Late Agenda of Corporate and Strategic Committee

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 02 September 2020

Subject: 2019-20 Annual Interim Results and Carry Forwards for 2020-21

Reason for Report

1. This item provides the Corporate and Strategic Committee with interim financial results for the 2019-20 financial year to 30 June 2020, prior to audit, and requests to carry forward expenditure budget from 2019-20 to 2020-21.

Officers’ Recommendations

2. Council officers recommend that the Committee receives the interim financial results and recommends to Council the approval of the budget allocations for carry forward to the 2020-21 financial year as proposed.

Executive Summary

3. Operating surplus is $44.6m, up from $3m in prior year but $43.5m below budget as a result of stranded Napier Port IPO funds retained within HBRIC.

4. Excluding the one-off Port IPO dividend delivers a $0.6m surplus for the year against a budget surplus of $7m (excluding the budgeted one-off Port IPO dividend).

5. The impact of the pandemic on the financial markets and subsequent investment returns reduced actual investment income to $1m, $6m short of an expected $7m from managed funds and other financial deposits.

6. The pandemic delayed various projects and increased some costs particularly those relating to Emergency Management to support Council’s pandemic response.

7. The annual revaluation of the Napier and Wellington investment property portfolios provided a further $11.5m of unrealised revaluation gains towards the operating surplus.

8. Total Other Comprehensive Revenue is $129.6m, up from $67m in prior year and above budget by $125m, mostly due to revaluation of HBRIC/Napier Port.

9. On the balance sheet, the main movements reflect the revaluations and the Port/HBRIC transactions with non-current borrowings increasing by $14m to reflect the loan from HBRIC to the Council ($16m loan increase offset by debt repayments through the year).

10. From the cost centre perspective, direct employee costs were up on budget overall by $500k (2%) this is due to the additional headcount and the outcome of the review of the remuneration system to better align to market, address historic under-remuneration of some roles and the introduction of a formal performance pay mechanism, which cost around 4% of salary compared to the 2% budgeted for increases.

11. External costs were over budget by $1.8m (29%). Specifically, general overheads (including accommodation and IT infrastructure) was $1.25m (34%) overspent and the support services cost centres were $395k (45%) overspent.

12. The net funding requirement for 2019-20 for Operating and Capital is over budget by $0.8m (3.5%). Asset Management was $3m underspent mainly offset by the overspending in Integrated Catchment Management (ICM) ($1.429m), Consents and Compliance ($1.458m), Governance ($869k), and Emergency Management ($467k).

	Net Funding Requirement
Group of Activities	Actual	Budget	Variance $	Variance %
Strategic Planning	$2.246m	$2.619m	$0.373m	86%
Asset Management	$3.498m	$6.577m	$3.079m	53%
ICM	$11.337m	$9.908m	$(1.429m)	114%
Consents & Compliance	$3.426m	$1.968m	$(1.458m)	174%
Emergency Management	$0.605m	$0.138m	$(0.467m)	438%
Transport	$0.249m	$0.204m	$(0.045m)	122%
Governance & Community Engagement	$3.189m	$2.320m	$(0.869m)	137%
Total	$24.55m	$23.734m	$(0.816m)	103.5%

13. Capital expenditure across the Groups of Activities was $3m (18%) below budget and asset purchases (new vehicles, computers, furniture, etc) was $1.6m (39%) below budget.

14. Group Managers have requested to carry forward $1.36m of budgeted operating expenditure to the 2020-21 financial year and a further $9.64m of budgeted capital expenditure.

Discussion

15. The main driver for the financial surplus for 2019-20 is the IPO of Napier Port with the sale of 45% of the group’s holdings in the port generating $107m in one-off revenue for the group. The net proceeds from the sale exceeded expectations by $24m.

15.1. The 2019-20 budget for HBRC was based on all proceeds from the Port IPO being available to HBRC but tax implications have resulted in a split with $63m remaining with HBRIC.

15.2. $44m of the IPO receipts reverted to HBRC with all receipts being invested in managed funds. Prior to year-end, an asset/loan swap between the Council and HBRIC placed a further $16m of managed funds under direct Council control.

16. Expected dividends received from HBRIC were down from $10m to $2.5m due to deferral of the anticipated interim Napier Port dividend. The Port dividend is based on free cash flow which has been affected by the uncertain trading conditions and the Port commencing work on the new wharf.

17. Expected capital growth, dividends and interest from the managed funds was significantly impacted by the financial market and share price fluctuations but recovered at the end of the year resulting in small growth for the year of 1%.

18. The increase in Total Other Comprehensive Revenue is due to the:

18.1. Revaluation of HBRIC based on the value of its Port shareholdings resulting in an increase of $117m

18.2. Revaluation increases in carbon credits of $1.2m

18.3. Unrealized growth in the managed funds of $1.4m

19. Operating expenditure was up $6.7m from prior year and $3m (9%) over budget. This relates to $2.25m of cost centre overspend, depreciation $600k above budget and fair value losses on some of the forestry offset by reduced finance costs.

20. The general overhead cost centres were overspent by $1.25m (34%) compared to budget:

21. Audit fees were particularly high due to the inclusion of cost over-runs for the 2018-19 audit and fully accruing for the 2019-20 audit fee in the 2019-20 year.

22. The support cost centres were overspent by $643k (10%) compared to budget on staff costs and $395k (45%) overspent on external costs. The external costs below have been adjusted to exclude overhead allocations.

23. Across all activity cost centres, the results were close to budget with an overspending in external expense $192k (11%) offset by an underspend on staff costs of $131k (1%) when allocated overheads are excluded.

24. The User Charges and cost recovery Operating revenue across the groups of activities showed significant variance but was $1.1m (11%) more than budget. The increased revenue for Emergency Management is due to the expected cost recoveries from government for the welfare costs incurred, ICM obtained un-budgeted external funding for two projects (SkyTEM, LiDAR) that had been included in the operating budget, and the under budget revenue of Consents and Compliance was comparable to prior year. The Consents and Compliance result is an expected outcome based on the LTP cost recovery expectations for S36 charges.

25. Operating expenditure across all activities for each group of activities was within 10% of budget except for Emergency Management which was 100% over budget due to the pandemic response costs.

26. Strategic Planning underspent operating expenditure over the year by $187k (4%) due to delays in projects 191 Regional Coastal Plan and 192 Strategy and Planning offset by an overspend in 196 Statutory Advocacy.

26.1. Regional Coastal Plan work was delayed due to the team being under-staffed and staff being prioritised to other resource management planning projects.

26.2. Strategy and Planning work was delayed due to TANK notification and an extended submission period resulted in the budget being off-track and associated costs (communications, IT, staff input etc) will be pushed into 2020/21. Hearings have also been delayed in TANK (RPC decision making and Covid-19) and OWB (6-month consultation) resulting in significant costs rollover to 2020/21 (est. $800,000). A new submissions database was purchased to support accurate management of public submissions on plans. The Senior planner vacancy was not filled until April. The Covid-19 pandemic response delayed this workstream as all members of the Planning Team were deployed to assist for some time in the CDEM Group Covid-19/drought response event.

26.3. Statutory Advocacy work was overspent due to additional external expenses that are primarily due to the commissioning of evidence from HBRC's experts on Environment Court proceedings for the Ngaruroro/Clive Rivers Water Conservation Order (WCO), plus associated legal services in same proceedings. Environment Court WCO proceedings have encountered delays due to Covid-19. Legal expenses were also incurred for the unbudgeted work to prepare evidence for first tranche of High Court proceedings on Marine & Coastal Area (Takutai Moana) Act applications.

27. Governance and Community Engagement was 3% overspent in operating expenditure where a $300k underspend in Community Partnerships was offset by a $400k overspend in 840 Community Representation. The overspend was mainly attributed to additional Executive, Governance and Project Management resources required to support meetings and Long Term/Annual plan development processes.

28. Asset Management had a $600k (5%) underspend in operating expenditure and $2.7m (67%) underspend on capital works. The capital expenditure shortfall included:

28.1. $800k underspend on the planned Clive River dredging due to delays in land purchase.

28.2. $700k on HPFCS Flood and River Control as work has been focused on hydrological modelling, planning and communication (internal staff or consultant). No physical work or land acquisition has been progressed any further.

29. ICM was close to budget overall (1% overspend) in operating expenditure but had a $3.9m overspend on capital expenditure.

30. There were variances across the ICM operating projects but this reflected work carried out under complementary projects with costs attributed to one project but budgeted under the alternative project (e.g. 312 Regional Surface Water Ecology underspent and 315 Surface Water Quality being overspent by a similar margin).

31. The ICM capital expenditure did not include the SkyTEM and LiDAR work which had been classified as operating expenditure in the LTP and annual plan. The SkyTEM and LiDAR capital costs have effectively been offset by external funding.

32. The Sustainable homes programme has been very successful leading to a $2.4m overspend compared to budget. The cost of installation (and the debt repayments by the rate payers) is classified as capital expenditure due to the loan asset created as a result. The additional expenditure will be recouped over the next 10 years through the voluntary targeted rate applied in each case.

33. Overall Consents and Compliance was overspent by $350k (7%) on expenditure and income was $1.1m below budget due to an under recovery in fees and charges of $300k for 402 Resource Consent Processing and $800k in 450 Compliance programmes.

34. Emergency Management was overspent by $2.4m (100%) due to the pandemic and drought responses. This was partially offset by an extra $1.5m in revenue being mainly cost recovery from the government.

35. Transport overall was overspent by $280k (5%) predominantly on 790 Subsidised Transport where the cost of the bus contract has increased substantially due to increased indexation rates and payment of drivers for a ten-minute break every 2 hours worsened by lower revenues through declining patronage.

36. The systems integration projects were underspent by $1.9m. This was due to a lack of organisational readiness (vacancies in Finance and People & Capability delaying the start of the Finance and HR implementations), a focus on using existing capabilities to deliver solutions to ICM and other teams, and re-prioritising the work programme based on risk resulting in the work on FUSE, Telephony and customer experience solutions being prioritised.

Carry Forward Requests

37. Carry Forwards is a common practice within Councils and allows for a number of functions to occur. These include the funding of final costs of projects and contracts that were unable to be completed by the financial year end, carry forward of rates to smooth peaks and troughs, carry forward of external income received for specific projects. Officers have compared the carry forwards against the 2020-21 budgets to ensure they are required.

38. The funding types are categorised below

38.1. General funding is from General Rates which includes investment income

38.2. Reserve funding is from target rates that have flowed through to Reserves and funding from Reserves

38.3. External is external funding received for specific projects

38.4. Debt is for debt funding not drawn down this year and is covered by interest and principal repayments that are already included in the following years budgets.

Operating Expenditure Carry Forward Requests

Capital Expenditure Carry Forward Requests

191 Operating - Regional Coastal Plan

39. Strategic Planning seeks a carry forward of $85,140 to fund project 194 Response to Climate Change which will require significant funds in response to Councils' Declaration of Climate Emergency and the Climate. Smart. Recovery action plan in response to Covid-19. This funding would enable a regional greenhouse gas inventory to be undertaken to inform policy and programme design.

39.1. Financial Assessment: Project 191 was underspent by $85,140 in general funding which could be carried forward. However, Strategic Planning are requesting total carry forward of $544,275 across their projects against a general funding underspend of $373,695 due to the overspend for Project 196 Statutory Advocacy.

39.2. Recommendation: That Council approves the carry forward of $85,410 in general funding.

192 Operating - Strategy & Planning

40. Strategic Planning seeks a carry forward of $459,135 to progress the OWB and TANK hearings that have been delayed and will fall into the new financial year. The hearings panels costs are estimated at approximately $180,000 for OWB and $600,000 for TANK - this excludes other associated costs e.g. mediation, admin, media etc. or any legal fees. There is a full work programme ahead driven by statutory timeframes/requirements - including a full plan review of the RRMP and RCEP and delivering freshwater catchment plans to meet statutory requirements under the NPSFM. Whilst there is still one vacancy, we are on track to undertake this work (due to the senior planner position being filled) and will require a number of external inputs to support this.

40.1. Financial Assessment: Project 192 was underspent by $459,135 in general funding which could be carried forward. However, Strategic Planning are requesting total carry forward of $544,275 across their projects against a general funding underspend of $373,695 due to the overspend for Project 196 Statutory Advocacy.

40.2. Recommendation: That Council approves the carry forward of $459,135 in general funding.

240 Operating - Makara Flood Control Scheme

41. Asset Management seeks a carry forward of $22,500 as the surveying of the dam pipes are overdue and funds are required to complete this work in the new financial year.

41.1. Financial Assessment: There is no impact to general funding. The project underspent its scheme reserve funding by $20,046 and, as at 30/6/2020, the scheme reserve balance will be $37,593 which can be used to cover additional funding required.

41.2. Recommendation: That Council approves the carry forward of the budgeted expenditure.

291 Operating - HPFCS - Napier/Meeanee/Puketapu

42. Asset Management seeks a carry forward of $15,000 of general rate funded expenditure and $135,000 of targeted rate funded expenditure to support the Ahuriri estuary joint working group with Napier City Council.

42.1. Financial Assessment: Project 291 had an underspend of $27,670 in general funding and underspent from targeted rates by $133,731. The targeted rate underspend of $133,731 will be automatically added to the scheme reserve and carried forward to 20/21.

42.2. Recommendation: That Council approves the carry forward of $15,000 in general funding.

292 Operating - HPFCS - Brookfields/Awatoto

43. Asset Management seeks a carry forward of $24,300 to be carried forward for Brookfields Pump Station SCADA work.

43.1. Financial Assessment: No impact to General Funding. Project 292 had an underspend of $29,409 in targeted rates funded expenditure in 19/20 which will be automatically rolled forward into the reserves.

43.2. Recommendation: That Council approves the carry forward of the budgeted expenditure.

306 Operating – Erosion Control Scheme Booster

44. ICM seeks a carry forward of $94,332. This funding is for the purchase of ISCO Sediment monitors and was funded by the Hill Country Erosion Fund (MPI). The funds have been received but purchase and installation will continue into 20/21.

44.1. Financial Assessment: Project 306 had an underspend of $94,332 reflecting the un-spent external funding received.

44.2. Recommendation: That Council approves the carry forward of $94,332 in external funding.

312 Operating - Regional Surface Water Ecology Research

45. ICM seeks a carry forward of $221,000 comprising $25k of general rate funded and $196k of externally funded expenditure. The $25k of general funding relates to work on faecal source tracking ($7.5K), Whakaki site repairs ($7.5K) and eDNA investigation ($10K) that could not be undertaken this year due to delays and missed fieldtrip windows from combined effects of drought and lockdown. If we can't carry funding forward, we would need to forgo this work, or reduce other monitoring work we do next financial year in order to recover the cost. In addition, $196,000 was provided by Fonterra as sponsorship of wetland development work that has not yet been completed. This funding should to be carried forward, to satisfy our obligation to our external partner.

45.1. Financial Assessment: Project 312 had an underspend of $318,975 in general funding that could be carried forward. Consideration should be given to the total under spend of general funding by ICM on operational expenditure of $152,981. Carrying forward the $196,000 of Fonterra funding will change the ICM result to an overspend.

45.2. Recommendation: That Council approves the carry forward of $25,000 in general funding and $196,000 of external funding.

351 Operating - Te Waiu o Tutira

46. ICM seeks a carry forward of $60,000. Note that Council is in Deed with MfE for this project, which is part of the Freshwater Improvement Fund project. Per this Deed, we have committed a total of $1.7m over the life of this 5 year project. If we can't carry this funding forward, we will need to find funds from future budgets to meet our agreement, and to ensure we can still deliver this project.

46.1. Financial Assessment: Project 351 had an underspend of $359,936 in general funding that could be carried forward. Consideration should be given to the overall under spend of general funding by ICM on operational expenditure of $152,981.

46.2. Recommendation: That Council approves the carry forward of $60,000 in general funding.

354 Operating - Whakaki Lake Protection & Enhancement

47. ICM seeks a carry forward of $54,000. Note that Council is in Deed with MfE for this project, which is part of the Freshwater Improvement Fund project. Per this Deed, we have committed a total of $1.6m over the life of this 5 year project. If we can't carry this funding forward, we will need to find funds from future budgets to meet our agreement, and to ensure we can still deliver this project.

47.1. Financial Assessment: Project 354 had an underspend of $54,579 in general funding that could be carried forward. Consideration should be given to the overall under spend of general funding by ICM on operational expenditure of $152,981.

47.2. Recommendation: That Council approves the carry forward of $54,000 in general funding.

662 Operating - Biodiversity

48. ICM seeks to carry forward the $40k contribution by Fonterra towards the restoration of Pigsty, a regionally significant wetland and Ecosystem Prioritisation site. Fencing was not able to be undertaken until the 20/21 financial year so the funds received should be carried forward, to fulfil the obligation to our external partner.

48.1. Financial Assessment: Project 662 had an underspend of $35,500 and carrying forward the external funding provided by Fonterra will create an overspend.

48.2. Recommendation: That Council approves the carry forward of $40,000 of external funding.

798 Operating - Regional Cycling

49. Transport seeks a carry forward of $60,000 for safety improvements to the Waimarama Road cycle-trail.

49.1. Financial Assessment: Project 798 was overspent by $184 and there is no general funding available to carry forward.

49.2. Recommendation: That Council approves the carry forward of $60,000 in general funding.

786 Operating – Regional Road Safety

50. Transport has received $22,000 from local councils for driver licensing and request the funds to be carried forward to the 2020-21 year.

50.1. Financial Assessment: Project 786 was overspent by $40,258 and there is no general funding available to carry forward.

50.2. Recommendation: That Council approves the carry forward of $22,000 of external funding.

874 Operating - Iwi Engagement

51. Governance seeks a carry forward of $70,000 to resource both the RPC and MPC committees.

51.1. Financial Assessment: Project 874 had an underspend of $152,567 in general funding that could be carried forward. The operating over spend on Governance for the year of $150k in general funding should be taken into consideration.

51.2. Recommendation: That Council approves the carry forward of $70,000 in general funding.

265 Capital - Upper Tukituki Scheme

52. Asset Management seeks a carry forward of $76,000 for erosion work on SH50 plus pole planting comprising $13,300 of general funding and 62,700 in targeted rate funding.

52.1. Financial Assessment: Project 265 underspent its general funding allocation by $11,650 and underspent the targeted rates funding by $55,000. The targeted rates funding will be automatically carried forward through the scheme reserve.

52.2. Recommendation: That Council approves the carry forward of $13,300 in general funding.

266 Renewal – Opoho Scheme

53. Asset Management seeks a carry forward of $56,000 to implement the results of the pump station review.

53.1. Financial Assessment: No impact to general funding as this project is fully funded from the scheme reserve.

53.2. Recommendation: That Council approves the carry forward of the budgeted expenditure.

286 Renewal – HPFCS - Flood & River Control

54. Asset Management seeks a carry forward of $657,000 to complete the Clive River dredging. This project has been delayed while finding suitable land to purchase for dumping.

54.1. Financial Assessment: No impact to general funding as this project is fully funded from the scheme reserve.

54.2. Recommendation: That Council approves the carry forward of the budgeted expenditure.

287 Capital - HPFCS - Flood & River Control

55. Asset Management seeks a carry forward of $800,000 comprising $240k of general funding and $560k of targeted rates funding, for:

55.1. $200k is required for Hawea park which includes building a new carpark, channel work, landscaping, potential new bridge, and potential wetland work.

55.2. $600k is required for construction at Maraekakaho which is beginning at the start of the financial year.

55.3. Financial Assessment: Project 287 underspent its general funding allocation by $240,300 and transferred an additional $516,000 into the scheme reserve. The current scheme reserve that includes projects 286 to 288 has a balance of $975,918 at year end and could be used to cover additional costs in 2020-21.

55.4. Recommendation: That Council approves the carry forward of $240,000 in general funding.

291 Capital - HPFCS - Napier/Meeanee/Puketapu

56. Asset Management seeks a carry forward of $110,000 for Capital Works - Urban Water Quality programme - Bores, Wetlands, Planting. The request comprises $11k in general rates funding and $99k in targeted rates funding.

56.1. Financial Assessment: Project 291 had an underspend of $14,064 in general funding that could be carried forward and the project underspent the targeted rates by $126,000. The targeted funding will be automatically carried forward. Additionally, the associated scheme has a total reserve of $815k at year end which could be drawn upon.

56.2. Recommendation: That Council approves the carry forward of $11,000 in general funding.

292 Capital - HPFCS - Brookfields/Awatoto

57. Asset Management seeks a carry forward of $12,000 for SCADA work - NEO group making recommendations on what assets are required for scheme. The request comprises $1,200 in general funding and $10,800 in targeted rates funding.

57.1. Financial Assessment: Project 292 had an underspend of $1,000 in general funding that could be carried forward and underspent on the targeted rates funding by $8,800. Additionally, the associated scheme has a total reserve of $307k which could be drawn upon.

57.2. Recommendation: That Council approves the carry forward of $1,200 in general funding.

295 Capital - HPFCS – Haumoana

58. Asset Management seeks a carry forward of $55,000 for pump replacement comprising $5,500 in general funding and $49,500 in targeted rates funding.

58.1. Financial Assessment: Project 295 had an underspend of $6,600 in general funding that could be carried forward and $59,400 was underspent from the targeted rates funding. Additionally, the associated scheme has a total reserve of $225k which could be drawn upon.

58.2. Recommendation: That Council approves the carry forward of $5,5000 in general funding.

362 Capital - Regional Park Network

59. Asset Management seeks a carry forward of $158,000 for the potential Te Rongo park that we may inherit and the initial capital works that will be required. The request comprises $15,800 in general funding, $71,100 in funding from the Sale of Land reserve/Long term investment fund and $71,100 in debt funding.

59.1. Financial Assessment: Project 362 general funding expenditure was on budget with nothing to carry forward, debt funding for the year was $75k under budget and budgeted funding from the sale of land reserve was $30k over budget.

59.2. Recommendation: That Council approves the carry forward of $15,800 in general funding and $71,100 of planned debt funding.

333 Capital – SkyTEM

60. ICM seeks to carry forward $1,231,859 to complete the SkyTEM project. The PGF co-funding is front-loaded on the project and the budget needs to be carried forward to reflect the funding split.

60.1. Financial Assessment: No impact to general funding in 2020-21 as the project is fully debt funded and the debt repayments have been included in future budgets.

60.2. Recommendation: That Council approves the carry forward of planned debt funding.

334 Capital – LiDAR

61. ICM seeks to carry forward $589,506. This comprises $196,506 in external funding that is unspent this year due to Covid-19 impacted project milestones and $389,549 in deferred debt funding.

61.1. Financial Assessment: No impact to general funding in 2020-21 as the project is fully funded from debt and external funding and the debt repayments have been included in future budgets.

61.2. Recommendation: That Council approves the carry forward of planned debt funding.

995 Capital – Water Security Investment

62. Strategic Planning seeks to carry forward $2,692,000. The project is joint funded through the Provincial Growth Fund.

62.1. Financial Assessment: No impact to general funding in 2020-21 as the Council’s portion of the project funding is from the Sale of Land/Long-Term Investment Fund.

62.2. Recommendation: That Council approves the carry forward of the budgeted expenditure.

913 Capital – Systems Integration Projects

63. IT seeks a carry forward of $1,877,000 to complete the FUSE, telephony and customer experience solutions and fund the updated work programme.

63.1. Financial Assessment: No impact to general funding in 20-21. The systems integration project is mainly debt funded with additional funding from the asset replacement reserve. The budgeted debt drawdown of $1.85m in 19/20 has not occurred and the repayments are included in the approved annual plan 20/21 and LTP. No financial impact to carry forward.

63.2. Recommendation: That Council approves the carry forward of planned debt funding.

IT asset purchases budget

64. IT seeks a carry forward of $287,000 for delayed rural aerial imagery work and the GIS Infrastructure improvements.

64.1. Financial Assessment: No impact to general funding in 20-21. IT asset purchases are funded from the asset replacement reserve.

64.2. Recommendation: That Council approves the carry forward of the budgeted expenditure.

ICM Science Equipment Budget

65. ICM seeks a carry forward of $1,041,046 for the following purchases:

65.1. Monitoring Drilling Equipment 18/19 & 19/20 - $369,549

65.2. Mt Misery Repeater - $50,000

65.3. Ruataniwha Ground Water Modelling - $282,521

65.4. Various Science Equipment approved in the 19/20 business case - $310,000

65.5. Ground Water Telemetry & Waikopiro buoy - $28,976

65.6. Financial Assessment: No impact to general funding in 20-21. The science budget is funded by a combination of the asset replacement reserve, internal and external debt. The loan repayments have already been included in the Annual Plan 20/21.

65.7. Recommendation: That Council approves the carry forward of the budgeted expenditure and associated planned debt funding.

Options Assessment

66. Option 1: Council approves the carry forwards from 2019-20 to 2020-21 to enable all the projects to be completed, service levels to be achieved, commitments to external organisations to be fulfilled and the future work to be funded.

67. Option 2: Council approves the carry forward of all non-general funded expenditure (i.e. targeted rate, reserve, debt and externally funded expenditure) with the general funded carry forward expenditure met through additional debt funding in 2020-21.

68. Option 3: Council does not approve the carry forwards and provide officers with guidance on which carry forwards, if any, should be approved.

Significance and Engagement Policy Assessment

69. In accordance with the Council’s Significant and Engagement policy, this matter has been assessed as of some importance. The projects to be completed and the funding requirements for future work affects the affordability of rates for future ratepayers.

Financial and Resource Implications

70. The interim financial results indicate that HBRC has overspent its general funding requirement by $0.8m.

71. To carry forward an additional $1.1m in general funding from 2019-20 to 2020-21 will increase the overspend in 2019-20 to $1.9m. This would be funded from the general operating reserve which has been accumulating from previous underspends and revaluations.

72. HBRC has included within the Annual Plan 20/21 the decision to debt fund any shortfall in revenue to meet the agreed budget. This results in the capability to meet any overspend through additional debt funding rather than through reducing reserves.

73. Council has noted its intention to minimise any borrowing requirement for the 2020-21 financial year.

74. Reserve and debt funded expenditure can be carried forward with no impact to general funding as this has been included in the LTP and Annual Plan.

75. Funding from targeted rates will be automatically carried forward through the associated reserve to enable the funds to be drawn down to complete the work in subsequent years.

76. External funding may be used to meet a shortfall in the current year but general funding in 2020-21 will be required to meet the HBRC’s obligations to the provider to complete the work or repay the funds.

Decision Making Process

77. Council and its committees are 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:

77.1. The decision does not significantly alter the service provision or affect a strategic asset, nor is it inconsistent with an existing policy or plan.

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

77.3. The decision is not significant under the criteria contained in Council’s adopted Significance and Engagement Policy.

77.4. The persons affected by this decision are ratepayers of Council.

77.5. 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 considers the “2019-20 Annual Interim Results and Carry Forwards for 2020-21” staff report.

2. The Corporate and Strategic Committee recommends that Hawke’s Bay Regional 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 or persons likely to have an interest in the decision.

2.2. Approves the carry forward of all expenditure requests from the 2019-20 to the 2020-21 budget; being:

Operating Expenditure Carry Forward

Capital Expenditure Carry Forward

Authored by:

Tim Chaplin

Senior Group Accountant

Ross Franklin

Contractor, Finance

Geoff Howes

Treasury & Funding Accountant

Approved by:

Bronda Smith