Agenda of Corporate and Strategic Committee - Wednesday, 17 November 2021

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

17 November 2021

Subject: Hawke's Bay Economic Development Review

Reason for Report

1. This report presents the findings and recommendations of the Stage 2 Review of Investment in Business & Industry Support across the Hawke’s Bay Region undertaken by Gus Charteris Consulting for the five Hawke’s Bay councils.

2. This report also presents subsequent joint ‘next steps’ recommendations with respect to the preferred option, structure and funding.

3. A briefing on the draft report was provided to Council in a workshop on 27 October 2021. This is the first time the public have received the information, therefore the key findings and recommendations have also been included in this report.

Officers’ Recommendations

4. Council officers recommend that the Committee notes and considers the findings of the review and recommends that Council support the establishment of an independent regional development entity in Hawke’s Bay.

5. Formal decisions of Council would be subject to the other four councils joint support and endorsement.

Executive Summary

6. In August 2020 the five Hawke’s Bay councils commissioned a review of business and industry support across the region.

7. The review presented a clear case for change – highlighting a range of inefficiencies and missed opportunities with current ratepayer-funded activities and services.

8. Councils endorsed participation in a second stage review process to further investigate recommendations and focus on what priority activities and services should be funded, what the best option for delivering this in Hawke’s Bay would be, and the required cost of investment.

9. Key recommendations from the second stage review (based on engagement with iwi/hapū and business) were:

9.1. Focus ratepayer investment in areas where there are gaps or at a ‘macro’ level (e.g. working with groups of companies or sectors and developing regional strategies to help marshal and direct scarce resources to areas of agreed regional priority)

9.2. Support other organisations to lead on ‘micro’ level activities and services (given this space is crowded and competitive).

9.3. Support a ‘by Māori for Māori’ approach to regional economic development given this is an area where Hawke’s Bay has not delivered on well in the past.

9.4. Continue to support the HB Business Hub and Matariki Regional Development Strategy.

9.5. Develop programmes and an area of focus for industry and sector development; investment and talent attraction; HB brand strategy and activation; coordination of skills and employment initiatives.

9.6. Consider funding the establishment of a regional development entity with the appropriate scale and mandate.

9.7. If the preferred option is not accepted, at minimum consider funding the establishment of a regional economic development team that would be hosted by the councils.

10. Prior to the second stage of the review being finalised, the key findings and recommendations were workshopped with all five councils, and feedback sought from iwi/hapū and business.

11. Based on the second stage review findings and feedback from councils, iwi/hapū and business - councils are jointly recommending the preferred option of establishing an independent regional development entity. This would take the form of a non-CCO and the governance structure would represent an equal co-governance model / tripartite partnership between business, iwi/hapū and local government.

12. This was the only fully supported option across councils, iwi/hapū and business.

13. Preference for this model over other options is based on the substantive and widespread view that if we are going to do this, we need to do it properly - and a minimum viable option would not deliver to meet the needs or potential of the Hawke’s Bay economy. It has also been based on the degree to which this option is most able to create an enduring platform that provides Hawke’s Bay with the appropriate scale and mandate to:

13.1. Better guide and direct activity to priority areas/issues

13.2. Support a culture of sharing, connection and collaboration, and

13.3. Support Hawke’s Bay to be greater than the sum of its parts (e.g. by presenting a strong and united voice and vision to external investors, talent and Central Government), and by helping to attracting the resources of others.

14. A similar paper and process is being presented to all five councils over the next four weeks.

Background /Discussion

15. In August 2020 the five Hawke’s Bay councils commissioned a review (Stage 1 Review) in business and industry support across the Hawke’s Bay region, stemming from a Local Government Act (2002) s.17A requirement to review the cost effectiveness of council arrangements for delivering services on a periodic basis.

16. Key reasoning for commissioning the review was the request for additional funding by Business Hawke’s Bay (BHB) – the region’s business development agency, and recognising the opportunities to improve regional coherence of economic development investments funded by ratepayers. Councils wanted a clearer picture of funding commitments to inform Long Term Plan processes starting from late 2020.

17. The focus of the Stage 1 Review was activities undertaken and services provided by BHB, Hawke’s Bay Tourism (HBTL) and individual councils. Insights developed in relation to Hawke’s Bay’s Regional Development Strategy (Matariki RDS) were also incorporated, however not reviewed in detail.

18. The Stage 1 Review presented a clear case for change - highlighting a range of inefficiencies and missed opportunities with current ratepayer-funded activities and services and found there was an opportunity to do something that better met the region’s needs and potential. The exception to this was HBTL, being widely supported by its main stakeholders and acknowledged to be doing a successful job in leveraging ratepayer investment into real value for the Hawke’s Bay economy.

19. During this review period BHB made the decision to wind down with formal closure taking effect on 30 June 2021.

20. Councils received and considered the Stage 1 Review in early 2021. Key recommendations included the establishment of a new regional economic development agency to lead non-tourism economic development activities, embedding a partnership with Māori, retaining the Hawke’s Bay Business Hub (Business Hub), investing in a clear impact framework for Matariki RDS and better understanding the impact of Great Things Grow Here (GTGH) in attracting investor/talent attention.

21. All councils endorsed participation in a second stage review process (Stage 2) to further investigate recommendations and explore options in relation to effective delivery of business and industry support for Hawke’s Bay.

22. As a result of BHB’s wind down councils also endorsed re-directing the joint economic development funding for a 12 month period to support the Business Hub remaining operational and continuation of two sector development initiatives (food & fibre and hi-tech & agri-tech) at a scaled back level. These activities were considered at minimum necessary to retain an important regional asset and momentum in two areas of economic development focus for the region while the Stage 2 Review progressed.

23. The Business Hub operations and staff and industry programme contractors were formally transitioned to Hawke’s Bay Regional Council (HBRC) oversight on 1 July 2021 on behalf of the five councils. This arrangement and associated operations/agreements are in place to 30 June 2022.

Discussion

Stage 2 Review - Process

24. The Stage 2 Review involved both engagement and desktop analysis, focusing on three key areas:

24.1. The priority activities/services for ratepayer investment

24.2. Options for the most effective way to deliver these for Hawke’s Bay

24.3. The estimated cost of investment.

25. Methodology continued the frameworks and approach used in Stage 1 – incorporating the needs of both current and future businesses facing the current Hawke’s Bay economy, but primarily focused on the appropriate role for local government investment. The rationale for support is based on this investment being focused to fill some sort of gap in provision of an activity or service (where there was a market failureto some degree), and/or seeking to add value that was additional to what could be achieved otherwise.

26. Engagement has focused on:

26.1. Hawke’s Bay iwi/hapū through Te Kāhui Ōhanga o Takitimu collective (TKO). TKO was formed to represent Māori economic interests in Hawke’s Bay and to help implement Matariki RDS

26.2. Hawke’s Bay businesses via a survey (see Annex C in the draft report and separate Annex D attachments) and a small number of group discussions

26.3. Leading providers or funders of support for small business in Hawke’s Bay, via small workshops.

27. Insights developed through this process have been used alongside the following sources of information:

27.1. The survey conducted as part of the first stage of the review

27.2. A survey Hastings District Council ran in mid-2020 on interest in, and the focus of, the Hastings Business Hub

27.3. Hawke’s Bay business and industry insights from COVID-19 resurgence check-in process led by Hawke’s Bay councils

27.4. Consultant’s own knowledge from working with a range of Hawke’s Bay companies, sector groups and iwi interests.

Stage 2 Review – Key Findings and Insights

28. The detailed review findings, and insights from engagement with iwi/hapū and wider businesses are detailed in the final report attached.

29. Summary insights from engagement with iwi/hapū are:

29.1. Delivering effectively for Māori will require a new approach or approaches.

29.2. Cultural differences, familiarity and trust will constrain the reach of mainstream providers and services. This means there needs to be more opportunity for Māori to inform, design, support and deliver activities and services.

29.3. Greater effort is required in helping whānau understand and navigate what is perceived as a cluttered and complex space. This requires effective regional networks and requires going to where Māori are, rather than expecting them to seek things out from central delivery points. Online is not enough.

29.4. Access to capital is more likely to constrain Māori business – both those starting out through to Post-Settlement Governance Entities (PSGEs).

29.5. Councils could use their procurement of services to more effectively support Māori business.

29.6. PSGEs are using their own procurement to support local and Māori capability. They see themselves as part of a social and economic eco-system and are building capability to provide wrap-around support for skill and business development.

30. Summary insights from engagement with business are:

30.1. There is no single business perspective. Different businesses will need different things based on their size and the sector in which they operate.

30.2. There are a wide range of views on the appropriate role of local government. Some think that local government should stick to infrastructure and getting the broad regulatory settings right and some believe councils can play a greater role in increasing funding for small business and/or sector-based support.

30.3. Smaller businesses are more likely to be looking for assistance with professional development and access to business support programmes. There are a range of existing barriers including awareness, cost, location, and cultural familiarity.

30.4. Beyond infrastructure and regulatory settings, larger businesses are likely to be looking for partnerships (with each other and with local government), to do things they might not be able to do alone. This is often because it requires decisions and/or investments in other areas that they do not have control over.

30.5. Bigger businesses and industry organisations are also more likely to be playing a role in helping to support the region’s strategic economic development priorities e.g. building on our regional strengths in food and the eco-system of sophisticated products and services that have grown to support this industry. This means they are more likely to want to understand how the region is setting and executing its regional economic development priorities and how they fit into the bigger picture.

30.6. Bigger businesses in Hawke’s Bay are frustrated that there is no ongoing and coordinated engagement, or clear point of contact/one unified voice on economic development issues. They are seeing opportunities that can only be taken forward as a region and there is a view that Hawke’s Bay is missing an opportunity to leverage our strengths and recover strongly from COVID-19.

30.7. There is acknowledgment that governance and organisational structures can either support or constrain collaboration and there is a view that Hawke’s Bay has not yet got this right.

30.8. There is a perception that there are still unhelpful and competitive behaviours in the system and that this is constraining more effective collaboration. As the 2020 Review found, this is feeding a perception in the business community that the economic development system in Hawke’s Bay is fragmented and not particularly transparent.

31. Summary findings for the priority activities/services for ratepayer investment are:

31.1. It is useful to think about funding for business and industry support in terms of more direct or ‘micro’ support (direct support for business e.g. training for business owners and employees), versus less direct or more ‘macro’ support for business (e.g. working with groups of companies or sectors and developing regional strategies to help marshal and direct scarce resources to areas of agreed regional priority).

31.2. The main gap in service delivery relates to more ‘macro’ support for business – broad types of activities include facilitation and connection, promotion, information provision and addressing collective action issues.

31.3. Given the existing providers of services to small to medium enterprises (SMEs) there is a less compelling case for local government investment in more ‘micro’ support for business. That said, engagement with providers and Central Government funders of these services note that demand is currently outstripping available supply of funded places. Additional funding could assist with this and involve partnerships between providers, iwi/hapū, and local and central government. Any local government funding assistance to provide these activities would want to target areas where there was a clear gap in service provision or the ability to add value.

31.4. One area that requires further consideration is support for start-ups. To be fully effective an economic development support system will have appropriate interventions along the spectrum of business needs from start-up through to mature. There appears to be unmet demand in the start-up area and a lack of funding to support existing providers of services. A regional economic development team or entity could help guide investment in this area i.e. develop the strategy in collaboration with partners, but outsource the delivery (with funding) to existing providers of services to SMEs.

32. Summary analysis for the most effective way to deliver these for Hawke’s Bay is:

32.1. The preferred regional economic development delivery platform for Hawke’s Bay is still a regional entity that has an appropriate mandate and appropriate resourcing. It can’t be set up to fail by not giving it a clear purpose and mandate and inadequate resources.

32.2. A regional entity with the appropriate scale and mandate could guide and direct activity to priority areas/issues; support a culture of sharing, connection and collaboration; and support Hawke’s Bay to be greater than the sum of its parts (e.g. by presenting a strong and united voice and vision to external investors, talent and Central Government; and by helping to attracting the resources of others).

32.3. This could take the form of an independent Trust, Incorporated Society or Company - or a Council Controlled Organisation (CCO). An independent form that is not a CCO is more likely to be accepted by iwi/hapū and wider business. Specialist legal and tax advice would be recommended before deciding the preferred legal form.

32.4. All structures would offer an opportunity to embed a tripartite governance partnership between local government, iwi/hapū, and wider business. An independent Board could be made up of 2 representatives from local government, iwi/hapū, and wider business respectively. An independent Chair could complete a 7-person Board.

32.5. This entity would need to be supported by an effective measurement and reporting framework which helps track the relationship between activities, outputs and outcomes i.e. whether ratepayers’ money is being invested and used effectively.

32.6. Hawke’s Bay may not be able to do this in one step. There is a legacy of mistrust that investment in regional economic development activities yield meaningful results and ratepayer funding is constrained. Trust may need to be earned and value delivered in order to motivate additional funding over time.

Stage 2 Review – Recommendations

33. The Stage 2 Review recommends that the priority activities/services for ratepayer investment should:

33.1. Focus in areas where there is a gap in provision of an activity or service. This will look like working with groups of companies or sectors and developing regional strategies to help marshal and direct scarce resources to areas of agreed regional priority.

33.2. Support other organisations to lead on support for SMEs and start-ups - this does not need to sit with a regional economic development entity. To assist with ‘lane clarity’ and to help support regional collaboration rather than competition, consideration should be given to supporting the HB Chamber of Commerce to take on the Regional Business Partner (RBP) contract. Separate funding could also be made available to an agreed Māori economic development nominee subject to developing an agreed approach and focus for the funding.

33.3. Prioritise the following activities/services:

33.3.1. HB Business Hub

33.3.2. Programme Management support for Matariki RDS

33.3.3. Industry and sector development programmes

33.3.4. Investment and talent attraction

33.3.5. Hawke’s Bay brand strategy and activation

33.3.6. Coordination of skills and employment initiatives – focused on connecting businesses with people and training organisations

33.3.7. Provision of funding to support a ‘by Māori for Māori’ approach to regional economic development (delegated to TKO and/or an agreed nominee)

33.3.8. Additional funding for SME and start-up support - if funding allows and a clear gap or need is identified, but delivered by other providers.

34. The Stage 2 Review recommends that councils consider funding the establishment of a regional development entity with the appropriate scale and mandate, that would be responsible for the priority activities and services above (see above).

35. If the preferred option is not accepted, the review recommends that at a minimum councils should consider funding the establishment of a regional economic development team that would be hosted by the Councils and would be responsible for:

35.1. The HB Business Hub

35.2. Programme Management support for Matariki RDS

35.3. Current industry and sector development programmes

35.4. Provision of funding to support a ‘by Māori for Māori’ approach to regional economic development (delegated to TKO and/or an agreed nominee).

Stage 2 Review – Consultation and Feedback

36. Prior to the Stage 2 Review being finalised, the key findings and recommendations were workshopped with all five councils. In addition, TKO were formally sent the draft report to provide feedback as our iwi/hapū partner in this process and a number of businesses engaged with to ensure they were on board and supportive of the planned direction.

37. Feedback summary – councils:

37.1. General support for direction of travel and recommendations. Understanding of rationale of focusing investment where gaps needed to be filled and a future platform ‘swimming in the appropriate lane’.

37.2. An acknowledgement of tumultuous history with Hawke’s Bay economic development agencies and historic under-funding and unclear purpose/mandate. The plan forward needs to be sustainable and enduring - if we’re going to do it, we need to do it well.

37.3. An acknowledgment that good metrics and outcome/reporting frameworks would need to be developed in the establishment phase to guide activities and hold the entity to account for delivery for the region (and individual districts).

37.4. A desire to understand business feedback and ensure they are on board – this is not about councils, it is about business.

37.5. Both communications and Hawke’s Bay branding, and skills and talent growth were seen as critical areas of focus. This leant to more support for the preferred option rather than a minimum viable option for Hawke’s Bay.

37.6. Best mechanism for delivery of funding for Māori economic development will need further consultation with Hawke’s Bay iwi/hapū.

37.7. Funding constraints and the need to prioritise are very real challenges for councils to consider. Any additional funding will likely significantly impact Annual Plans.

38. Feedback summary – iwi/hapū (via TKO):

38.1. Acknowledgement that there is merit across the options presented.

38.2. Raised the importance of an outcomes or performance framework that references to the current Hawke’s Bay Strategy – Matariki RDS.

38.3. Desire to further understand what a Māori partnership/co-governance model would look like.

38.4. General support for direction and seeking in summary:

38.4.1. Commitment to a partnered approach

38.4.2. A co-governance model and active involvement in the strategic leadership

38.4.3. A co-managed operational model

38.4.4. By Māori for Māori regional economic development approach (delegated to TKO or nominee).

39. Feedback summary – business:

39.1. Widespread endorsement and support for the preferred option recommendation – a fully funded regional development entity. Pleasantly surprised where this had landed and see this a big step forward for Hawke’s Bay.

39.2. Noted that the proposal would only be supported if councils commit to getting in behind the entity and not running parallel strategies or undermining it.

39.3. Acknowledged the critical need for Hawke’s Bay to speak with one voice nationally – be unified and seen to be unified.

39.4. Agreement that the new entity should stay out of the business advice space and focus on the big transformational opportunities. Noted the need for any entity to focus effort very tightly and avoid taking on all the region’s problems and achieving nothing.

39.5. Agreement to keep Hawke’s Bay Tourism separate but explore co-location to share overheads and maximise synergistic collaboration in the future.

39.6. Acknowledged the importance of Matariki RDS and thinking about economic development from an ‘every whānau and every household’ perspective – however noted that it needs a refresh and refocus.

39.7. A desire to ensure governance is light touch, with clusters of industry participants working together on specific programmes.

39.8. Supportive of tripartite governance model and independent non-CCO entity.

39.9. Some larger businesses were favourably disposed toward financial or in-kind contributions in the future.

39.10. Concern raised with a July 2022 start date – we don’t want to lose momentum and energy, or opportunities to secure Central Government funding for key sector programmes.

Options Assessment

40. The Stage 2 Review considers 5 main options for delivery. These are detailed in the attached report. Options were analysed and rated against key criteria with the assessment resulting in the best option for Hawke’s Bay being a regional development entity.

41. Preference for this model over other options is based on the degree to which this option is most able to create an enduring platform that provides Hawke’s Bay with the appropriate scale and mandate to:

41.1. Better guide and direct activity to priority areas/issues

41.2. Support a culture of sharing, connection and collaboration, and

41.3. Support Hawke’s Bay to be greater than the sum of its parts (e.g. by presenting a strong and united voice and vision to external investors, talent and Central Government), and by helping to attracting the resources of others.

42. If this option is not accepted, the review recommends that at a minimum councils should consider funding the establishment of a regional economic development team that would be hosted by the councils.

43. Both the preferred option (a regional development entity) and the minimum option (a regional development team), were presented to councils, iwi/hapū and business during feedback sessions and workshops.

Regional Cost of Investment

44. The Preferred Option - Option 3: A Regional Development Entity represents:

44.1. Estimated cost of investment per annum of $1.706m

44.2. One-off investment in CAPEX of $50,000

44.3. Representing an operational increase of $1.193m per annum on the existing investment of $513,000 across the five councils (excluding internal economic development investment within councils)

45. The Minimum Option - Option 2: A Regional Development Team represents:

45.1. Estimated cost of investment per annum of $1.05m

45.2. One-off investment in CAPEX of $50,000

45.3. Representing an operational increase of $537,000 per annum on the existing investment of $513,000 across the five councils (excluding internal economic development investment within councils).

46. Central Government funding has been secured to support Matariki RDS programme management for 2022 and 2023. This totals $155,000 (year 1) and $130,000 (year 2). This would therefore decrease the total funding requirement for either option over these two years, given Matariki RDS programme management support has been built into the overall budget.

Preferred Option Recommendation

47. Based on the Stage 2 Review findings and feedback from councils, iwi/hapū and business, councils are jointly recommending:

47.1. The Preferred Option – Option 3 – A Regional Development Entity. This option equates to an increase of 200%+ and $1.2M on the current joint investment of $513,000.

47.2. This was the only fully supported option across all five councils, iwi/hapū and business.

47.3. Preference for this model over other options is based on the substantive and widespread view that if we are going to do this, we need to do it properly - and a minimum viable option would not deliver to meet the needs or potential of the Hawke’s Bay economy. It has also been based on the degree to which this option is most able to create an enduring platform that provides Hawke’s Bay with the appropriate scale and mandate to better guide and direct activity to priority areas/issues; support a culture of sharing, connection and collaboration; and support Hawke’s Bay to be greater than the sum of its parts (e.g. by presenting a strong and united voice and vision to external investors, talent and Central Government), and by helping to attracting the resources of others.

47.4. The following regional funding split is agreed

Council	% Split
Hawke's Bay Regional Council (HBRC)	29%
Hastings District Council (HDC)	29%
Napier City Council (NCC)	29%
Central Hawke's Bay District Council (CHBDC)	8%
Wairoa District Council (WDC)	4%

47.5. A non-CCO independent entity with the legal form (i.e. Trust, Incorporated Society or Company) to be confirmed upon legal and tax advice

47.6. An appropriate governance structure with an independent chair that incorporates equal co-governance across business, iwi/hapū and local government.

48. Whatever legal form is chosen, councils could influence priorities through yearly Statement of Intent and Service Level Agreement (SLA)/Contract for Service (CfS) setting discussions. This entity would also need to be supported by an effective measurement and reporting framework which helps track the relationship between activities, outputs, and outcomes. This would help to provide greater transparency and accountability around whether ratepayers’ money is being invested and used effectively.

Strategic Fit

49. Most of what Council does and is focussed on under its 2020-2025 Strategic Plan is critical for the region’s economic wellbeing – particularly the management of the region’s natural resources and hazards. HBRC plays a broad role by ensuring the natural resource platform upon which both the economy and community relies on is managed to meet the reasonably foreseeable needs of future generations. Equally, a strong regional economy is essential to fund Council’s projects and key activity through rates and investment returns.

50. Support for the development of individual businesses, industries or sectors however is not a focus area or strategic priority. Council’s focus is typically related to areas of core competence, such as water security or flood control.

51. Funding for HBTL and BHB have historically occurred as a consequence of the Council’s ability to raise rating revenue across the entire region. It is proposed that the economic development rate continue to be collected by Council (70% from the commercial sector) and that this be applied to continuing to fund HBTL and a percentage of a future economic development entity.

Significance and Engagement Policy Assessment

52. Staff have assessed the significance of the decisions in this report and have concluded that they are not significant and therefore do not require community consultation before these decisions are taken. The assessment considered the “criteria for significance” from the Council’s adopted Significance and Engagement Policy, summarised in the table below.

Criteria	Assessment
Community interest	Low to Medium
Impact for affected individuals of groups	Low to Medium
Impact on rights and Interests of Tāngata Whenua	Low
How much promotes community outcomes or other council priorities	Low
Impact on existing levels of service	Low
Impact on rates or debt	Low
Cost and financial implications to ratepayers	Low to Medium
Involvement of strategic asset	No
Conclusion	Not significant

Climate Change Considerations

53. Climate change is expected to create barriers and opportunities for future economic development within the region and it will be important that any new delivery model for the region is responsive to these change drivers. Water security has been an existing pillar of Matariki RDS as one component of ensuring there is climate resilience to support the future wellbeing of the regional economy. As the regional lead agency on climate change Council staff will ensure that any new model that emerges is informed about these barriers and opportunities in due course.

Considerations of Tangata Whenua

54. Tangata whenua have a significant stake in the regional economy and are key partners for regional economic development support activity. Councils have partnered with TKO (on behalf of Hawke’s Bay iwi/hapū) throughout this review process. TKO have endorsed the key findings and recommendations subject to ongoing partnership and co-design around future service delivery.

55. A commitment has been made to a partnered approach and it is intended that collaboration will continue to occur as the next phase progresses.

56. The proposed governance model in the preferred option includes equal co-governance across iwi/hapū, business and local government.

Financial and Resource Implications

57. The financial impact of the recommended option – a regional development entity, for the five councils is set out in the table following. This takes into account the Central Government funding secured for Matariki RDS. Also highlighted is the increase from Council’s current direct funding in this space (total investment required less the previous BHB funding and other direct economic development expenditure).

58. It is proposed that the increased investment ($308K - $354K) is funded by reallocation within the existing regional development budget as discussed at the 27 October workshop. This is primarily achieved by reallocating the non-committed economic development consultancy budget, and the reapportionment of some corporate overheads within the budget model. Because this funding is derived from a targeted rate for the purposes of economic development it is not available for reallocation to other Council functions or priorities.

59. The proposed approach will still absorb corporate overheads to a level which is deemed appropriate for the new activity given less activity will be delivered by Council directly under this proposal. Initial modelling has been completed and the CFO is comfortable that the impact of the reallocation is not significant.

Consultation and Next Steps

60. In undertaking both the Stage 1 and Stage 2 reviews, the Consultant has surveyed and interviewed key stakeholders involved in economic development across the region. Feedback was also sought on key findings, recommendations and the proposed way forward.

61. The recommended option and funding mechanism will not trigger consultation requirements under the Local Government Act 2002 or Council’s Significance and Engagement Policy with respect to form/structure, increased investment or delivery model.

62. Council will inform and communicate any agreed changes to the community as part of the 2022-23 Annual Plan, however it will not be a separate consultation topic.

63. The Committee will be provided an update at the next Corporate and Strategic Committee meeting.

Decision Making Process

64. 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:

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

64.2. The use of the special consultative procedure is not prescribed by legislation for this decision but is for consequential decisions.

64.3. This decision is not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, however consequential decisions will be informed by 2022-23 Annual Plan consultation with the community.

64.4. The persons affected by this decision are all regional ratepayers and residents who benefit directly or indirectly from the Council’s economic development activities.

64.5. 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 this decision.

Recommendations

1. That the Corporate and Strategic Committee receives and considers the “Hawke's Bay Economic Development Review” 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. Supports the Stage 2 Review recommendations for priority activities/services and the focus for ratepayer investment in business and industry support.

2.3. Supports the establishment of a regional development entity in Hawke’s Bay.

2.4. Supports the recommended funding split and notes the financial implications for the Regional Council.

2.5. Endorses councils’ partnership approach with Hawke’s Bay iwi/hapū

2.6. Agrees to accommodate the Regional Council’s funding contribution for the new entity from reprioritisation within the targeted rate funded regional development budget in the 2022/23 Annual Plan.

Authored by:

Sarah Tully

Regional Recovery Manager

Approved by:

Jessica Ellerm

Group Manager Corporate Services

James Palmer

Chief Executive

Attachment/s

1 ⇨	Stage 2 Review of Investment in Business Industry Support in HB	Under Separate Cover
2 ⇩	Summary of survey responses
3 ⇩	Survey Responses - verbatim comments

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

17 November 2021

Subject: 2020-21 Compliance Annual Report

Reason for Report

1. This item provides the 2020-21 Hawke’s Bay Regional Council’s (HBRC) Compliance Annual Report for the Committee’s information and recommendation to Council for adoption.

2. A comprehensive report on HBRC’s Compliance Monitoring and Enforcement (CME) activities provides transparency to our communities and those regulated by us. Reporting the level of compliance with consent conditions, breaches of the Resource Management Act 1991 (RMA) and Regional Resource Management Plan and interventions undertaken, allows trends to be tracked and council’s performance be open to public scrutiny.

Officers’ Recommendations

3. The reporting officer recommends that the Corporate and Strategic Committee receives the report and recommends that Council adopts the report for publication on the Council’s website.

Executive Summary

4. The attached annual report summarises HBRC’s Compliance Monitoring and Enforcement functions undertaken under the RMA. It details the breadth of monitoring undertaken, the levels of compliance reported, and a summary of enforcement action taken during the year.

5. Compliance monitoring - staff monitored a total of 3092 (93.8%) resource consents out of a total 3297 to be monitored. This included 2029 water takes monitored remotely through telemetry, and 1063 discharge and land use consents monitored through inspections and data returns. Overall, 2574 (83.2%) of consent holders were fully compliant, and only 22 (0.8%) were in significant non-compliance.

Figure 1. Consents monitored

6. Monitoring involved a site inspection, desktop assessments, assessing performance monitoring returns from consent holders or a combination.

7. Pollution response - calls received to our hotline continue the decreasing trend we observed the previous year with 823 incidents logged for 2020-21 (11% reduction). The continued reduction this period was driven by reduced complaints about odours from Te Mata Mushrooms and fewer airshed burning incidents during restricted seasons. As in previous years, the majority of complaints are related to air quality 509 (62%) followed by discharges to land 143 (18%) and surface water 130 (16%).

Figure 2. Incidents per year (left) and incidents by resource type for 2020-21

8. Enforcement – for 2020-21 the enforcement team has continued to undertake a large volume of enforcement work through formal actions with a high level of prosecutions, infringement notices and abatement notices issued.

9. Twelve prosecutions concluded and an additional five commenced with 12 individual charges. The increased volume in prosecutions has put significant pressure on our environmental regulation team, as these cases require more resource to investigate, process and take through the courts. The establishment of a senior investigator role to manage case files and prosecutions has helped to streamline the process

10. The Council issued a similar number of infringement notices to last year (86), totalling $43,800 in fines. The number of infringement notices issued for winter burning continues to decrease, with only 31 issued this period. There has been a significant increase in the number of abatement notices issued this period (66) compared to 2019-20 (21) and 2018-19 (40). This reflects an increase in more serious offending as well as a tougher stance on controlling activities with a high likelihood of environmental effects.

Figure 3: Number of enforcement actions by year.

11. Detailed information is contained within the report attached to this agenda item.

12. Staff will make a presentation to Committee at the meeting based on the written report.

Background /Discussion

13. For the Committee’s information, reporting back occurs through the following mechanisms to Council or Committee:

13.1. Compliance Annual Report

13.2. HBRC Annual Report – results are presented through the Regulation Group of Activities within the Annual Report document

13.3. Active investigations or issues are reported to Council through the Significant Activities item on the monthly Council agenda.

14. Internally, a weekly incident report is prepared for the Group Manager which details complaints and incidents and the outcomes or progress towards the outcomes.

15. Staff have also established an approach whereby a media release will be issued at the conclusion of any prosecution carried out by HBRC, regardless of the outcome of the prosecution.

Strategic Fit

16. Undertaking compliance monitoring (and enforcement where necessary) helps us to:

16.1. Protect aquatic ecosystems and ensure water use is sustainable (Priority Area: Water)

16.2. Ensure sustainable land use (Priority Area: Land)

16.3. Maintain a healthy and functioning biodiversity (Priority Area: Biodiversity).

Significance and Engagement Policy Assessment

17. Whilst the matters discussed in this report are of interest to the community they do not directly impact or affect the community. There are no financial or levels of service implications associated with deciding to adopt this report. Accordingly, this report is of low significance.

Considerations of Tangata Whenua

18. The attached report sets out ways we have improved our engagement with tangata whenua on compliance matters. This includes:

18.1. Keeping tangata whenua and iwi representatives informed in relation to high level enforcement action.

18.2. Working closely with iwi and iwi trusts to seek victim impact statements for prosecution offences, facilitated by our Maori Partnerships team.

18.3. Ensuring consent conditions that require consultation and engagement with iwi are met by the consent holder.

18.4. Building cultural competency within the compliance team with internal training.

19. It is becoming increasingly common for resource consents to include more complex conditions that better recognise Te Ao Maori. For example, conditions requiring development of cultural monitoring plans in consultation with iwi/ marae/ hapū and treaty groups.

19.1. In the next report we hope to include analysis and reporting on findings from cultural health monitoring undertaken in accordance with resource consents.

20. Future areas of focus are:

20.1. Improving how we report incidents, particularly discharges to water, to tangata whenua and kaitiaki so we can inform their decision-making and their observations and involvement can inform cultural assessments.

20.2. Establishing regular meetings and workshops with tangata whenua across the region to further strengthen communication and relationships, build trust and increase accountability.

Financial and Resource Implications

21. There are no financial and funding implications associated with adopting the report.

Decision Making Process

22. 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:

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

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

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

22.4. There are no persons directly affected by this decision.

22.5. 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 notes the “2020-21 Compliance Annual Report” staff report.

2. Te Corporate and Strategic Committee recommends that Hawke’s Bay Regional Council:

2.2. Adopts the HBRC Annual Compliance Report 2020-21 for publication on the Hawke’s Bay Regional Council website.

Authored by:

Jack Blunden

Team Leader Compliance - Urban & Industrial

Rob Hogan

Manager Compliance

Approved by:

Katrina Brunton

Group Manager Policy & Regulation

Attachment/s

1 ⇨

HBRC Annual Compliance Report 2020-21

Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

Wednesday 17 November 2021

Subject: Possum Control Area - Partial Regional Pest Management Plan Review

Reason for Report

1. This item updates the Committee on the Partial Plan Review process for the Possum Control Area (PCA) programme including a review of the Cost Benefit Analysis (CBA) and seeks decisions to progress to the next stage of the process. The decisions sought are:

1.1. To establish a Biosecurity Working Party (BWP) which will also serve as a Hearing Panel for the Partial Plan Review submission process

1.2. To delegate to the BWP the relevant powers and functions under the Biosecurity Act necessary to deliver the Partial Plan Review of the PCA programme.

1.3. To confirm the appointment of 5 councillors and 2 members of the Hearings Committee to the BWP.

Officers’ Recommendation(s)

2. Council officers recommend that the Committee establishes the BWP as proposed, including the decision making delegations, and provides feedback on the engagement plan.

Executive Summary

3. There are a range of elements that need to be completed to meet the requirements of the Biosecurity Act 1993 (the Act) in the PCA programme Partial Plan Review (PPR). There are also process steps that need to be considered regarding the funding of the programme and its potential implementation and management. These include:

3.1. A review of the expected outcomes, who receives those benefits and how the programme might be funded

3.2. the completion of a cost benefit analysis

3.3. a proposal for a change to the Regional Pest Management Plan (RPMP) that meets section 70-71 of the Act

3.4. the level of resourcing required to deliver the outcomes

3.5. the implementation speed and delivery options of any changed PCA operating model

3.6. establishment of a Biosecurity Working Party to provide staff guidance on the Partial Plan Review and hear submissions on the proposal if considered appropriate.

4. As part of the Partial Plan Review the Council is required to consult on amending the Hawke’s Bay Regional Pest Management Plan. The steps to ‘make’ an RPMP are clearly outlined within sections 70 to 77 and section 10D(5) of the Act. This includes preparation of a proposal in accordance with the Act, public notification, receipt of submissions and conducting a hearing process.

5. The 8 September 2021 EICC meeting discussed the establishment of a Hearing Panel (BWP) to hear submissions, potentially with the delegated authority to make certain decisions under the Act.

Background /Discussion

6. The Partial Plan Review of the PCA programme signals a potentially substantial change in how possum control is managed in the Hawkes Bay region. Broadly speaking this change requires considering why we do possum control, the outcomes we expect to get and the funding basis and rates impact of any change. Alongside this how possum control is delivered and the speed of any change to possum management has a direct bearing on when costs fall due. These are also key factors in managing the risk that the current programme continues to be under resourced and potentially fails at sufficient scale that the value of the investment over the last 20 years is lost.

7. The proposal for a change to the RPMP required under sections 70-71 of the Act, the potential resourcing and the options for the implementation of change will be discussed in more detail by the BWP who will make recommendations to Council.

Cost Benefit Analysis

8. The cost benefit analysis (CBA) is a key part of the Partial Plan Review process and has been updated from the work undertaken in 2017-18 for the RPMP. This economic analysis was undertaken by Jon Sullivan at Lincoln University, Melissa Hutchison at Tenex consultants and Hawke’s Bay Regional Council staff and is outlined in their draft report “Proposed Regional Pest Management Plan possum control area Partial Plan Review Cost Benefit Analysis and Cost Allocation Report”. This report is referred to below as the “CBA Report” and is Attachment 1. Minor changes may still need to be made to the CBA report.

9. The CBA indicates that the total benefit of the PCA programme is around $51m and at an annual PCA programme cost of $3.5m the net benefit using discounted cashflow analysis is $21m over a ten-year period. Net benefit exceeding cost is a key test of the Act.

10. It is important to note that the CBA is based on an indicative cost of $12/ha per annum for the first year and $7/ha per annum for subsequent years possum control. HBRC’s approved possum contractors have indicated that the initial years cost of control to transition to HBRC managed contracts is between $8-12 per hectare. Subsequent years of maintenance control would be in the range of $6-9/ha. This assumes large-scale longer term performance-based output contracts with a mean residual trap catch (RTC) of 4% and no individual monitoring line over three possums.

Engagement process

11. Engagement will be an important part of the PCA programme Partial Plan Review. This will be undertaken:

11.1. Individually with key stakeholders

11.2. Broadly through social media and other media platforms

11.3. As part of the Long-Term Plan amendment / annual plan process.

12. A draft engagement process associated with the Partial Plan Review process is set out in Attachment 2.

Outcomes delivered by possum control

13. For the last 20 years possum control has been funded by HBRC on the basis that the primary benefits have been to farming in terms of reducing possum impact on pastoral production and reducing the risk of Bovine TB.

14. It is important to note that OSPRI Ltd have responsibility for the National bovine TB strategy which is levy funded by farmers to eliminate TB from New Zealand. While coordination between HBRC and OSPRI is important, and mutually beneficial, the principal outcomes HBRC seeks to deliver from possum control are biodiversity related.

15. There is evidence from research over the last 20 years that possum control also provides significant biodiversity benefits. “A review of biodiversity outcomes from possum-focused pest control in New Zealand” is a meta-analysis of 47 research projects and one of the largest studies of quantitative data to date on the biodiversity benefits of possum control. This report is attached at attachment three. The key themes from the report are:

15.1. Eighty five percent of studies reporting on the impacts of possum control on vegetation (canopy cover, threatened plants, tree mortality, fruit /seed production) reported a positive response of vegetation to possum- focused pest control.

15.2. Native birds benefit from possum control with 80% of the relevant studies in the meta-analysis showing improved nesting success and bird abundance after possum control.

15.3. Impacts of possum control on invertebrates and frogs is more difficult to assess as it can be linked with rat control and interactions between complex ecosystems. There appears to be evidence that Weta and some frogs benefit from possum and rat control.

16. Council has not reviewed the funding of the biosecurity programme over the last two decades and the PCA Partial Plan Review is an appropriate time to do so.

Biosecurity Working Party

17. As part of the consultation plan discussion at the 8 September EICC meeting it was recommended that a Hearing Panel be established to hear submissions. This Panel (the BWP) can also be delegated the authority to make certain decisions under the Act.

18. The decisions and recommendations that a Hearing Panel can be required to make with delegated authority are:

18.1. To determine whether the Proposal meets the requirements of sections 70 and 71 of the BSA and make recommendations to council on that (refer https://www.legislation.govt.nz/act/public/1993/0095/latest/DLM315719.html)

18.2. Hear submissions on the Proposal and receive and consider recommendation reports from staff

18.3. Make a recommendation to council (or a committee of council) on whether sufficient consultation has been undertaken on the Proposal under section 72 of the BSA and that the issues raised in consultation have been considered

18.4. Approve the preparation of an amendment to the RPMP and which body is to be the management agency

18.5. Consider the amendment to the RPMP and determine that the requirements of sections 73 and 74 of the BSA have been met (refer https://www.legislation.govt.nz/act/public/1993/0095/latest/DLM315730.html)

18.6. Prepare a written report under 75(1) of the BSA and make recommendations to Council as to its decision on the amendment to the RPMP.

19. During the 2019 - 2039 RPMP development, the BWP included one independent out of region member, with both Biosecurity and hearings process experience, to sit on the panel as a Biosecurity expert. This worked well and staff recommend this takes place for the Partial Plan Review as well. Staff propose that this is discussed at the first meeting of the BWP.

20. It is proposed that:

20.1. The BWP is established as a subcommittee under Schedule 7 of the Local Government Act 2002.

20.2. The Chair of the BWP will be delegated the power to have a casting vote if a majority decision is unable to be reached on any matter.

20.3. The Chairperson of the BWP is authorised to act alone to exercise any powers, functions and duties delegated in respect of the conduct of the Hearing. This allows the Chair to issue notices of hearing and minutes before and during the hearing regarding procedural requirements for the hearing without needing the signatures and approval of all the hearing panel members. It does not authorise the Chair to act alone in relation to decisions or recommendations on the Proposal.

20.4. Councillors Will Foley, Jerf Van Beek, Craig Foss, Charles Lambert and Jacqueline Taylor are formally appointed as members of the BWP.

20.5. Roger Maaka and Katarina Kawana (two members of the Hearing Panel delegated by the Māori Committee) are also formally appointed as members of the BWP.

Options Assessment

21. There is the option to consider the Possum Control Area Partial Plan Review and hear submissions as part of Regional Council meetings and the annual plan process (status quo). However, given the range of broader, non-submission related matters to consider and the prescriptive steps set out in the Biosecurity Act, staff do not recommend this. The BWP will provide greater flexibility to discuss and consider the PCA Partial Plan Review and then bring recommendations back to Council or its committees.

22. Staff’s preferred option is to establish the BWP subcommittee with the delegations detailed in the recommendations section of this paper.

Strategic Fit

23. The PCA programme sits within the RPMP. The RPMP plays an important role in achieving both the Biodiversity and Land strategic outcomes and goals in the HBRC Strategic Pan 2020-25.

24. Pest management sits within a biosecurity framework for the Hawke’s Bay region, which includes the RPMP, the Hawke’s Bay Biodiversity Strategy and the HBRC Strategic Plan. Neighbouring Regional Pest Management Plans and national legislation, policy and initiatives have also influenced this Plan.

25. All programmes sitting within an RPMP are required to have clear measurable outcomes, which are specified within the monitoring section. This monitoring section is integrated into the Biosecurity Annual Operational Plan, which goes to council for approval prior to each financial year. The Operational Plan sets out the operational delivery for each programme and the monitoring and reporting requirements. Staff report to council annually (November) on the progress of the Operational Plan.

26. Failing to achieve the RPMP objective and council Level of Service Measures for the PCA programme could affect achieving the strategic outcomes and goals in the HBRC Strategic Pan 2020-25 for Biodiversity and Land.

Significance and Engagement Policy Assessment

27. The decisions in this paper are of low significance. Council will be required through the PPR to consult with the community as part of BSA requirements.

Financial and Resource Implications

28. The costs associated with the BWP will be between $10-15,000 and will be met from existing Catchment Services budgets set aside for the RPMP process.

Decision Making Process

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

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

29.2. The Biosecurity Act requires amendments to be made to the RPMP if changes are to be made to the Possum Control Area programme. The Biosecurity Act outlines consultation and other requirements for amending the RPMP.

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

29.4. The persons affected by this decision are all those with an interest in the region’s biosecurity. The proposed establishment of a BWP to hear submissions and make recommendations on the Partial Plan Review will enable those persons to be heard on any proposed amendments to the RPMP.

29.5. 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 these decisions without consulting directly with the community.

Recommendations

1. That the Corporate and Strategic Committee receives and considers the “Possum Control Area - Partial Regional Pest Management Plan Review” staff report.

2. The Corporate and Strategic Committee recommends that Hawke’s Bay Regional Council, acting under clause 32 of Schedule 7 of the Local Government Act 2002:

2.1. Establishes the Biosecurity Working Party with the Terms of Reference proposed.

2.2. Appoints councillors Will Foley, Jerf van Beek, Craig Foss, Charles Lambert and Jacqueline Taylor, Dr Roger Maaka and Katarina Kawana as members of the Biosecurity Working Party.

2.3. Delegates to the Biosecurity Working Party the powers, functions and duties of the Council set out in sections 71 to 74 (excluding sections 72(5)) and 100D(6)(b)) of the Biosecurity Act 1993, in respect of the Proposed Regional Pest Management Plan 2018-2038 Possum Control Area Partial Plan Review.

2.4. Delegates to the Biosecurity Working Party the powers functions and duties of the Council to hear submissions and make recommendations on the proposal to amend the Regional Pest Management Plan.

2.5. Delegates to the Biosecurity Working Party the powers, functions and duties of the Council set out in sections 75(1) and (2) of the Biosecurity Act 1993 to prepare a written report on the Regional Pest Management Plan.

2.6. Directs that the Biosecurity Working Party provides recommendations to Council as to Council’s decision on the Regional Pest Management Plan.

2.7. Authorises the Chair of the Biosecurity Working Party acting alone to exercise any powers, functions and duties delegated in respect of the conduct of the Hearing.

2.8. Authorises the Chair of the Biosecurity Working Party to have a casting vote when there is an equality of votes when exercising any of the powers, functions and duties delegated.

Authored by:

Lauren Simmonds

Project Manager - Biosecurity Review

Campbell Leckie

Manager Catchment Services

Approved by:

Iain Maxwell

Group Manager Integrated Catchment Management

Attachment/s

1 ⇩	Council led Possum Control Cost Benefit Analysis
2 ⇩	PCA Review Draft Pre-engagement Plan
3 ⇨	Byrom et al 2016 Biodiversity Outcomes from Possum Control	Under Separate Cover
4 ⇩	Biosecurity working Party Subcommittee TOR

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

17 November 2021

Subject: HBRIC Ltd Quarterly Update

Reason for Report

1. This item provides Council with a quarterly update on the activities of Hawke’s Bay Regional Investment Company (HBRIC).

Discussion

Financial reporting

2. HBRIC’s annual report, including auditors report, for the year ended 30 June 2021 is attached. The annual report was approved by the Directors of HBRIC on 8 November 2021.

3. Key items to note:

2020-21 2019-20

3.1. Group profit after tax - $23.9mil $16.6mil

3.2. Parent profit after tax - $8mil $47.9mil

3.3. Group year-end equity - $423mil $406mil

3.4. Parent year-end equity - $446mil $459mil

3.5. Group total assets - $526mil $442mil

3.6. Parent total assets - $446mil $459mil

3.7. Parent = HBRIC; Group = HBRIC + NPHL

4. Financial Statements for the quarter ending 30 September 2021 are attached to this report.

5. Key items to note for the quarter:

5.1. Statement of Financial Performance - Surplus of $92k (excluding fair value movements through other comprehensive income)

5.2. Other Comprehensive Income – Loss of $27mil driven by a drop in the Napier Port Holdings Limited (NPHL) share price (loss on revaluation)

5.3. A reduction in net assets by $27mil due to the drop in NPHL share price.

Managed Funds

6. The funds remain under management in compliance with Council’s SIPO.

7. The value of managed funds with HBRIC as at 30 September 2021 amounted to $48.7m, a movement of approximately +$289K (0.6%) year to date.

8. This lower return as compared to previous quarters was mainly driven by a downturn in global equity markets.

9. In the FY20-21 HBRIC divested circa $3.2mil (after protecting the capital value) from managed funds during a period of time where the financial markets were at historical highs.

HBRIC Capital Structure

10. The Board of HBRIC is continuing to progress the development of a clear capital structure and investment mandate to support the growth of the company, as agreed with Council. HBRIC staff have developed a draft Investment strategy and Treasury Policy which are under review by the board of directors. The policy framework is designed to give clarity for operationalising the strategy and provide defined parameters to operate within.

FoodEast

11. FoodEast has now been established as a registered entity (July 2021).

12. HBRIC has invested $1.7mill of its planned $4mill investment, with further capital drawdowns to occur during the life of the investment.

13. The project has encountered construction cost inflation above budget, upon receipt of the final construction tender. This has resulted in a delay to the commencement of construction, whilst re-design work is undertaken.

14. A further update will be provided in the New Year.

Aquaculture

15. There has been no further work on this item.

Napier Port

16. Napier Port will report on its full financial year ended 30 September 2021 to the 24 November Regional Council meeting.

17. During the financial year, bulk cargo trade volume increased 26.6% to a record 3.95 million tonnes including record log exports, while containerised cargo volume increased to 276k TEU, up 2.9% on the prior year. There were no Cruise visits during the year.

18. A copy of Napier Port’s 12-month trade results to September is available at: https://www.napierport.co.nz/investor-centre/#announcements

19. Construction of 6 Wharf remains on budget and on track for completion late 2022. All piles have now been completed, which is a major milestone. Further information can be found at: https://www.napierport.co.nz/6-wharf-update-piling-completion-milestone/

20. During the fourth quarter, Napier Port released its 10-year Sustainability Strategy and Action Plan. Developed over a two-year period, in consultation with Napier Port’s many diverse stakeholders, the plan has 100 identified actions. It concentrates firstly on local issues which the Port can directly influence and improve, including:

20.1. promoting healthy reefs and clean oceans locally

20.2. aiming for zero net emissions by 2050

20.3. running community projects and good neighbour programmes

20.4. protecting marine and bird life

20.5. continuing to build a workplace that embraces diversity and cultural values

20.6. adopting clean energy solutions and minimising waste or duplication of resources.

21. Good progress has already been made in key areas, including:

21.1. launching a Marine Cultural Health Programme

21.2. installing LED floodlight towers

21.3. reducing carbon emissions

21.4. creating artificial reefs to increase biodiversity

21.5. undertaking water quality surveys and monitoring, and

21.6. the protection of at-risk bird species that make their home at Napier Port.

22. A copy of the Strategy and Action Plan can be found at: https://www.napierport.co.nz/wp-content/uploads/2021/08/Napier-Port-Sustainability-Strategy-and-Action-Plan.pdf

Decision Making Process

23. 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 “HBRIC Ltd Quarterly Update”.

Authored by:

Kishan Premadasa

Management Accountant

Approved by:

Jessica Ellerm

Group Manager Corporate Services

Attachment/s

1 ⇨	HBRIC Annual Report 2020-21	Under Separate Cover
2 ⇩	HBRC Statement of Financial Position September 2021
3 ⇩	HBRIC Statement of Financial Performance Jul21-Sep 21

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

17 November 2021

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

Reason for Report

1. The following matters were considered by the Finance, Audit and Risk Sub-committee (FARS) meeting on 13 October 2021 and are now presented for the Committee’s consideration alongside any additional commentary the Sub-committee Chair wishes to offer.

Agenda items

2. The Audit NZ Report on Year Ended 30 June 2020 item provided the report on the 2019-20 audit process including findings and recommendations from Audit NZ. Each year, following the completion of the audit of Council’s Annual Report the auditors report back to the governing body on any findings from the audit. That Audit report provides commentary on areas where Hawke’s Bay Regional Council is doing well and makes recommendations for improvement. Sub-committee discussions covered:

2.1. The report’s recommendations are being addressed by staff, particularly around building capacity in the Finance team and the implementation of the new finance system

2.2. Impacts of Covid, changes in personnel and Council’s previous outdated financial system all contributed to a very challenging Audit process and are reflected in the report’s findings

2.3. The impacts of the twice delayed Audit on the organisation – due to internal resource challenges at Audit NZ and then discovery during peer review of the use of a different methodology for valuing land and buildings by the Port which required remedying – were highlighted

2.4. An adjustment to the ACC liability to account for land value increases is highlighted as an item Council staff have raised as a prior period adjustment in the FY20-21 audit.

2.5. Corrections were made prior to Council’s adoption of the final Annual Report on 24 February 2021 (normally adopted by end of October each year)

2.6. Receiving and accepting the report on the review of the audit process is consistent with the Terms of Reference for the sub-committee (refer to Decision Making Criteria section of this item).

3. The 2020-21 Annual Report – Draft Non-Financial Results item provided the non-financial results for the 2020-21 financial year in advance of the financial results to alleviate potential delays for adoption of the annual report. Discussions covered:

3.1. The information was updated to reflect feedback from the Corporate and Strategic Committee on the interim results provided to the 18 August meeting

3.2. The Corporate Plan underlying the LTP better enables Council to meet ambitious performance targets by providing adequate organisational resources (e.g. IT, accommodation, staff) and support systems

3.3. The non-financial results will be combined with the financials for presentation to an extraordinary FARS meeting scheduled 8 December.

4. The Roadsafe S17a Review item sought the sub-committee’s agreement to the engagement of Morrison Low to undertake a Service Delivery Review of the Hawke’s Bay Regional Council’s Road Safety function. The Road Safety programme is a component of Central Government’s ‘Road to Zero’ strategy and based on identified risks and road safety issues. The programme is delivered in partnership with key partners including the Councils, Waka Kotahi, NZ Police, Iwi, schools and ACC, and includes activities such as Driver Licensing, Hawke’s Bay Youth Roadsafe Expo and regular roadside support to police and emergency services that feature road safety messages (including fatigue and speed). It was noted that the Regional Transport Committee considered and resolved agreement to the s17a review at its 17 September 2021 meeting, requesting that it include investigation of the most effective relationship between governance and programme delivery.

5. The Risk Maturity Update item provided an update on the status of the Council’s risk management maturity deliverables for phases 1 through 3 of the risk maturity roadmap, and implementation of phase 4, highlighting:

5.1. Phases 1 through 3 will be completely closed out, including finalising 3 remaining enterprise risk bowties, by Christmas 2021

5.2. Implementation of phase 4 of the roadmap will be undertaken through two discrete and concurrent projects phased in over the next two years.

5.2.1. The first project will focus on embedding structured risk management processes into governance, strategic planning and strategic project execution activities. The Risk Team is working closely with the Strategy and Governance Team to identify key activities to embed risk processes into. On completion of this identification phase a project plan will be developed to support the implementation.

5.2.2. The second project is focussed on embedding risk management processes and risk-based thinking consistently into the operational business. Using the Council approved Risk Management Framework, the Risk Team is formalising ‘right sized’ risk management system processes for use in the business. In the implementation phase of embedding risk processes into the business the Risk Team is be supported by a Risk Champion that sits within each Group.

5.3. The next steps for maturity of the Council’s risk management system include:

5.3.1. The Risk Team working with the Strategy and Governance Team to develop a project plan to formalise the use of risk management processes into targeted governance, strategic planning and strategic project execution activities

5.3.2. The Risk Team developing a project plan for ELT approval, to embed risk management processes and risk-based thinking into the operational business

5.3.3. ELT identification of a Risk Champion within each Group

5.3.4. The Risk Team commencing upskilling Risk Champions on risk management philosophies and methodologies.

6. The Annual Enterprise Internal Audit Plan item proposed the internal audits to be undertaken over the current financial year, covering:

6.1. Propose 2 audits of Council’s fraud management framework and data analytics

6.2. Retain the balance of the budget to allow flexibility to undertake other audits if the need arises

6.3. Suggestion that an internal audit of Council’s entire “people and capability” management system including Health, Safety and Wellbeing, Recruitment, etc be undertaken next financial year.

7. The Internal Assurance Dashboard - Corrective Actions Status Update items update the status of management actions recommended by previous internal audits. The Dashboards and discussions highlighted:

7.1. Covid 19 response debrief management actions have been completed

7.2. The management actions from the Talent Management audit are on track to date and the People and Capability Manager will be invited to attend the next sub-committee meeting to provide a detailed update

7.3. Cyber Security (discussed in Public Excluded session) are on track.

Decision Making Process

8. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that:

8.1. All items were considered at the Finance, Audit and Risk Sub-committee in accordance with the Terms of Reference, specifically in relation to the 13 October 2021 meeting, its responsibility and authority to:

8.1.1. Receive the internal and external audit reports and review actions to be taken by management on significant issues and recommendations raised within the reports (2. Audit NZ Report on Year Ended 30 June 2020 and 7. Internal Assurance Dashboard - Corrective Actions Status Update)

8.1.2. Review whether Council management has a current and comprehensive risk management framework and associated procedures for effective identification and management of the council’s significant risks in place (5. Risk Maturity Update)

8.1.3. Undertake systematic reviews of Council operational activities against Council stated performance criteria to determine efficiency/effectiveness of delivery of Council services (4. Roadsafe S17a Review)

8.2. The Finance, Audit and Risk Sub-committee is delegated by Council, specifically in relation to the 13 October 2021 meeting, to:

8.2.1. Receive all of the information and documentation needed or requested to fulfill its responsibilities and duties, subject to applicable legislation

8.2.2. Ensure that recommendations in audit management reports are considered and, if appropriate, actioned by management (7. Internal Assurance Dashboard - Corrective Actions Status Update)

8.2.3. Review the objectives and scope of the internal audit function, and ensure those objectives are aligned with Council’s overall risk management framework (6. Annual Enterprise Internal Audit Plan)

8.2.4. Assess the performance of the internal audit function and ensure that the function is adequately resourced and has appropriate authority and standing within Council (6. Annual Enterprise Internal Audit Plan).

8.3. This item is for reporting purposes in accordance with the Finance, Audit and Risk Sub-committee Terms of Reference, specifically to report to the Corporate and Strategic Committee to fulfil its responsibilities for:

8.3.1. The provision of appropriate controls to safeguard the Council’s financial and non-financial assets, the integrity of internal and external reporting and accountability arrangements

8.3.2. The independence and adequacy of internal and external audit functions

8.3.3. The robustness of risk management systems, processes and practices.

8.4. This item is for information and noting only, there are no decisions required, and therefore the LGA decision making provisions do not apply.

Recommendations

1. That the Corporate and Strategic Committee receives and notes the report from the Finance, Audit and Risk Sub-committee, including the Sub-committee recommendations, being that the Finance, Audit and Risk Sub-committee:

Audit NZ Report on Year Ended 30 June 2020

1.1. Receives and accepts the “Audit NZ Report on the Year ended 30 June 2020” and advises the Corporate and Strategic Committee accordingly.

1.2. Notes the consequences of Audit report delays on the organisation.

2020-21 Annual Report – Draft Non-Financial Results

1.3. Receives and notes the “2020-21 Annual Report – Draft Non-financial Results” staff report.

Roadsafe S17a Review

1.4. Approves the engagement of Morrison Low to undertake a Service Delivery Review of the Hawke’s Bay Regional Council’s Road Safety function.

Risk Maturity Update

1.5. Reports to the Corporate and Strategic Committee that Phases I through III of the Risk Maturity Roadmap are nearing completion, and

1.6. Reports to the Corporate and Strategic Committee that Staff, with full Executive Leadership Team endorsement and commitment, are preparing two discrete project plans to embed risk management processes and risk-based thinking into the business; this being the delivery of phase IV ‘risk intelligence’ of the risk maturity roadmap. The timeframe for implementation of phase IV of the risk maturity roadmap is estimated to be approximately two years.

Annual Enterprise Internal Audit Plan

1.7. Reports to the Corporate and Strategic Committee that the 2021-22 Annual Enterprise Internal Audit Plan has been approved and will be carried out within budget provisions made in the 2021-22 Annual Plan for this purpose.

Internal Assurance Dashboard - Corrective Actions Status Updates

1.8. Confirms that management actions undertaken or planned for the future adequately respond to the findings and recommendations of the internal audits.

1.9. Confirms that the dashboard reports provide adequate information on the progress of corrective actions and the progress of the approved Annual Internal Audit programme.

1.10. Confirms that the management actions from the HBRC Covid-19 Response Debrief Report Communication (Internal & External) finding have been completed and the finding is now closed.

1.11. Reports to the Corporate and Strategic Committee, the Sub-committee’s satisfaction that the Internal Assurance Programme Update provides adequate evidence of the adequacy of Council’s internal assurance functions and management actions undertaken or planned respond to findings and recommendations from completed internal audits.

Authored by:

Leeanne Hooper

Team Leader Governance

Helen Marsden

Risk & Corporate Compliance Manager

Approved by:

Katrina Brunton

Group Manager Policy & Regulation

Jessica Ellerm

Group Manager Corporate Services

James Palmer

Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Corporate and Strategic Committee

17 November 2021

Subject: National Policy Statement on Urban Development - Napier-Hastings Housing Assessment

Reason for Report

1. This report presents findings of a housing capacity assessment that has been prepared in partial fulfilment of requirements under the National Policy Statement on Urban Development 2020 (NPS-UD). The Regional Council is jointly responsible (with Hastings District Council and Napier City Council) for implementing the NPS-UD in relation to the Napier-Hastings Urban Environment.

2. To be clear, the Committee is not being asked to approve the technical housing assessment report, but rather to receive it and take its findings into consideration as part of the Regional Council’s own forward planning processes such as the ‘Kotahi’ project, Long Term Plan, regional land transport planning, etc.

3. The two attachments and similar versions of this briefing report have been presented by the respective councils’ senior staff to:

3.1. Hastings District Council’s Strategy & Policy Committee meeting, 2 November; and

3.2. Napier City Council’s Future Napier Committee meeting, 11 November 2021.

Overview

4. The NPS-UD requires ‘Tier 2 councils’, which includes Hastings District, Napier City and Hawke’s Bay Regional Councils (the Councils), to undertake an assessment of the expected demand and supply of housing in their areas over the next 30 years^{^[1]}.

5. The purpose of the housing assessment is to ensure council’s planning and infrastructure decisions enable at least sufficient development capacity to meet expected demand for housing and to assess the impact of those decisions on the affordability and competitiveness of the local housing market.

6. The housing assessments must be undertaken every three years and in time to inform the Long Term Plan (LTP) iterations. The first housing assessment was required to be prepared this year (July), one year after the NPS-UD was approved by Government. The NPS-UD requires that councils with overlapping or interrelated housing markets prepare a joint assessment. The three councils jointly commissioned Market Economics Limited (MEL)^{^[2]} to complete that technical assessment work due to limited capacity of council staff.

7. The housing assessment is a comprehensive and highly technical piece of work, but one which will provide fundamental evidence-based information for forthcoming planning processes such the review of the Heretaunga Plains Urban Development Strategy (HPUDS) and ultimately the district plans, LTPs and the ‘Kotahi’ project. An independent high level summary report (Attachment 1) has been prepared by Barker and Associates (Barkers)^{^[3]} which is a consultancy firm of urban and environmental planners. The MEL housing assessment report is published in full as Attachment 2. Committee members are not necessarily expected to familiarise themselves with the details contained with the full report, hence convenience of the Barkers summary report.

8. The Barkers summary report presents a number of recommendations for HDC, NCC and the Regional Council to consider in their future work programmes (individually and/or collectively as relevant). Many of those recommendations are likely to impact the immediate work programmes of HDC and NCC as they are the key influencers of district plan zonings, and responsible for timing and delivery of many essential infrastructure work programmes that would service infill (intensification) and greenfield growth areas. Implications for the Regional Council’s own roles and responsibilities are not as pressing.

Summary of Findings

9. The analysis suggests that:

9.1. Napier has sufficient housing development capacity over the short, medium and long term to meet demand.

9.2. Hastings has sufficient housing development capacity over the short and medium term but has a deficiency in the long term (i.e. 10-30 year timeframe). To resolve this issue, further infrastructure planning will be required by HDC.

9.3. Over the medium to longer term, the assessment assumes a greater take up of intensification opportunities than the current growth strategies.

10. The analysis also shows that there is significantly greater demand for housing up to $400,000 than the market is likely to provide resulting in a lack of affordable housing options.

11. The NPS-UD requires that a housing bottom line for the short, medium and long term be included in the relevant regional policy statement and district plans as soon as practicable after the housing assessment is made publicly available.

12. The purpose of housing bottom lines is to clearly articulate the amount of development capacity that is sufficient to meet the expected demand including a buffer.

13. The table below, identifies the housing bottom lines for Hastings and Napier based on findings from the MEL housing capacity assessment. These are not expressed cumulatively.

	Hastings	Napier
Short term (2020 – 2023)	1,920 dwellings	1,190 dwellings
Medium term (2023 – 2030)	3,270 dwellings	1,990 dwellings
Long term (2030 – 2050)	7,640 dwellings	4,010 dwellings
TOTAL	12,830 dwellings	7,190 dwellings

Strategic Fit

14. This work is part of a programme that relates to several goals of the 2020-2025 Strategic Plan, particularly ‘From 2020, unplanned urban development avoids highly productive land.’

Next Steps

Housing bottom lines in the Regional Policy Statement

15. The NPS-UD directs regional councils to:

15.1. insert housing bottom lines into the Regional Policy Statement as soon as reasonably practicable; and

15.2. make those amendments without using a ‘Schedule 1’ public submission process typically required for plan changes under the RMA.

16. The Regional Council’s Group Manager Policy & Regulation holds delegation to authorise those types of automatic insertions into HBRC’s RMA planning documents.

17. The NPS-UD requires those same housing bottom lines to also be inserted by HDC and NCC into their respective district plans.

18. Accordingly, officers from the three councils are intending to:

18.1. align the insertion of housing bottom lines for the Napier-Hastings Urban Environment in all three planning documents (i.e. RPS and two district plans); and

18.2. complete those respective amendments before the end of 2021 (i.e. web-based versions of those plans would be updated in that timeframe).

Future Development Strategy for Napier-Hastings Urban Environment

19. The NPS-UD requires the three councils to be jointly responsible for preparation of a Future Development Strategy (FDS) in time to inform the 2024-34 LTPs. HPUDS2017 is akin to a FDS, but obviously pre-dates the NPS-UD 2020’s newer specifications. Now that the detailed housing assessment has been completed, attention will soon focus on developing a cost-effective work programme that at least:

19.1. completes an assessment of business land supply and demand matters for the Napier-Hastings Urban Environment (which is another requirement of the NPS-UD)

19.2. involves a review of the 2017 Heretaunga Plains Urban Development Strategy; and

19.3. preparation of a FDS for the Napier-Hastings Urban Environment in time for the 2024-34 LTP.

Resource Management System Reforms

20. Design and development of that work programme will also need to bear in mind the looming repeal of the RMA and wider reforms of the resource management system. Planning staff have previously presented an overview of the resource management system reforms to the Regional Planning Committee at meetings on 10 March 2021 and 1 September 2021.

21. The Barkers report (Attachment 1) refers to the potential for additional infrastructure planning associated with housing demand and capacity to be addressed “either through an HPUDS review for Napier-Hastings, which would essentially be a ‘Future Development Strategy’ in NPS-UD terms; or if it more appropriate to do so, on a wider regional basis through a Regional Spatial Strategy for Hawke’s Bay as it emerges through Government’s reform of the resource management system. Either of those processes would provide the vehicle for integrating land use and infrastructure planning and funding decisions.”

22. It should be noted that the Regional Council has not yet made any commitment to undertake a region-wide spatial planning project or a regional spatial strategy, but the pros and cons of those initiatives are currently being evaluated.

Decision Making Process

23. 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:

1. Receives and notes the “National Policy Statement on Urban Development - Napier-Hastings Housing Assessment” staff report.

2. Notes that the Group Manager Policy and Regulation has delegation to approve insertion of housing bottom lines for the Napier-Hastings Urban Environment in the Regional Policy Statement.

Authored by:

Gavin Ide

Principal Advisor Strategic Planning

Approved by:

Katrina Brunton

Group Manager Policy & Regulation

Attachment/s

1 ⇩	Napier and Hastings Housing Assessment Summary Report by Barker and Associates - 23 Sept 2021
2 ⇨	Housing Development Capacity Assessment 2021 (Napier, Hastings Urban Environment) by Market Economics Limited - September 2021		Under Separate Cover

[1] With that 30-year period further split into short term (1-3 years), medium term (4-10 years) and long term (11-30 years).

[2] MEL have completed a number of such assessments across the country under the current NPS-UD and previously under the earlier 2016 NPS on Urban Development Capacity for both ‘Tier 1’ councils (larger metropolitan centres) and ‘Tier 2’ councils (larger regional centres).

[3] The housing assessment reporting project was managed on behalf of the three councils by Barkers – a consultancy which has experience with the NPS-UD drafting and implementation. Barkers have also provided some independent advice in relation to what the findings mean for the three councils’ forward planning.

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED	REASON FOR PASSING THIS RESOLUTION	GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION
Confirmation of the Public Excluded Minutes of the 19 May 2021 Corporate & Strategic Committee Meeting	7(2)s7(2)(j) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of the information is necessary to prevent the disclosure or use of official information for improper gain or improper advantage	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.
Public Excluded Report from the Finance, Audit & Risk Sub-committee Meeting	7(2)7(2)(f)(ii) The withholding of the information is necessary to maintain the effective conduct of public affairs through the protection of such members, officers, employees, and persons from improper pressure or harassment	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.

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