Agenda of Corporate and Strategic Committee - Wednesday, 19 February 2025

Hawke’s Bay Regional Council

Corporate and Strategic Committee

19 February 2025

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 (14.) provide for public forums which are run as follows.

2.1. Public forums are a defined period of time of up to 30 minutes, usually at the start of a meeting, 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.

2.2. Any issue, idea or matter raised in a public forum must fall within the terms of reference and ideally, relate to an agenda item for that meeting.

2.3. Requests to speak at public forums are to be submitted to the HBRC Governance Team (06 88359200 or governanceteam@hbrc.govt.nz) at least 2 working days prior to the meeting it relates to.

3. Some time limits and restrictions apply, including:

3.1. A period of up to 30 minutes will be set aside for the Public Forum and each speaker allocated up to 5 minutes to speak. If the number of people wishing to speak in the public forum exceeds 6 in total, the meeting Chairperson has discretion to restrict the speaking time permitted for all presenters.

3.2. The meeting Chairperson has the discretion to decline to hear a speaker or to terminate a presentation at any time if:

3.2.1. the speaker’s topic / issue is not within the terms of reference for the Committee or on the Agenda for the meeting

3.2.2. the speaker is repeating views presented by a previous speaker

3.2.3. the speaker is criticising elected members and/or staff

3.2.4. the speaker is being repetitious, disrespectful or offensive

3.2.5. the speaker has previously spoken on the same issue

3.2.6. the matter is subject to legal proceedings

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

4. At the conclusion of a speaker’s time, the Chairperson has the discretion to allow committee members to ask questions of speakers to obtain information or clarification on matters raised by the speaker.

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

Decision-making process

6. 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

Hawke’s Bay Regional Council

Corporate and Strategic Committee

19 February 2025

Subject: Financial Report for FY24-25 to 31 December 2024

Reason for report

1. This report presents the financial results of the Council for the six months to 31 December 2024.

Background

2. Financial performance is reported to the Corporate and Strategic committee quarterly. The report presented today is for the second quarter of the 2024-2025 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 $92.8M, which is $18M above budget. Subsidies and grants make up $10m of that variance, with Sediment & Debris and Hawke’s Bay Regional Recovery Agency (HBRRA) being the major contributors.

5. Comparably, total operating expenses for the period are $29M above budget at $75.9M, again largely impacted by expenditure on Sediment & Debris as this programme utilises and expends all funds in line with the DIA Sediment & Debris Funding contractor.

6. Borrowings continue to be high in our short-term position while we continue to work through the National Emergency Management Agency (NEMA) and insurance claims. Reimbursement of costs from Cyclone Gabrielle insurance claims are ongoing and a recent meeting with insurers have been positive to enable us to progress at pace with these to 30 June 2024. to progress these. We have received payments for NEMA claims 7 and 8 during the quarter, totalling over $700K.

7. To 31 December 2024 liquidity was maintained at a high level due to external borrowing in anticipation of cashflow required for the NIWE project. From February 2025 the LGFA has eliminated additional costs to borrow outside tender dates, allowing HBRC to reconsider their liquidity strategy. Rather than hold additional cash on hand, Council will instead increase their Standby Facility to ensure compliance to their liquidity ratio. It is not anticipating any future drawn-down against the standby facility and Council will instead draw funds from the LGFA as required.

8. 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 Council-approved carry forwards of 2023-2024 budgets.

Commentary on Statement of Comprehensive Revenue and Expense

9. The actual result to 31 December 2024 for the total Comprehensive Revenue and Expense is a surplus of $31.4M while the budget was $28.6M surplus.

10. Sediment & Debris (HBRRA) and the Silt Taskforce (HBRC) continue to be significant activities for the organisation. These were due to be completed by 31 December 2024, but an extension to 30 June 2025 has been negotiated. The net position for HBRC from Silt & Debris will be a net $0 result with no cost overruns expected.

11. After removing HBRRA ($1M) and Silt Taskforce funding ($30M), subsidies and grants are $13.6m year to date, $21.2M behind budget, primarily due to the timing of the NIWE programme.

12. Other revenue is exceeding budget by $3.5M due to unbudgeted income on insurance claims and interest income received from holding HBRRA funds.

13. Total operating expenses for the quarter were $75.9M of which $30.4M is for HBRRA and Silt Taskforce, leaving $45M spent year to date against a budget of $46.8M, an underspend of 4%.

14. The remaining $1.8M operating underspend is spread across several areas, including IRG, biosecurity, biodiversity, and ECS/Land for Life. Partially offsetting these underspent areas, there are a couple of key areas of overspend. Legal fees related to the Land Categorisation process are expected to total $90K this financial year, with additional costs anticipated in future years. Furthermore, the ongoing task of opening and maintaining river mouths is projected to result in a $0.5M overspend this year. Continuous drain clearing is also contributing to these overspends.

15. Further detail on financial and non-financial information for Groups of Activities is detailed in the Organisational Performance Report.

16. Due to the increased value of our infrastructure assets from the revaluation, our depreciation costs have gone up. We did not allocate funds in the LTP to cover the additional $250K of infrastructure depreciation in 2024-25 (in layman’s terms, we did not rate to cover this).

Commentary on Statement of Financial Position

17. 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 from $442.4M to $449.7M since the last quarter, giving a $7.3M increase. The end of year budget in the LTP does not include the significant revaluation of infrastructure assets that occurred during the 2023-2024 annual reporting process.

18. Intangible assets value has increased this quarter by $300K, predominantly due to the carbon credits movement in price.

19. Napier Port share price as at 31 December 2024 was $2.57 against $2.26 at 30 September 2024, a total increase of $34M. This is reflected in the investment in council-controlled organisations.

20. Trade and other receivables have decreased since the last quarter by $1.5M due to payments received for rates and our continued focus on collections.

21. Cash and Cash equivalents is at $48M as of 31 December 2024, a decrease of $15M since the last quarter. $8M has been set aside in a short-term deposit to repay the LGFA loan maturing in April 2025.

22. Trade payables are sitting at $60.2M, a decrease of $2.4M from the last quarter which was $62.6M. With spend increasing on capital projects, the value of payables is likely to remain quite high for the balance of the year.

Financial summary by Group of Activities (GOA)

23. 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 2023-2024.

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

Rates collection

25. Rates penalties issued in 2024 totalled $700K (12,111 ratepayers). In 2023 we issued $552K of penalties to 11,720 ratepayers.

26. Year to date at 31 December 2024 the team has processed remissions for utility charges to local authorities ($187K), Public Transport ($99K), Natural Calamity ($71K) and Hardship as a Result of the Policy Changes ($7K).

27. There are 25 remaining hardship remissions received relating to Revenue & Financing Policy changes and natural calamity. These are being assessed and remitted where appropriate.

Debt collection

28. As at 31 December 2024 the Council had $2.49M of outstanding trade debtors. This compares to $9.1M at the end of last financial year (June 2024). Receivables from government agencies had inflated previous balances.

29. For rates specifically, an outstanding of balance of $3.6M remains unpaid with $1.2M related to the latest rates invoices issued for 2024-2025. At the same time last year, we had $5.0M outstanding with $3.0M related to the 2023-2024 rates invoices that had just passed their due date.

Commentary – Treasury

30. With the Silt & Debris operations wrapping up, almost all the funds held on behalf have been exhausted. In the past HBRC has used the interest received on these funds to offset Council’s cost of funds and, moving forward, expects net costs of funds to increase.

31. During the quarter to 31 December 2024 HBRC repaid $5M long term debt to the LGFA and has pre- funded $8M of debt maturing in April 2025.

32. In December HBRC commenced a programme of short-term borrowing to fund the Crown’s portion of the NIWE project costs. This is initially a commercial note for 4 months while HBRC finalises reimbursement terms with the Crown. HBRC may be required to hold additional debt (estimated at $13M) to fund this cashflow throughout the entire NIWE project.

33. HBRC continues to work through its application to LGFA for a Green Loan to cover its share of the NIWE project costs. This is a slow process; however, once approved, any existing long-term borrowing for this can be converted to a Green Loan at reduced cost of borrowing.

34. All Managed Fund Portfolios are now held with Harbour Asset Management and performing well. Markets have been favourable and to 31 December 2024 the managed funds have returned net 7.56% year to date. Looking forward it is possible HBRIC may, after ensuring inflation protection of the assets, realise a portion of fair value gains to fund the cash dividend required from investment assets under the SOE to HBRIC. Any gains realised will be held in a resilience reserve.

Cyclone Recovery

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

36. 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.

37. 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.

Decision-making considerations

38. 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 31 December 2024 staff report.

Authored by:

Pam Bicknell

Senior Group Accountant

Megan McKenzie

Senior Business Partner

Tracey O'Shaughnessy

Treasury & Investments Accountant

Tuesday Walker

Graduate Financial Accountant

Chris Comber

Chief Financial Officer

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

Wednesday 19 February 2025

Subject: Organisational Performance Report for the period 1 October - 31 December 2024

Reason for report

1. This item presents the Organisational Performance report for the period 1 October – 31 December 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 by exception (i.e. measures with red or orange traffic light status with 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.

Corporate metrics

5. Employee numbers have dropped for the second quarter in a row despite further recruitment to support additional flood resilience work programmes. HBRC continues to hold at least 20 vacancies as part of its fiscal savings plan.

Level of service measures

6. Staff have reported 11 performance measures as ‘off track’. A further 6 are reported as ‘not due’ and will be reported on at the year-end in the Annual Report.

Activity reporting

7. Staff have reported 3 activities as ‘off track’ from their usual workplans. This is 1 more than last quarter.

8. Financial reporting shows that 1 of the 6 Groups of Activities is over budget. Commentary is provided to provide context.

Decision-making considerations

9. 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 October - 31 December 2024.

Authored by:

Sarah Bell

Team Leader Strategy and Performance

Approved by:

Desiree Cull

Strategy & Governance Manager

Attachment/s

1 ⇨

2024-25 Q2 HBRC Organisational Performance Report

Under Separate Cover
online only

Hawke’s Bay Regional Council

Corporate and Strategic Committee

19 February 2025

Subject: Regional Economic Development Agency update

Reason for report

1. This item provides a brief update from the Regional Economic Development Agency (REDA), which will be presented by Lucy Laitinen, CEO. This memo provides an update of HBREDA’s activity since HBREDA’s last update to HBRC in November 2024. Lucy will provide an overview of the key findings of HBREDA’s recently published research into the HB economy at the meeting. Hard copies of the research and the HBREDA Annual Report have already been provided to councillors.

Background

2. HBREDA held its inaugural shareholders’ AGM on 13 December where it tabled its annual report and approved annual accounts and reported against its letter of expectations (LOE).

3. Prior to the shareholders’ AGM, HBREDA contracted independent consultant Kevin Jenkins to undertake an external review of the Board, as required by its Governance Charter every two years. The review was provided to shareholders at the Shareholders’ AGM.

4. HBREDA’s first LOE ended in December 2024 and the Matariki Governance Group will shortly issue a new LOE to HBREDA following input from shareholders. Following receipt of the LOE, HBREDA will present a statement of intent to shareholders outlining its intended work programme for the year

General

5. HBREDA is supporting the Regional Recovery Agency, where possible, with the regional deal process, primarily through providing economic research and insights to support the application process.

6. HBREDA has been continuing to find opportunities to advocate for increased resilience in HB’s telecommunications network and the two-year anniversary of Cyclone Gabrielle has enabled HBREDA to provide messaging in the media around our continued telecommunications vulnerabilities.

7. The four latest district-level Community Compass reports are now on the HB REDA website: https://www.hbreda.co.nz/community-compass.

Current projects

8. Understanding the HB Economy’’ research. HBREDA launched its study into the HB economy in December at an event for business, followed by a presentation to the Matariki Governance Group. The research gives a comprehensive overview of our economy and the main barriers and opportunities for growth. There are a number of high level recommendations, which we are currently working through and which will inform our work programme as well as regional priority-setting.

9. The connection between productivity and Māori health outcomes (NZIER). This project is a partnership between HBREDA and Tīhei Takitimū the Iwi Māori Partnership Board. It aims to estimate the value of lost productivity due to priority health conditions in working age Māori in Hawke’s Bay with a view to building a case for increased and more targeted investment in Māori health. Low productivity is arguably the number one problem in our economy and with an increasing Māori population it makes sense to address systemic issues such as the health profile of Māori as one avenue with the potential to lift productivity by ensuring a more productive workforce.

10. Analysis of the economic value of SH2 (NZIER). This project is a partnership between HBREDA and Trust Tairāwhiti. Its aim is to investigate the economic and social impacts of investing in more resilient road infrastructure between Napier and Gisborne. This includes future potential impacts from investment not only to existing businesses but also to other stakeholders within the region as well as wider socioeconomic benefits such as educational and health benefits. If a solid evidence base can be built this piece of work will be used to advocate for increased investment.

11. FoodEast business case. HBREDA will shortly start a project with MartinJenkins looking at the opportunity to develop a fermentation capability at FoodEast as well as explore other options to activate the site.

12. Review of tourism in Hawke’s Bay. HBREDA is shortly about to start a project with MartinJenkins to investigate the value of tourism in Hawke’s Bay and opportunities to grow that sector.

Operation of Te Rae

13. The number of clients continues to grow and feedback remains positive. HBRC past and forecast use of the Te Rae rooms is shown below. The ‘value’ of the rooms at our rates was $9730 from July 2024 to February 2025. All councils receive free use of the rooms.

Next steps

14. HBREDA will respond to the LOE with a statement of intent outlining its planned work programme, which will largely be based on the recommendations of our research into the economy.

Decision-making considerations

15. 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 & approved by:

Lucy Laitinen

HB REDA Chief Executive

Attachment/s

There are no attachments for this report.

Hawke’s Bay Regional Council

Corporate and Strategic Committee

Wednesday 19 February 2025

Subject: HBRIC quarterly update

Reason for report

1. This item provides HBRIC’s quarterly update.

Executive summary

2. During the second quarter of FY24/25, the Group assets increased by $25.6m, made up by a $9.9m increase in NPHL share price, a $13.6m increase in managed funds and $2.1m increase on property and carbon credits revaluation.

3. Managed Funds: From 1 July to 31 December, the Group portfolio grew by $13.6 million, representing an 8.11% year-to-date increase.

4. FoodEast: Progress in tenanting has been made given challenging market conditions

5. Investment Strategy: HBRIC continues to focus on delivering Council’s new investment objectives.

Managed funds

6. As of 30 December 2024, HBRC and HBRIC held the following managed funds portfolios with Harbour Asset Management:

Fund	Total
*HBRIC - FIF*	$53,097,613
*HBRC - FIF*	$72,135,842
	$125,233,455
*HBRC - LTIF*	$55,957,261
	$181,190,716

7. Chris Di Leva, Harbour Asset Management’s Head of Global & Multi Asset Investment, will be in attendance and provide an overview presentation to the Committee.

FoodEast

8. FoodEast management continues to make progress in tenanting in challenging market conditions. Focus has shifted from food-producing businesses to agritech businesses, and a strategy is in place for engaging with the regional agritech industry.

9. The highlight of Q2 was the official opening of FEH, with the Hon. Shane Jones attending and unveiling a commemorative plaque marking the occasion.

10. FoodEast also reported progress in the development of its commercial and innovation activities. Total rents received, inclusive of conference room income and on-charge costs less lease incentives were $78,199 for the first half of the financial year relative to budget of $90,687. Unbudgeted project income of $12,500 was received from Sustainable is Attainable (with a further $12,500 to be received in Q3, and $25,000 per year in FY2026 and FY2027) along with unbudgeted grant income of $10,000. Overall revenue was $100,699 relative to a budget of $90,687.

Napier Port

11. The Napier Port Annual Shareholder Meeting was held on 19 December 2024.

11.1. Revenue for the 2024 financial year increased 15.9% to $141.4 million from $122.0 million in the previous year, following growth across all trade areas.

11.2. Underlying net profit after tax of $20.7 million was up 94.6% from $10.7 million in the prior year.

11.3. Reported net profit after tax of $24.8 million was up 49.7% on the prior year’s $16.6 million.

11.4. Post-Cyclone Gabrielle business interruption insurance claim contributed further $9.25 million to earnings.

12. Directors declared a fully imputed final dividend 6 cents per share, taking total dividends for the 2024 financial year to 9 cents per share, up from 5.25 cents for the prior year, and representing a gross dividend yield of 5.5%.

Council’s cash investment expectations

13. Council set FY24/25 cash return expectations from its Group investment portfolio of $15,050,000. This comprised a $12,500,000 base Annual Plan expectation plus a one-off special dividend of $2,550,000.

14. To date, the following cash receipts from investment assets have been paid to Council:

14.1. Napier Port Dividend (Ex HBRIC) $6,330,000

14.2. Wellington Leasehold Income $ 496,770

14.3. Napier Leasehold Income $ 312,215

Total $7,138,985

15. Following a six-month performance review of the Group’s Managed Funds Portfolio managed by Harbour Asset Management, at its 10 February 2025 Board meeting HBRIC recommended that $5,000,000 be drawn against the $12,676,439 YTD group portfolio gains. This sum to be split between HBRC ($3.7m) and HBRIC (1.3m).

16. Following these payments $12,138,985 (or 81%) of the full year cash requirements will have been delivered and the managed funds’ portfolios will remain in compliance with their capital protection thresholds.

17. Of the remaining $2,911,015 scheduled to be paid to Council before the end of the financial year, HBRIC is budgeting to receive a further $3,220,000 by way of interim dividend from Napier Port, which provides confidence that Council’s 2024-2025 cash expectations from Group Investments will be fully met.

18. In summary, the early payment to Council is the result of a higher than budgeted final dividend from Napier Port and a strong six-month performance from the managed funds portfolio. However, a solid H1 performance is not guarantee for a similar result in H2. A further update will be provided at HBRIC’s next quarterly update to the Committee, including HBRIC’s projections for the establishment and seeding of the Income Resilience Reserve, as requested by Council.

Decision-making considerations

19. 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 quarterly update.

Authored by:

Tracey O'Shaughnessy

Treasury & Investments Accountant

Tom Skerman

HBRIC Ltd Commercial Manager

Approved by:

Susie Young

Group Manager Corporate Services

Attachment/s

1 ⇩	HBRIC December 2024 Financial Statement
2 ⇨	HBRIC Investment Performance update February 2025		Under Separate Cover *online only*