Agenda of Corporate and Strategic Committee - Wednesday, 13 November 2024

Hawke’s Bay Regional Council

Corporate and Strategic Committee

13 November 2024

Subject: Public Forum

Reason for report

1. This item provides the means for the Committee to give members of the public an opportunity to address the Committee on matters within its terms of reference.

Background

2. The Hawke’s Bay Regional Council’s Standing Orders provide for public forums as follows:

14. Public Forums

Public forums are a defined period of time, usually at the start of a meeting, which, at the discretion of a meeting, is put aside for the purpose of public input. Public forums are designed to enable members of the public to bring matters to the attention of the local authority.

In the case of a committee or sub-committee, any issue, idea or matter raised in a public forum must also fall within the terms of reference of that meeting.

Requests must be made to the HBRC Governance Team (06 835 9200 or governanceteam@hbrc.govt.nz) at least one clear day before the meeting; however this requirement may be waived by the Chairperson.

14.1 Time limits

A period of up to 30 minutes, or such longer time as the meeting may determine, will be available for the public forum at each scheduled Regional Council, Corporate & Strategic Committee, Environment & Integrated Catchments Committee and Regional Transport Committee meeting.

Speakers can speak for up to 5 minutes. No more than two speakers can speak on behalf of an organisation during a public forum. Where the number of speakers presenting in the public forum exceeds 6 in total, the Chairperson has discretion to restrict the speaking time permitted for all presenters.

14.2 Restrictions

The Chairperson has the discretion to decline to hear a speaker or to terminate a presentation at any time where:

 a speaker is repeating views presented by an earlier speaker at the same public forum

 the speaker is criticising elected members and/or staff

 the speaker is being repetitious, disrespectful or offensive

 the speaker has previously spoken on the same issue

 the matter is subject to legal proceedings

 the matter is subject to a hearing, including the hearing of submissions, where the local authority or committee sits in a quasi-judicial capacity.

14.3 Questions at public forums

At the conclusion of the presentation, with the permission of the Chairperson, elected members may ask questions of speakers. Questions are to be confined to obtaining information or clarification on matters raised by a speaker.

14.4 No resolutions

Following the public forum no debate or decisions will be made at the meeting on issues raised during the forum unless related to items already on the agenda.

Decision-making process

3. 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 Public Forum speakers’ verbal presentations.

Authored by:

Leeanne Hooper

Team Leader Governance

Approved by:

Desiree Cull

Strategy & Governance Manager

Attachment/s

1 ⇩

Corporate and Strategic Committee Terms of Reference 2023-2025

Hawke’s Bay Regional Council

Corporate and Strategic Committee

13 November 2024

Subject: Regional Economic Development Agency update

Reason for report

1. This paper provides an update on the establishment and operations of the Hawke’s Bay Regional Economic Development Agency (HBREDA).

Background

2. Councils in the Hawke’s Bay region resolved to fund HBREDA in late 2021. The organisation was formed as partnership between local government, business, and iwi/hapū.

3. Following legal advice, the legal structure for HBREDA was confirmed to be a council organisation (but not a CCO) in the form of a limited liability company and governed by an independent skills-based board. Shareholdings in the HBREDA company were agreed by council CEs and the Matariki Governance Group (MGG) to be in equal thirds between business, iwi/hapū and local government. Fourteen shareholder entities are represented within these three groupings.

4. The MGG set up a board appointments panel and appointed the Board in December 2022. Board members are:

4.1. Alasdair MacLeod (Chair)

4.2. Shayne Walker

4.3. Caren Rangi

4.4. Erin Simpson

4.5. Rawinia Kamau (resigned May 2024).

5. The Matariki Governance Group was nominated by shareholders, via the HBREDA constitution, as the shareholder representative.

6. The funding committed by councils in December 2021 is allocated between councils as outlined in the table below.

7. Prior to HBREDA’s establishment, some of the funds set aside for HBREDA were allocated to the operation of the Business Hub in Ahuriri, shifting the business support agencies to Hastings and setting up a new business hub, the Regional Freight Distribution Strategy, consultant support to assess the needs of business post-cyclone, and consultant and legal costs for the establishment of HBREDA.

HBREDA establishment update

8. Lucy Laitinen was appointed as Chief Executive of HBREDA and commenced in 14 August 2023.

9. HBRREDA was incorporated on 14 September 2023 with a constitution that outlined the shareholder arrangements and appointed the Matariki Governance Group as the shareholder representative.

10. The Shareholders’ Charter was approved at a meeting of shareholders on 23 February 2024. This lays out the governance, reporting, and funding arrangements for the company. The Charter states that the Matariki Governance Group, as the shareholder representative, shall agree an annual letter of expectations (LOE) with the HBREDA Board. The process for agreeing the annual letter of expectations must allow for an opportunity for shareholder entities to provide their input/feedback into the letter. The Matariki Governance Group has the final signing authority, on behalf of shareholders. HBREDA’s governance arrangements are illustrated below.

11. The Shareholders’ Charter lays out 8 operating principles to assist HBREDA in determining its work programme (to be detailed in the LOE). The full Charter can be referred to in Attachment 1.

12. The HBREDA Shareholders’ Charter, approved on 23 February, defines the letter of expectations (LOE) as the mechanism for Matariki, the shareholder representative, and HBREDA to agree work programme priorities, reporting, and performance measures for the company.

13. HBREDA provided the Matariki Governance Group a draft LOE for the six month period starting 1 July 2024 at the 5 April 2024 meeting, asking the MGG to provide it to shareholder entities for feedback with a view to agreeing the LOE at the 21 June 2024 Matariki meeting.

14. Over time, when Matariki has the capacity available, HBREDA has recommended a move to a process where Matariki prepares a LOE each year, with input from all shareholder entities, and provides it to HBREDA, which then responds with a Statement of Intent. This would allow for the development of a robust and transparent process to secure shareholder feedback and input and allow HBREDA to exercise its independence through developing a Statement of Intent in response.

15. The MGG is reviewing an LOE laying out HBREDA’s work programme, performance measures, and reporting requirements for a six-month period. The LOE will be annexed to HBREDA’s funding agreement with councils.

16. The financial reporting provided by HBREDA to the Matariki Governance Group will meet the reporting requirements for local government expenditure. It is Matariki’s responsibility to ensure this reporting, along with narrative reporting, is disseminated to shareholder organisations. It is not expected there will be any additional formal reporting mechanisms to shareholders outside of those outlined in the Letter of Expectations, nor separate KPIs. HBREDA will continue to respond to requests from shareholders, such as HBRC, to provide updates directly on its activities. These will not be considered part of HBREDA’s formal reporting to shareholders.

17. Following the approval of HBREDA’s first LOE, HBREDA will sign a funding agreement with the funding councils. HBREDA is currently receiving tax and accounting advice on the draft agreement. We are also in the process of clarifying the treatment of pre-incorporation expenses, which is relevant to HBRC because HBRC held HBREDA’s funding before it was established.

Establishment of Te Rae

18. The responsibility for running the new business hub was given to HBREDA before the company was established. Due to the shift of the previous business hub away from Ahuriri to Hastings, HBREDA ‘inherited’ a building project.

19. HBREDA turned the building project into ’Te Rae’, the new business hub, which was blessed and opened to the public on 23 February 2024. Te Rae houses the business support agencies (Chamber of Commerce, NZTE, Business Central, and Export NZ) and HBREDA, and provides six meeting rooms for public hire. HBREDA has partnered with Toi Mairangi to provide gallery space for local artists in the events/meeting space.

20. The Te Rae website can be accessed at www.terae.nz. HBREDA is seeking clarification from the MGG that all councils should receive free use of the rooms.

21. HBREDA has just taken over the lease on 101 Queen St East, where Te Rae is located, from Hastings District Council and now has licenses to occupy with tenants. A considerable portion of HBREDA funds have been put toward the design and fitout of Te Rae. Landlord and operational responsibility for Te Rae will be an ongoing part of HBREDA’s responsibilities.

Telecommunications resilience report

22. HBREDA engaged consultant Jonathan Brewer to conduct a review of Hawke’s Bay’s telecommunications resilience as a contribution to the recovery, to investigate the widespread telecommunications outage that occurred after Cyclone Gabrielle and develop recommendations. The Regional Recovery Agency is responsible for developing an action plan for next steps. The report will be released shortly.

RFPs: ‘Research into understanding the HB Economy’ and ‘Provision of Regional Dashboard and Economic Insights’

23. HBREDA published two RFPs in May and is currently evaluating esponses. Both the research and the ongoing provision of economic and wellbeing data will inform HBREDA’s future work programme and will provide useful insights and data for all of our stakeholders.

Matariki secretariat

24. HBREDA has been asked to fund and support the Matariki secretariat. It has contracted a board secretary, communications function, and just recently a strategic advisor. A grant of $60,000 has recently been provided by MSD to support these costs as well as the development costs of a Matariki website, when appropriate.

Decision-making considerations

25. 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 Regional Economic Development Agency update.

Authored by:

Tracey O'Shaughnessy

Treasury & Investments Accountant

Approved by:

Susie Young

Group Manager Corporate Services

Attachment/s

1 ⇩	HBREDA Charter
2 ⇩	Matariki letter of expectations
3	July 2024 economic performance report	Under Separate Cover online only

Hawke’s Bay Regional Council

Corporate and Strategic Committee

13 November 2024

Subject: HBRIC quarterly update

Reason for report

1. This item provides HBRIC’s quarterly update.

Executive summary

2. During the first quarter of FY24/25, the Group transitioned its managed funds portfolio to Harbour Asset Management.

3. Managed Funds: From 1 July to 31 October, the Group portfolio grew by $6.9 million, representing a 4.2% year-to-date increase.

4. FoodEast: While new tenants are signing on, market conditions remain challenging.

5. The HBRIC FY24 Group financial statements have been approved, and the audit is now complete.

6. Investment Strategy: HBRIC continues implementing Council’s new investment objectives. Further updates are provided on Council’s forestry investments, Napier Leasehold Properties and Wellington leasehold properties.

Managed Funds

7. As of 30 June 2024, HBRC and HBRIC held the following managed funds portfolios:

Fund	Jarden	Mercer	Total
*HBRC - LTIF*	$25,999,654	$25,830,971	$51,830,625
*HBRC - FIF*	$42,717,326	$24,130,757	$66,848,083
		*HBRC Total*	$118,678,708
*HBRIC - FIF*	$15,607,038	$33,247,264	$48,854,302
		*Group Total*	$167,533,010

8. HBRC’s portfolio was fully transferred to Harbour by the end of July. As of 31 October, the combined HBRC portfolio had increased by 4.1% ($4,905,494).

9. HBRIC’s portfolio was fully transferred by the end of October and, as of 31 October, had increased by 4.3% ($2,085,279).

FoodEast

10. FoodEast is not immune to the current state of the commercial and industrial property markets and, despite good progress, faces challenges in securing tenants. Management is actively exploring opportunities to promote the facilities and attract new tenants in this challenging leasing market. The team takes a proactive approach to delivering an effective commercial strategy while adhering to Kanoa’s innovation funding requirements.

11. The AGM was held on-site on 14 October, and the facility’s official opening is scheduled for early December.

Napier Port

12. Napier Port reported a 3.4% increase in container cargo volumes and a 9% rise in bulk cargo for the year ending 30 September 2024. The growth in container volumes was driven by the recovery of refrigerated exports and higher exports of wood pulp and timber, as Pan Pac’s production mills resumed full operations. Bulk cargo volumes also grew, primarily due to strong log exports, including windthrown and unprocessed logs from Pan Pac. Additionally, Napier Port received 89 cruise vessel calls over the 2023/24 period.

13. The final dividend will be announced in late November, with the Annual Shareholder Meeting scheduled for early December.

Council-initiated Investment Performance Review

14. In 2023, the Council reviewed its approach to managing investments, which are either directly owned or held by its wholly owned CCTO, HBRIC Ltd.

Asset (June ’24)	HBRIC $000	HBRC$000
Napier Port	272,800
FoodEast	3,203
Managed Funds	48,854	118,723
Wellington Leasehold		24,100
Napier Leasehold*		9,017
Forestry Tree Crop		11,898
Forestry (NZUs)**		8,404
Entity Total (Gross)	$324,857	$172,142
Group Total (Gross)	$496,000

*Accounting for estimated $33 million lease receivables liability to ACC.
**Based on NZU value of $50.50 as of 30/6/24.

Council’s Investment Objectives

15. HBRIC has been directed to maximise the commercial value of the Group’s investment portfolio, ensuring a steadily growing dividend for the Council. The targeted outcomes from this portfolio include:

Cash dividend generation

15.1. FY24/25: $12.5 million (plus a special dividend of $2.5 million)

15.2. FY25/26: $13.0 million (plus a special dividend of $300,000)

15.3. FY26/27: $13.5 million.

Capital protection

15.4. Aiming to safeguard the managed funds portfolio at approximately $4.5 million per annum, based on a long-term inflation target of 2.5%.

Resilience Fund

15.5. Establishing a new fund equivalent to one year’s Napier Port dividend, estimated at $7-8 million.

16. While the Group’s portfolio, valued near $500 million, may seem sufficient to achieve these targets, various assets are either held for non-financial purposes (fully or partially) or consist of legacy investments that yield low returns.

Forestry Tree Crop

17. Despite projected forestry revenue of approximately $12 million over the next four years, net returns are expected to be minimal after accounting for direct harvest and internal costs. Although listed as an investment asset, the tree crop primarily serves as an irregular source of internal funding for Council objectives (e.g. erosion control) across these properties.

18. HBRIC believes the forestry estate should not be considered a core investment asset contributing to the Group’s primary financial objectives.

19. Notably, two Central Hawke’s Bay properties in the forestry estate—originally acquired for proposed land-based wastewater treatment initiatives that did not proceed—are planted with relatively low-value species. The Council may wish to consider a process that investigates reallocating this capital to higher-priority activities.

NZUs

20. HBRC currently holds 186,472 New Zealand Units (NZUs). Of these, 13,705 are not associated with a carbon accounting area and are thus ‘unencumbered’, meaning they can be sold at any time on the spot market. An additional 118,569 units are considered low-risk and also available for immediate sale, although it is recommended that a 20% buffer be retained to account for various modeling and real-world uncertainties.

21. With the current price of NZUs around $60, the unencumbered units are valued at approximately $178,000, while the low-risk units, after accounting for a 20% contingency, are valued at $5.69 million.

22. The Council may consider selling NZUs valued at up to $2 million to meet increased dividend requirements under the Long Term Plan. This proactive approach could help bridge potential shortfalls in returns from the managed funds portfolio, which may fluctuate annually due to credit and equity market volatility. Before proceeding, the Council should ensure these NZUs are not required to support other organisational objectives.

Napier Leasehold Property Portfolio

23. In 2013 the ex-Harbour Board portfolio comprised 628 individual properties sited on leasehold land. In some cases, the leasehold interest had been cross-leased and, therefore, had multiple dwellings on a single leasehold estate. The portfolio valuation for the leasehold interest at the time was $48m.

24. In return for a lump sum of $37.651, HBRC sold the cashflows arising from rents from this portfolio to ACC for 50 years from 1 July 2013 until 30 June 2063. These funds sit within Council’s managed funds reserves.

25. Since the agreement was signed, 358 individual properties (occupying 285 leases) have been freeholded. As at 30 June 2024, the value of the remaining properties is $42m but this is partially offset by the outstanding liability to ACC arising from the obligation to pass rental cashflows through.

26. HBRC receives a portion of rental income and proceeds of property freeholding, but this is a very complex financial arrangement which makes returns forecasting very difficult. For the period 1 January 2019 to 30 June 2024 investment income has averaged approximately $400,000 pa.

27. HBRIC and HBRC have agreed to jointly develop a detailed financial model to better forecast future returns. In the meantime, the investment income is being treated as forming part of the Group’s cash dividend requirement.

Wellington Leasehold Property Portfolio

28. Leasehold interest in 11 inner-city residential and central area properties increased from 2020 valuation of $17.75 million to the current $24.1 million, with one property sold for $628,000 in FY24. This represents an annualised value increase of 6.8% pa.

29. Rental income rose from $813,596 in 2020 to $930,959, contracted for FY25. Rent reviews occur every 14 years, with a weighted average lease term of approximately 7 years across all properties. Current gross yield from this investment is 3.9%.

30. In October, HBRIC directors toured the properties and consulted with a professional advisor for a portfolio review. Key observations include that the properties are located in three premium, well-positioned areas in Wellington. However, market conditions in Wellington’s property sector are currently very weak. It is generally recognised that the best buyer for a leasehold interest in land is often the lessee, and lease renewal is an ideal opportunity to explore a sale. The portfolio is relatively illiquid, and transactions may take some time.

31. Notably, three properties, representing about half the portfolio’s value and income, are leased to a single tenant and are due for lease renewal in October 2025. This upcoming renewal provides an opportunity to assess the tenant’s interest in freeholding the property.

Decision-making considerations

32. 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 - strategic assets and investment structure report.

Authored by:

Tom Skerman

Contractor

Approved by:

Susie Young

Group Manager Corporate Services

Attachment/s

There are no attachments for this report.

Hawke’s Bay Regional Council

Corporate and Strategic Committee

13 November 2024

Subject: Organisational Performance Report for the period 1 July - 30 September 2024

Reason for report

1. This item presents the Organisational Performance report for the period 1 July – 30 September 2024.

Organisational Performance Report content

2. The attached report contains four parts:

2.1. Executive summary including highlights and challenges.

2.2. Corporate metrics that focus on how we are performing across a number of corporate-wide measures such as employee turnover and official information requests.

2.3. Level of service measures by group of activities with traffic light status and commentary.

2.4. Activity reporting with non-financial traffic light status and commentary, and financial status and commentary rolled up to the group of activities.

3. Organisational performance reports were established in 2018. The status and commentary reporting are rolled up from budget lines to activity level. Commentary by budget lines is still available to committee members on request to staff.

4. Staff complete their reporting in a software tool called Opal3. For LOSM and activity reporting, staff select the status (red, amber, green) and provide commentary on what they did in the quarter against their annual work plans.

Points of interest

5. Level of service performance measures (LOSMs) are included in their totality this quarter rather than by exception. This is the first quarter of the new Three-Year Plan, and there are 16 new measures and a further 3 that have been adjusted from the previous Long Term Plan.

6. Summarised financial reporting shows actual versus budget by activity. This includes operational and capital expenditure by activity, plus funding for the group. Commentary is also provided for the group.

Corporate metrics

7. Annual staff turnover continues to drop from its high two years ago.

8. Our Customer Service team has had an extremely busy quarter following rates invoices being sent out. All key forms of contact with the public are up on the same quarter last year.

9. LGOIMAs are at an all-time quarterly high of 57 – previous high of 56 was the quarter following Cyclone Gabrielle.

Performance measures reporting

10. Staff have reported 7 performance measures as ‘off track’. A further 7 cannot be reported on until later in the year, and reporting was ‘not available’ for 3 measures (all in HBCDEM).

Activity reporting

11. Staff have reported 2 activities as ‘off track’ from their usual workplans. This is the same as last quarter.

12. Financial reporting shows that 4 of the 6 Groups of Activities are over budget. Commentary is provided to provide context.

Decision-making considerations

13. 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 Organisational Performance Report for the period 1 July - 30 September 2024.

Authored by:

Sarah Bell

Team Leader Strategy and Performance

Approved by:

Desiree Cull

Strategy & Governance Manager

Attachment/s

Quarterly Organisational Performance Report 1 July – 30 September 2024

Under Separate Cover online only

Hawke’s Bay Regional Council

Corporate and Strategic Committee

13 November 2024

Subject: Financial report for FY24-25 to 30 September 2024

Reason for report

1. This report presents the financial results of the Council for the three months to 30 September 2024.

Background

2. Financial performance is reported to the Corporate and Strategic committee quarterly. The report presented today is for the first quarter of the 2024-25 financial year.

3. The financial performance statements included are:

3.1. HBRC Statement of Comprehensive Revenue and Expense

3.2. HBRC Statement of Financial Position

3.3. Comprehensive Revenue and Expense by Group of Activities.

Key Points

4. Total operating revenue for the period is $77.4m, which is $40m above budget. Subsidies and grants for sediment and debris and HBRRA are ahead of budget as funding is received ahead of the work being done. Income related to the flood resilience programme of work is behind budget due to timing.

5. Comparably, total operating expenses for the period are $40m above budget at $63.8m, again largely impacted by expenditure on sediment and debris.

6. Borrowings continue to be high while we continue to work through the National Emergency Management Agency (NEMA) and insurance claims. We have received payments for NEMA claims 5 and 6 during the quarter, totaling over $2m. We continue to work on further claims.

7. Liquidity remains high due to the annual rates intake and preparatory work on the NIWE project. Council has pre-funded an external loan repayment of $8m due in April 2025.

8. All managed funds portfolio’s have transition to the new Group Investment Manager.

9. The budgets reflected in this report are year 1 of the Three-Year Plan 2024-2027. Revised budgets are used for management reporting which include the carry forwards of 2023-24 budgets.

Commentary on Statement of Comprehensive Revenue and Expense

10. The actual result to 30 September 2024 is a gain of $13.4m while HBRC budgeted a gain of $14.3m

11. Sediment and Debris (HBRRA) and the Silt Taskforce (HBRC) continue to be significant activities for the organisation, making up $52m of the revenue and $43.4m of the expenditure reflected above ($8.6m of sediment & debris funding has been received that will be spent in Q2). The continuation of this activity was not budgeted in the Three-Year Plan 2024-2027 and, therefore, is the main contributor to the significant variances in revenue and expenditure.

12. After taking out the Hawke’s Bay Regional Recovery Agency (HBRRA) and silt taskforce funding, subsidies and grants are $28m, $10.7m behind budget. This is mainly due to the time taken to work through the NEMA and insurance claims and to start claiming for the Government contribution to the NIWE schemes.

13. The shortfall in other revenue reflects the timing of the HBRIC dividend. The budget is phased evenly across the year but the dividend is received in two installments in Q2 and Q4.

14. Total operating expenses for the quarter were $63.8m of which $23.6m is for the HBRRA (sediment and debris) and $19.6m for the silt taskforce, leaving $20.6m against a budget of $23.4m.

15. The remaining $2.8m operating underspend of is across a number of areas including biosecurity and biodiversity work that increases over the summer months, Total Mobility costs lower than planned and some rephasing required in flood protection budgets. Further detail on financial and non financial information for Groups of Activities is detailed in the Organisational Performance Report.

Commentary on Statement of Financial Position

16. Infrastructure assets continue to increase due to the significant amount of capital work being undertaken to repair assets damaged by Cyclone Gabrielle. The value has increased by $6.5m over the quarter. The end of year budget in the LTP does not include the significant revaluation of infrastructure assets that occurred during the 2023-24 year end.

17. Intangible assets value has increased this quarter by 3.2m, predominantly due to the carbon credits movement trading price increased from $50.50 to $74.88.

18. Napier Port share price is sitting at $2.26 at 30 September, down from $2.48 at the beginning of the financial year. The price on 5 November was $2.23. The driver of the price change has been attributed to the closure of two mills in the Ruapehu District, both of which put cargo through the Napier Port. This is reflected in the Investment in Council-controlled organisations.

19. Trade and other receivables have increased over the quarter as a result of the issue of the annual rates invoices.

20. Cash and Cash equivalents is showing at $63m as of 30 September 2024 with $8m set aside in a short term deposit to repay the LGFA loan maturing in April 2025. See the Treasury commentary for further details on overall cash position.

21. Trade payables are sitting at $62.6m a large portion of which is the sediment and debris work.

Financial summary by Group of Activities (GOA)

22. The following table provides a breakdown of the statement of comprehensive revenue and expense by Group of Activities (GOA). The Organisational Performance Report includes further financial and non-financial commentary for each GOA. Please note that the budgets used in this report are from the LTP and the budgets used in the Organisational Performance Report include subsequent adjustments including approved carry forwards from 2023-24.

23. GOA expenditure includes each activity’s external expenditure, internal staff time, finance costs (interest), depreciation/amortisation and a share of corporate overheads.

Rates Collection

24. The rates and customer experience teams have experienced very high volumes of enquiries and requests for payment plans and remissions, especially following the issue of the rates penalty letters after the due date of 20 September 2024.

25. Rates penalties issued this year totaled $700k (12,111 ratepayers). Last year we issued $552k of penalties to 11,720 ratepayers.

26. Year to date at September the team have processed remissions for utility charges to local authorities ($163k) and $90k of public transport remissions.

27. 140 hardship remissions have been received relating to revenue & financing policy changes and natural calamity. These are now being assessed and remitted where appropriate.

Debt Collection

28. As at 30 September 2024 the Council had $4.2m of outstanding trade debtors. This compares to $9.1m at the end of last financial year (June 2024) and $13.4m a year ago (September 2023). Receivables from government agencies had inflated previous balances.

29. The level of debt overdue by more than 60 days has decreased from $1.3m a year ago to $753k now.

30. On the rates side we currently have $12.5m outstanding (including sustainable homes $1.5m) with $9.6m related to the latest rates invoices issued for 2024/25. At the same time last year we had $11.2m outstanding (sustainable homes $1.5m) with $8.6m related to the 2023/24 rates invoices that had just passed their due date. This increase is in line with the average rates increase for the year and as such does not reflect a significant change in the number of ratepayers not able to pay their rates (also reflected in the small increase in the number of rates penalties issued).

Commentary - Treasury

31. All short-term borrowings held to fund cyclone recovery operations were either repaid or rolled into long term debt prior to 30 June due to the uncertainly of insurance proceeds value and timings.

32. No new borrowing has been drawn during the quarter and it is anticipated Council may enter the December/January LGFA tender to assist with funding of the NIWE project.

33. HBRC has however submitted an application for a Green Loan with LGFA to fund the NIWE project and if successful will replace the proposed draw-downs above. While green loans provide an additional 5 basis points reduction on interest costs they carry additional requirements and the criteria is tight. We expect an outcome on our application prior to Christmas.

34. The annual insurance renewal process is now complete and we are awaiting insurance invoices. While the premium levels are in line with prior years, additional asset coverage is up by 35-40%. A full breakdown of insurances will be provided to Risk and Audit once all invoices are received.

35. At 31 October HBRIC had completed the transition of all managed portfolio’s to Harbour Asset Management. All portfolios are operating within the Group SIPO.

Cyclone Recovery

36. The below table summarises the current forecast financial impact from Cyclone Gabrielle response and recovery. It excludes work on sediment & debris and NIWE.

37. Overall we expect to have spent a total of $71.5m in responding to and recovering from the cyclone. The other costs relate to staff time that is not claimable, independent reviews and the like.

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38. NEMA and insurance monies received will be used to repay external loans taken out to cover the expenditure incurred. The balance of the borrowing and the recovery of the council and scheme disaster damage reserves will be funded from general rate funding already included in the LTP.

NIWE Update

39. The following table reflects the spend to date on the various NIWE projects.

40. The majority of the spend to date has been in early design and site investigations across the projects. We are working closely with Crown Infrastructure Partners (CIP) to get our approved Project Delivery Plan (PDP) schedules and milestones confirmed so we can progress our first claim which we expect to be before the end of the calendar year.

41. We anticipate this first claim will be approximately $1.6m. The team are working at pace to get four more PDPs ready for submission also, which will allow for a further claim of circa $2.7m once approved.

42. As mentioned above we are also progressing with Green Loan applications from LGFA for the co-funding portions of the NIWE projects to minimise the cost of borrowing.

Decision-making process

43. 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 Financial report for FY24-25 to 30 September 2024.

Authored by:

Pam Bicknell

Senior Group Accountant

Tracey O'Shaughnessy

Treasury & Investments Accountant

James Park

Management Accountant

Chris Comber

Chief Financial Officer

Approved by:

Susie Young

Group Manager Corporate Services

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