to keep the Committee abreast of project progress and provide assurance that action has been taken on escalated issues (i.e. amber and red traffic lights).

7. More information is provided below on an exception basis, of the four red and five amber projects (please note this information may be out-of-date for some projects as it is based on the November monthly status reports). No commentary is provided on the remaining 10 green projects.

Overall Status (change from previous month)	Project Name	Escalations
Red (no change)	Regional Integrated Ticketing System (RITS) * This project is run by a consortium of nine regional councils.	Schedule - INIT (the provider) is behind schedule with system development, but a recent successful Factory Acceptance Testing process has given greater confidence that a revised schedule will be adhered to. This should be reflected in the reduction from red to amber in the December report. Budget - NZTA revised its subsidy rate for the project after budgets were finalised by HBRC, however, we are still within HBRC local budget, with further delay, there is a risk that this could be exceeded. Risks - We are scheduled for 15 April 2019 Go Live, subject to the system functioning properly. There are several phases of testing which we will take part in and at which we will specifically test our own fares, routes, zone structures etc. The project management team will guide and support through this, and we have been assured that no region will go live until it is satisfied with the system’s functioning.
Red (no change)	Public Access to Rivers	Scope and budget - This project requires a critical review to ensure clarity in scope and budget. It may be replaced by a number of smaller projects. This review will occur when Manager Regional Projects and Project Manager roles are filled. The project currently has no project manager. Recruitment for Team Leader Open Spaces and two project delivery resources is currently underway.
Red (no change)	Heretaunga Plains Flood Protection Scheme (HPFPS) LOS increase	Scope and budget – same as above. Budget is $1.1m per year for construction and $0.1m p.a. for enhancement. A total of $20m over a twenty year period. With significant project planning and design required it is unlikely that construction will commence this financial year. Cashflow based on schedule needs to be produced. Schedule - Current project is for a period of twenty years from July 2018. There is currently no high level schedule of Initiation, Planning, Execution and Closure. There are significant land issues to be resolved depending on the option selected to increase LOS from 1:100 to 1:500 which may require consultation and time to resolve.
Red (worsened)	Implementation of MERI framework (Monitoring, Evaluation, Reporting and Improving)	Budget – a new job code and labour hours for team members engaged in the MERI project needs to be considered as part of 2019/20 Annual Plan. Costs for external consultants for social science aspects of the MERI is unknown and may not be possible in current LTP budget. No in-house social science knowledge/skills.
Amber (no change)	State of the Environment Monitoring – Lakes	Issues/Risks - A presumed power outage caused an unplanned ‘off’ period for the air curtain in Waikopiro. A cyanobacterial bloom developed in the 3 days the air curtain was off. Air curtain turned back on and has removed the obvious symptoms of a bloom (i.e. no slick and no bad smells), but too early to tell whether the phytoplankton community will be reset by keeping the lake in a mixed state for an extended period. Early signs are promising but there is huge variability in the data which mean more time is needed to pick up any clear trends. As a result we are looking into communication options so warnings can be automated, and ideally remote operation possible. Lake Tutira has been looking very good, with clear water conditions. pH has started to rise lately, however, which may be an ominous warning for the summer to come.
Amber (no change)	TANK to becoming operative	Schedule - The Project Schedule has been amended to allow ‘adequate time’ for iwi authorities to respond to the pre-notification draft plan as discussed at RPC on 31 October. This pushes likely notification of PC9 out to March/April. Scope - A scope change includes HBRC science response to SPZs including further modelling work and liaison with JWG (and RPC) Budget - Labour and external costs are still TBC. The above changes to schedule and scope could have a direct impact, resulting in further demands on the budget and staff time. Risk - There are risks to the programming timetable, by and large these are not uncommon to the decision-making process i.e. RPC decisions, consideration of the plan content, reaching consensus.
Amber (no change)	IRIS (Integrated Regional Information System) Implementation Phase 1	Budget - HBRC will require or consume more RSHL PMO and SME time than RSHL has anticipated or allowed for - result - fatigue, cost to councils, unmet expectations for HBRC. This is being managed through the Commercial/PIDS Action Plan. Risk - There is risk of losing knowledge through change in staffing. The current Project Manager and Business Analyst have resigned and are expected to be transitioned out of the project by the end of this calendar year.
Amber (worsened)	Whakaki Hot Spot	Risk - We are in a critical phase. Our stakeholders need to sign the affected party approval form if we want to receive the FIF (Freshwater Improvement Fund) grant. The process takes time and pressure is on to meet the deadlines. Schedule - All tasks and milestones currently on track for delivery. However several land blocks will have their SAGM late in Nov which could delay the consenting process a bit. The team is working hard to make sure we meet the deadline. There was an important meeting on Wednesday 5 December that will influence the future of the project – this could change the Risk and overall status to Red.
Amber (worsened)	Napier Port Consultation	Schedule – In the November status report, there was some concern that appeals could be made on consents granted which may have affected decision-making pre- Christmas. No appeals were made so schedule is back on-track for decision on preferred option on 19 December. Budget - Allocated budget of $100k well over spent including unplanned spend to deliver 2-pager and postcard. $100K for PWC report. Risk - Judicial review risk live. Mitigation includes comprehensive process and decision paper supported by legal advice from Bell-Gully.

Key Milestones Achieved

8. The key milestones achieved by the PMO so far include:

8.1. Meetings with all teams within HBRC to explain purpose of PMO (presentations)

8.2. Creation of templates, tools and guides created specifically for HBRC

8.3. Creation of a new PMO Hub on HerBi (Council’s intranet site) for all HBRC staff to access these best practice resources

8.4. Design and build of project sites for each pilot project (through the PMO hub) – in collaboration with ICT

8.5. In-house training for project managers on how best to use their project sites (with guidance materials)

8.6. Contracted Tregaskis Brown as external partner to work with PMO in delivering one day “Project Management Essentials” workshop for pilot project managers. This workshop included practical tips and tricks for applying the project management tools designed by the PMO, as well as useful guidance for stakeholder management etc.

8.7. Quality check all status reports for pilot projects.

Next Steps

9. Next steps for the PMO include:

9.1. Updating project sites based on feedback to improve user experience

9.2. Working with OCEC (Office of the Chief Executive and Chair) to identify future opportunities for status reporting through Opal3

9.3. Identifying topics for ‘master classes’ on specific project management topics and working with Tregaskis Brown to deliver to applicable HBRC staff

Decision Making Process

10. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendation

That the Corporate and Strategic Committee receives and notes the “Project Management Office Pilot Update and Project Status” report.

Authored by:

Mandy Sharpe

Project Manager

Karina Campbell

Senior Project Manager

Desiree Cull

Strategy and Projects Leader

Approved by:

Tom Skerman

Group Manager Strategic Planning