Clifton
to Tangoio Coastal Hazards Strategy Joint Committee
Friday 31 May 2019
Subject: Contributory Fund
Reason for Report
1. This report
proposes options for establishing, managing and funding the Coastal Response
Contributory Fund (contributory fund) to support the implantation of the
Clifton to Tangoio Coastal Hazard Strategy 2120 (Strategy). Specifically
the report.
2. Outlines how
the contributory fund will be used and expenditure is reported to the Councils.
3. Provides a
draft Coastal Contributory Fund Rules Deed to assist with further direction
from the Joint Committee.
Background
4. The Joint
Committee have been discussing the concept of a contributory fund since the
idea was first introduced in Stage 2 of Strategy development, and have agreed
in principle to establishing such a fund. The Joint Committee have previously
requested further detail from TAG Funding Workstream on how the fund would be
operated, managed and governed.
5. Currently
Napier City Council (NCC), Hastings District Council (HDC) and Hawke’s
Bay Regional Council (HBRC) have agreed to commit to providing $100,000 each
for the next 10 years for the continued development of the Strategy.
6. This allocation
of money is being used for design engineering, financial strategy development,
project management, communication planning and joint committee meeting
expenses. At this stage, there is no intention to discontinue this
commitment and the current $300,000 per year will not be part of the
contributory fund.
7. The
contributory fund is a separate collection of funds from ratepayers and other
external funding agencies. It has been proposed that the three partner
Councils begin collecting from the ratepayers from the 2021/22 year for
spending in the future for the public good and protection of the TLA’s
and HBRC’s infrastructure portions (when the whole community benefits
from the expenditure) from the physical intervention.
8. The private
good benefit (when individuals or identified parts of a community will benefit)
will be collected at a later stage through a targeted rate when there is
certainty of the timing and value of the physical intervention. Once
collected, this money will also be deposited in the contributory fund account.
9. Debt funding
for the construction will be applied for at the time of the physical
construction and this money again will be added to this fund.
10. All expenditure for the
strategy will be paid out of the contributory fund.
11. Managed retreat has been
considered in the strategy but only in the long-term, along the terms of
covering the costs for making safe and good abandoned property for public good.
Basis of the Contributory fund
12. A contributory fund is a
way we can start collecting money now to assist to offset the future costs of
physical intervention. A key output of the Design Workstream, detailed
estimates for each interventions are currently being prepared. As a guide the
2018 Report, “Report of the Northern and Southern Cell Assessment
Panels” estimated the rating impact of implementing all recommended
pathways would have a rating cost of $3.2m p.a with an estimated total cost of
$52m over the first 20 year horizon. In addition, the Joint Committee paper
presented on 5th December 2017 Titled “Coastal Hazards
Strategy- High Level Cost Estimates” developed an envelope cost for the
preferred pathways over all three time horizons of between $130m to $285m.
13. Although this level of
money is not required immediately, it would be sensible and prudent to start
collecting money now to reduce the reliance on debt financing in the future.
14. To date the order in which
the proposed interventions will be implemented has not been confirmed.
15. The Joint Committee has
previously recommended that each council share the responsibility to collect
for the contributory fund from the ratepayers in their city/district/area.
What is the fund being collected for
16. Initially the fund will be
used for funding the public good component of the physical interventions and
for the protection of the TLA and HBRC owned infrastructure behind the
interventions.
17. Items that are primarily
considered public good
17.1. Making safe & good the abandoned
property and possible areas of managed retreat
17.2. District/regional plan change costs
related to the implementation of the strategy
17.3. Consenting costs and related expenses.
18. Items that have components
of public and private good
18.1. Physical interventions
18.2. TLA infrastructure
protection, HBRC infrastructure protection
19. Each mitigation for each
cell must be considered individually to identify the percentage of public and
private good, and these percentages may differ from coastal community to
coastal community.
20. It is noted for clarity
this fund will not be for business as usual expenses or other coastal works
programmes that occur outside of the Strategy.
When to start the Fund
21. Given the expected cost of
the proposed interventions, any funds collected in advance will reduce the need
for debt funding later, and the sooner the Councils commence collecting, the
larger the contributory fund will be when required. For this reason the TAG
Funding Workstream is recommending that all Partner Councils commence the
collection of funds as soon as it is practicable.
22. The TAG Funding Workstream
are recommending that public consultation commence as soon as practicable, and
on that basis it should take place in July/August 2020. With the intention of
rating for the year 2021/22
23. It is envisaged that all
three Councils would consult together being led by HBRC with consistent
messages.
24. This approach would allow
the fund to commence early, and would have a compounding impact on the ultimate
size of the fund for when works commence.
25. On the flip side, in
2021/2022 the Strategy would not have completed their modelling and the
preferred pathway and detailed costs will not be known. However, we are certain
that doing nothing is not an option, and whatever is done will be expensive.
26. The disadvantages of
collecting early is that at this stage there has been no decision on what the
public good percentage will end up being for each intervention, nor have
we decided what is the value of the protection being offered to each TLA for
each intervention.
Collection of the Fund
27. The TAG Funding Workstream
has considered who should collect the contributory fund. There are two options,
27.1. The first and most
obvious is Hawke’s Bay Regional Council (HBRC) due to previous Joint
Committee meetings agreeing that they are the most obvious vehicle to collect
the public good component of future works.
27.2. The second option is
that all three Council begin collecting funds for the contributory fund. HBRC
would collect for the public good component of the future works, and the
Territorial Local Authorities (TLA) would collect for their contribution for
the protection of their infrastructure (roads and 3 waters).
28. The advantages of the
second method is that a greater level of funding can be accrued by spreading collections
over all three Councils; we anticipate that the amount collected could be
double that collected were a single Council collecting. We know that whatever
the amount we are able to collect through a contributory fund, it will never be
sufficient to meet all construction costs and will need to be complemented with
debt funding; the more we can collect now, the less debt funding that will
ultimately be required.
29. Below is a table that
demonstrates what the proposed new rate might raise per year if implemented
where the rate per property averages $5 to $25 per property per Council.
30. Options range from $5 per
property per Council to $25 per property per Council
31. For example if only HBRC
were collecting the rate and the amount settled on was $15 per property per
year, then $825,000 would be collected in year one, which represents a 3.6%
rate increase on the existing HBRC rating base.
32. However if all three
Councils implemented an average rate increase of $15 per property, $1,650,000
would be collected. While the HBRC rate increase would remain at 3.6%, and the
TLA’s would be between 0.5-0.6%, the overall impact on the ratepayer is a
1% increase in rates on his or her property. This is the level that the TAG
Funding Workstream would recommend for year 1.
33. The TAG Funding Workstream
also debated whether that rate should remain at $15 for year 2, or whether it
would progressed up to $20 year 2, and then $25 year 3. Given the ultimate cost
of the interventions, it is TAG Funding Workstream’s view that year 2 and
3 should include a gradual increase so the fund has a meaningful balance
available when works commence.
34. Rationale is the balance
between affordability and meaningful contributions for the size of the strategy
Method of Collection – Uniform Rate
vs General Rate with differentials
35. Having decided to collect
towards the contributory fund, the next decision is how to collect it. There
are two main options;
35.1. The first is the easiest
to implement and understand being a flat uniform charge of $xx per property.
35.2. The second is to create
a targeted rate where the rate is based on bands of proximity to the coast.
36. The first option is easy
to explain, but does not take into account the differing levels of benefits
that a coastal property would enjoy compared to say a rural property or a
elevated residential property, which may be many kilometres from the coast. It
also does not address affordability as every property owned pays the same.
37. The second option is a
targeted rate with bands based on proximity to the coast. This addresses the
issue of benefit. However, the rate could be a flat charge per property, or
based on land values. A land value approach could be done to try to address
affordability as the property owners in Flaxmere and Maraenui would pay less
than those in Havelock North and Napier Hill would, however you’ll have a
perverse outcomes for farmers, orchardists, and commercial building owners.
38. Ultimately it isn’t
the place of the Joint Committee to make this decision as each individual
Council sets their own rates, but rather to highlight that the decision to
collect early has knock on decisions that each individual Council will need to
make in due course.
39. The Tag Funding Workstream
on balance recommend that a flat uniformed charge per property is the easier
collection method. Each Council must come to their own conclusion as to the
rating tools used to recover their share of the contribution. This may
include modifying the Revenue & Financing Policy and considering the
requirements of Section 101 (3).
40. Also the implications of
the introduction of a new rate and the impact of this against its own
Significance and engagement policy and the need to consult. If the
councils introduce a new targeted rate, outside of the LTP process, then they
need to consider the impacts of section 23 (2) of the Local Government (Rating)
Act 2002.
Draft Deed of Agreement
41. To assist the Joint
Committee with some further detail on how a contributory fund could operate in
practice, TAG Funding Workstream have worked with independent legal advice to
prepare a draft Deed of Agreement (attached). It is noted for clarity
the attached Deed is an early proposal for Joint Committee feedback.
42. As the Joint Committee has
been formed under Clause 30(1)(b) of Schedule 7 of the Local Government Act
2002 (LGA) by agreement between the Councils it is not a Council-Controlled
Organisation under the LGA because it is not an “entity”.
43. The Joint Committee
operates under the Terms of Reference that does not currently provide any
functions in relation to the management or oversight of a contributory fund.
44. The TAG Funding Workstream
consider that the Joint Committee is well placed to provide this oversight, and
notes that amendments to the Terms of Reference would be required by agreement
of all the Members, to enable this function and to confirm how decisions on
holding and spending the funds should be made.
45. The structure of the DRAFT
Deed attached is on the following basis:
45.1. The only parties of the
Deed are the three funding Councils
45.2. The primary function of
the deed is to govern how the funds are to be held by the holding party (using
HBRC as example until the Joint Committee decide)
45.3. The draft Deed sets out
how the funds are to be used
46. Any other matters
pertinent to the operation of the fund can be set out in the terms of reference
by which all councils are governed.
47. Previous legal advice
indicates that one council can hold the funds for the benefit of all Councils.
It is currently proposed in the draft Deed that HBRC would hold the funds and
would be entitled to invest the funds in accordance with HBRC’s
investment policy. However this is a matter for further discussion with the
Joint Committee.
48. The Holding
Council’s Investment Policy will be an attachment to this Deed. The funds
must be held in a separate account on trust for all three funding Councils.
49. Any losses (not due to
breach, fraud or wilful default by Holding Council) would be met as to 1/3 each
by each of the three funding Councils.
50. The percentages collected
for each Council are to be inserted following further discussion. This
includes the total to be collected and will equate to $XX per ratepayer in
Napier/Hastings based on 55,000 ratepayers for the first year (this may change
in subsequent years if the number of ratepayers changes).
51. The $XX per ratepayers for
the first three years is still to be determined. Confirming where it is the
same fixed rate for all three years or a step up increase each year will
indicate that we are serious about doing something.
52. The financial commitment
is proposed to be confirmed for the first three years only – thereafter
the three Partner Councils are to review whether they continue with this model.
53. If/when debt funding is
obtained, that would also be paid into the same contributory fund
account. Note: if that occurs then it is likely that all three Funding
Councils would need to be the borrower for that debt funding.
54. Also, when private benefit
funding is rated and received this too will be deposited into this fund.
55. This fund will hold all
the income and pay out all the expenses related to Strategy Implementation.
Allocation of the Funds
56. When it comes to
allocating the funds Clause 3.3 of the draft Deed sets out a suggested process
for how this could work being:
56.1. TAG to make a proposal
to the Joint Committee
56.2. Joint Committee to
decide if proposal is a public good and if it agrees with the proposal
56.3. If so, Joint Committee
refers proposal to the three funding Councils for their approval
56.4. If not, Joint Committee
can amend proposal or reject it. Amendments can be made either in
consultation with TAG or not – this provides flexibility to the Joint
Committee depending on what the objectionable aspect is
56.5. If the three funding
Councils agree with the proposal then the Joint Committee can authorise
specified nominated signatories to give the holding party (currently proposed
as HBRC) notice to release funds
56.6. If any of the three
funding Councils do not agree with the proposal then it would be vetoed until
either it was rejected by the Joint Committee or amended so that all three
funding Councils agree with the proposal.
57. Funds can only be paid out
on either written instruction signed by the Nominated Signatories (suggested
three Joint Committee members or designated council representative appointed by
each funding Council) or as provided in the Deed.
58. It is intended that the
contributory fund covers any investment costs incurred as well as the deduction
of any tax or bank fees or other charges on the account.
59. It is not intended that
the holding Council would be paid any fees for holding the funds but it would
be entitled to deduct third party charges or fees for holding the funds and/or
investing.
60. However, once physical
intervention starts and the fund is used as an operating fund the intention
would be to pay the holding council an annual administration fee as agreed by
the Joint Committee.
|
Recommendations
That the Clifton to Tangoio Coastal
Hazards Strategy Joint Committee:
1. Receives and notes the “Contributory Fund”
report;
2. Recommend to Hawke’s Bay Regional Council, Napier City
Council, and Hastings District Council that a Coastal Contributory Fund be
established.
3. Recommend to Hawke’s Bay Regional Council, Napier City
Council, and Hastings District Council that Hawke’s Bay Regional
Council be the Council that administers the Fund on behalf of Hawke’s
Bay Regional Council, Napier City Council and Hastings District Council.
4. Recommend to Hawke’s Bay Regional Council, Napier City
Council, and Hastings District Council that they all begin rating towards the
future cost coastal intervention works in the 2021/22 financial year at the
rate of $15.00 per ratepayer, with amount to be reviewed annually thereafter.
5. Endorse the Contributory Fund Rules Deed in principle
acknowledging it is an early draft.
|
Authored by:
|
Trudy
Kilkolly
Principal Accountant Rates and Revenue
|
Brent
Chamberlain
Manager Strategic Finance
|
Approved by:
|
Chris
Dolley
Group Manager Asset Management
|
|
Attachment/s
|
⇩1
|
Coastal
Contributory Fund Rules Deed - Draft
|
|
|
Clifton
to Tangoio Coastal Hazards Strategy Joint Committee
Friday 31 May 2019
Subject: Community Consultation
– options and risks around LTP alignment
Reason for Report
1. This report has been prepared in response to a request from the
Joint Committee for the Technical Advisory Group (TAG) to consider risks
associated with commencing community consultation on the Clifton to Tangoio
Coastal Hazards Strategy (the Strategy) at the same time as Councils commence
consultation on their respective Long Term Plans (LTP).
Background
2. At the last meeting of the Joint Committee on 18 March 2019, the
Project Manger reported that 12 months had been added to the project timeline
to provide additional time for the Design Workstream to complete their work.
This additional time is required to account for the complexity of tasks in this
workstream and the resources available to complete them.
3. A consequence of the amended timeframes is that public consultation
on the Strategy under the Local Government Act (LGA) has been delayed from the
first quarter of 2020 to the first quarter of 2021. This means that,
rather than commence as a separate item under a special consultative process,
consultation on Strategy implementation will coincide with public consultation
on the next review of Council Long Term Plans.
4. The Joint Committee noted their concerns with this alignment, given
the volume of information that will be put before the community for feedback at
one time. It was felt that this may lead to consultation fatigue /
overload. The Joint Committee requested that TAG consider these risks and
report back to the next meeting.
Discussion
5. As previously reported to the Joint Committee, Stage 4 of the
Strategy is being developed in 3 phases:
5.1. Phase 1: Pathway Concept Development, Testing and Planning;
5.2. Phase 2: Community Consultation and Approvals; and
5.3. Phase 3: Pathway Implementation Projects (multiple).
6. TAG are currently working on Phase 1, which seeks to refine, test
and develop to a next level of detail the recommended pathways developed by the
Assessment Panels in Stage 3; this is essentially the implementation plan for
the concepts developed by the Panels.
7. TAG have established 5 interrelated workstreams (Design, Funding,
Governance, Regulatory and Triggers) to complete the work required in Phase 1.
8. The full package of detailed information developed in Phase 1,
including concept plans, costs and funding policies, requires full consultation
with all members of the Napier and Hastings communities.
9. Having considered the risks noted by the Joint Committee with
aligning this Strategy consultation with consultation on Council LTPs, TAG have
identified 3 options for Joint Committee consideration. These options are
presented and assessed below.
|
Option
|
Description
|
Strategy Consultation Commences
|
Pros
|
Cons
|
|
Aligned consultation
|
Strategy consultation commences with and as part of
Council consultation on LTPs.
|
Early 2021
|
· Efficient for Councils with all major consultation activity occurring
through one combined process
· Avoids further delays in Strategy implementation
|
· Consultation overload – significant volume of material for
community to consider at one time. Likely to affect ability to provide
meaningful input
|
|
Delayed consultation
|
Strategy consultation occurs as a separate LGA
special consultative process after 2021 LTP consultation is fully completed.
|
Late 2021
|
· Avoids consultation overload
· Reduces time pressures for TAG / Joint Committee
|
· Further delays Strategy implementation – loss of momentum and
risks failure to respond to Assessment Panel recommendations within
reasonable timeframe
|
|
Staged consultation
|
Strategy consultation is staged; initial concepts
(e.g. contributory fund) are tested with the community ahead of LTP
consultation in 2021 and remaining matters are consulted on as a separate LGA
special consultative process after 2021 LTP consultation is fully completed
|
Stage 1 – July / Aug 2020
Stage 2 – late 2021
|
· Breaks-up complex consultation process into more manageable parts
· Enables earlier community contact than other options – better
maintains momentum and engagement
· Allows outcome of Stage 1 consultation to be incorporated into 2021
LTP e.g. commencement of rating for contributory fund
· Timing also avoids overlaps with annual plan consultation.
|
· Ultimate outcome is still delayed until post 2021 LTP
|
10. Overall, TAG recommend the Staged Consultation approach.
11. A key
concern is to maintain momentum following the delivery of the Assessment
Panel’s recommendations. The staged approach strikes the best
balance, in TAG’s view, between maintaining momentum while avoiding risks
associated with shortening project timelines or combining with other significant
consultation processes.
12. If the
Joint Committee agree with this approach, TAG will develop some further detail
for Joint Committee review around the following points:
12.1. The
subject areas that can be developed for consultation to occur in July/August
2020;
12.2. How the
outcome of that consultation can be incorporated into 2021 LTP review process;
12.3. The
timing and detail of the full consultation process to occur post the 2021 LTP
review process; and
12.4. A
revised project plan to account for the staged consultation approach.
Comment on
Consultation Process
13. It is noted that, whether
staged or not, consultation on the proposed approach to implementing the
Strategy will be a significant undertaking on a scale not dissimilar to
triennial Council Long Term Plan consultation. As such, TAG are mindful
that the consultation process needs to be appropriately resourced and carefully
planned and executed.
14. For example, the
consultation document will need to traverse a broad range of complex material,
from coastal hazards risks to technical concept drawings and financial
models. A range of options (beyond those recommended by the Assessment
Panels) will also need to developed and presented for community feedback;
Councils cannot consult on only one option. Clearance from Audit NZ will
also be required before any consultation documentation can be distributed
15. Following notification,
the consultation document will likely attract significant public interest and
potentially high numbers of submissions, given the subject matter and level of
Council expenditure proposed. This means a hearings process, and
potential opposition to the proposal.
16. With these aspects of the
consultation process in mind, and following feedback from the Joint Committee
on the options discussed above, TAG will develop a Consultation Plan to map out
the consultation process and associated requirements. A draft plan will
be presented to the Joint Committee for review and approval.
|
Recommendation
That the Clifton to Tangoio Coastal
Hazards Strategy Joint Committee receives and notes the “Community
Consultation – Options and Risks around LTP Alignment”
report.
|
Authored by:
|
Simon Bendall
Project Manager
|
|
Approved by:
|
Chris
Dolley
Group Manager Asset Management
|
|
Attachment/s
There are no
attachments for this report.
