Agenda of Regional Council Meeting

	Agenda Item	Action	To Respond	Due Date	Status Comment
5	Action Items	Future Action Items reports to have any emails sent to Councillors containing information appended to the list	LH	Aug 13	First report to include emails, if there are any, will be for the 28 August meeting.
5	Action Items	Update for Councillors on progress with the Dalton Street remediation work and legal processes seeking costs	MA	Sept 13
5	Action Items	Update on work programmes associated with taking forward the use of alternative methods of managing irrigation water resources put forward by submitters to the Annual Plan – such as using rostering & rationing, global consents, user groups, etc	IM	Nov 13

	Agenda Item	Action	Person Responsible	Due Date	Status Comment
13	Guppy Road Reserve Land Transfer	Screening ‘landscaping’ of the more unsightly parts of the Ops Group site from the motorway to be carried out on site	GH	July 2013	Planting commenced wk beginning 26 August.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 28 August 2013

SUBJECT: HBRIC Ltd Board of Directors - Councillor Directors Perceived Conflict of Interest

Reason for Report

1. At its meeting on 31 July Council considered a paper that it had sought from HBRIC Ltd on options for managing perceived conflict of interest and perceived pre-determination issues that had arisen as a result of three elected councillors being Directors of the HBRIC Ltd Board of Directors.

2. As a consequence of the HBRIC Ltd paper and legal advice from Sainsbury Logan and Williams Council deliberated on this issue. Notwithstanding the recommendations Council:

2.1. Determined that action needs to be taken to reduce the perception of conflict of interest and/or pre-determination by councillor directors on the Board of HBRIC Ltd in relation to HBRC decisions on the Ruataniwha Water Storage Project; and

2.2. Requested that a further report on options to reduce the perception of conflict of interest by councillor directors on the Board of HBRIC Ltd, including costs and implications associated with those options, be brought to the August Regional Council meeting for consideration.

3. The purpose of this report is to meet the requirement set out in para 2.2.

HBRIC Ltd Constitution

4. The Company Constitution incorporates matters dealing with both appointment and removal of directors. The relevant excerpts can be summarised as follows:

4.1. The maximum number of Directors is seven;

4.2. HBRC shall be entitled to appoint up to seven directors with three of those Directors being existing Council members (“Councillor directors”) and three Directors being independent of the Council (“Independent Directors”) and the Managing-Director;

4.3. HBRC can appoint or remove directors or nominate alternates;

4.4. HBRC can appoint any person who is not already a Director and who is approved by the majority of other Directors to act as an alternate for a Councillor Director, either for a specified period or during the absence or inability to act from time to time of the Councillor Director;

4.5. A quorum for a Board meeting is a majority of the Directors who are entitled to vote at that meeting to include not less than two Councillor Directors or their alternates

Perceived Councillor Director Conflict of Interest and/or Predetermination Issues

5. Council has requested that a range of options for addressing perception issues presented in the July paper, or identified at the July meeting, be assessed in relation to likely costs and other implications.

6. It is worth noting that the legal advice held that there do not appear to be any legal reasons to alter the current governance arrangements for the Board of HBRIC Ltd. However the July paper also noted that the issue of perception of conflict of interest or predetermination needs to be addressed.

7. A range of options have been identified to address the perception of conflict of issue and/or pre-determination by councillor-directors on the Board of HBRIC Ltd in relation to future decisions on any HBRC investment in the Ruataniwha Water Storage Scheme.

8. After discussion with legal advisers, and taking a pragmatic approach to how this matter may be addressed, there are several principles that are considered fundamental in determining the way forward:

8.1. The avoidance of perception of conflict of interest at a future event (noting that there are no actual conflicts of interest at the present time)

8.2. Maximising the ability for councillors to take part under Local Government Act decision-making processes in decisions regarding whether HBRC should invest in the RWSS, if such investment is recommended by HBRIC Ltd

8.3. In particular in relation to 8.2 ensuring that the Chairman of Council is available to lead the Council through such a significant decision-making process

8.4. The avoidance of risk that councillor-directors of HBRIC Ltd could be deemed to have pre-determined their position on the RWSS.

8.5. Retention of Council oversight and input (as 100% shareholder) into all other decisions of the holding company.

8.6. Establishment of a timetable for managing the role of councillor-directors on the Board of HBRIC Ltd.

Assessment of Options

Temporary Removal of councillor directors

9. Assumption/Description: Councillor Directors would remain as directors of HBRIC Ltd but would abstain from receiving papers, attending, deliberating or voting on matters relating to the RWSS.

10. Pros:

10.1. Addresses the perception of conflict of interest and pre-determination for HBRC decision making

10.2. Is a temporary measure and allows other matters of HBRIC Board business to be conducted using full Board

10.3. Is cost neutral

11. Cons:

11.1. No representation by elected representatives in HBRIC Ltd decision making processes, removing the benefits of appointing councillors to boards of directors as identified by the Office of the Auditor General in 1994

11.2. Requires a change to the Constitution of HBRIC Ltd in relation to the quorum for a Board meeting

11.3. Workload for remaining directors commensurately increased

11.4. Councillor directors would still have liability for any decisions made by the Board in their absence.

Delegate decision making on RWSS to new subsidiary company

12. Assumption/Description: Establishment of a subsidiary entity comprising external independent directors only to undertake the assessment of the RWSS project.

13. Pros:

13.1. Addresses the perception of conflict of interest and pre-determination for HBRC decision making but only if subsidiary company reports directly to Council

13.2. Subsidiary company could comprise completely commercially-focussed directors

13.3. Subsidiary company would be a wholly owned subsidiary company of HBRIC so under direct control of holding company

14. Cons:

14.1. The Holding Company Board has a decreased workload and activity and is not directly involved in the preparation of a recommendation to HBRC

14.2. It will require the re-write of the Statement of Intent for Hawke’s Bay Regional Investment Company Ltd

14.3. It is a very short-term measure for a very high cost – extra layers of costs would include: additional directors, administration, and establishment costs including professional advice. The estimated cost for establishing the subsidiary for an 8 month period is $196,000.

14.4. Time delays while subsidiary company is established

14.5. Loss of benefit of setting up a new Special Purpose Vehicle if and when the RWSS is approved.

Appoint three alternate directors to replace councillor directors

15. Assumption/Description: Appointment of three alternate directors for a specified period – until such time as a recommendation is made by HBRIC Ltd to HBRC on whether or not to invest in the RWSS. It is assumed that the three alternate directors would be independent.

16. Pros:

16.1. Addresses the perception of conflict of interest and pre-determination for HBRC decision making on the RWSS

16.2. Can be flexible and allow for separate Board meetings – (i) those dealing with RWS (in which alternate directors would take part) and (ii) those dealing with other Board matters (in which councillor directors would take part)

16.3. Could be cost neutral if three current Board advisers – Danelle Dinsdale, David Faulkner, Roger Maaka - replaced councillor directors as alternate directors

16.4. Can be done without changing Company Constitution on assumption that, for quorum purposes, alternates are deemed to be councillor directors.

17. Cons:

17.1. No representation by elected representatives in HBRIC Ltd decision making processes, removing the benefits of appointing councillors to boards of directors as identified by the Office of the Auditor General in 1994

17.2. Can enhance complexity of Board processes if separate meetings required with separate groups of directors for separate matters

17.3. Additional costs possible if alternate directors are not current Board advisers

Appoint two alternate directors and retain one councillor director

18. Assumption/Description: Appointment of two alternate directors for a specified period – until such time as a recommendation is made by HBRIC Ltd to HBRC on whether or not to invest in the RWSS. One councillor director would remain on the Board and would receive papers, attend and deliberate BUT abstain from voting on the RWSS at any HBRC meeting.

19. Pros:

19.1. Retains some Council oversight /input/control into the decision making processes by the holding company

19.2. More cost effective than replacement of all three councillor directors, as only two alternate directors would need to be paid

19.3. The one remaining councillor director can take part in deliberations at Council meetings, while abstaining from voting

19.4. Can be done without changing Company Constitution on assumption that, for quorum purposes, alternates are deemed to be councillor directors.

20. Cons:

20.1. Reduction in representation by elected representatives in HBRIC Ltd decision making processes, reducing the benefits of appointing councillors to boards of directors as identified by the Office of the Auditor General in 1994

20.2. Additional costs possible if alternate directors are not current Board advisers.

Total abstention of councillor directors at Council meetings

21. Assumption/Description: Councillor directors would remain on the Board but they would all abstain from attending, deliberating or voting (or any combination of these) at any Council meeting when the RWSS is being considered.

22. Pros:

22.1. Addresses the perception of conflict of interest and pre-determination for HBRC decision making on the RWSS

22.2. Would be cost neutral

22.3. No changes required to Company Constitution

23. Cons:

23.1. Only six people would be able to vote through the HBRC decision making process for the RWSS and electors would expect that all elected representatives could vote on significant decisions.

Retain status quo until after local body elections

24. Assumption/Description: Retain Board as currently identified in Company Constitution. Review this when considering appointment of councillor-directors to HBRIC Ltd for the new term of Council.

25. Pros:

25.1. Cost neutral

25.2. Retains Council oversight for the appointment of new Napier Port directors

25.3. Ensures Council input into final process for confirmation of investor consortium

25.4. Ensures Council input into ensuring that the final design and construction bid meets criteria important to the values of HBRC

25.5. Representation by elected representatives in HBRIC Ltd decision making processes, removing the benefits of appointing councillors to boards of directors as identified by the Office of the Auditor General in 1994.

26. Cons:

26.1. Perception of conflict of interest and pre-determination for HBRC decision making on the RWSS remains, although with a clear pathway to resolution

Discussion

27. If Council considers that it needs to address the perceived conflict of interest issue now, then it is considered that the most pragmatic approach is to appoint two alternate directors and the retention of one councillor-director for a period until the recommendation is made by HBRIC ltd on either to invest or not invest in the RWSS. The benefits of this option outweigh the negatives especially if two existing board advisers are appointed as alternate directors.

28. Alternatively Council may be of a mind to acknowledge that the management of perception of conflict of interest issues should be the prerogative of the incoming Council. The Company Constitution requires that Council determined the appointments for councillor-directors on HBRIC Ltd within a 3 month period from the date of the local body elections. If it would be of assistance to Council a timetable to manage the role of councillor-directors could be prepared and recommended to the incoming Council.

Decision Making Process

29. Council is required to make a decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained in Part 6 Sub Part 1 of the Act in relation to this item and have concluded the following:

29.1. The decision does not significantly alter the service provision or affect a strategic asset.

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

29.3. The decision does not fall within the definition of Council’s policy on significance.

29.4. The persons affected by this decision are Councillor and Independent Directors on the HBRIC Ltd Transition Board of Directors.

29.5. Options that have been considered include are outlined in the paper.

29.6. The decision is not inconsistent with an existing policy or plan.

29.7. 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

That Council:

1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted policy on significance and that Council can exercise its discretion under Sections 79(1)(a) and 82(3) of the Local Government Act 2002 and make decisions on this issue without conferring directly with the community and persons likely to be affected by or to have an interest in the decision due to the nature and significance of the issue to be considered and decided.

2. Notes confirmation from legal advice that there is no actual conflict of interest for councillor-directors on the Board of HBRIC Ltd at present.

3. Confirms that it has considered the potential solutions for the perceived conflict of interest issue in line with the request made at the July 2013 Council meeting, and either:

3.1. Resolve to appoint two alternate directors to replace two councillor directors on the Board of Hawke’s Bay Regional Investment Company Ltd for a period until such time as a recommendation is made by Hawke’s’ Bay Regional Investment Company Ltd to the Hawke’s Bay Regional Council on whether or not to invest in the Ruataniwha Water Storage Scheme

or:

3.2. Resolve to recommend that the incoming Council consider the perceived conflict of interest issue during its consideration of the appointment of councillor directors for HBRIC Ltd following the local body elections.

Paul Drury

Group Manager

Corporate Services

Liz Lambert

Interim Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 28 August 2013

SUBJECT: HBRIC Ltd Independent Directors' Fees

Reason for Report

1. In April 2013 Council considered a paper from HBRIC Ltd that requested that Council:

1.1. Approves an increase in directors’ fees for HBRIC Ltd for the period from 1 January 2013 until financial and contractual close of the RWSS has been achieved;

1.2. Agrees that HBRIC Ltd directors fees will be externally reviewed and benchmarked to provide a basis for a revised fee level for the period after the RWSS has either been transferred to the implementing SPV, or otherwise terminated;

1.3. Agrees that, for the period from 1 January 2013 until financial and contractual close has been achieved, HBRIC Ltd directors fees be set at $37,500 per year and the Chairman’s fee at 1.75 times the director’s fee ($65,625); and

1.4. Reviews and reconsiders its policy regarding the payment of fees to Councillor Directors to the effect that they are paid normal director’s fees in line with the practice in other Council-owned investment or holding companies that have Councillor Directors.

2. While not making a separate resolution Council did identify that the Company Constitution provided that Directors fees not be paid to Councillor Directors and there was not appetite to change this situation. This matter (1.4) has effectively been dealt with. Council left the matter of the remuneration of independent HBRIC Ltd Board members to lie on the table and for it to be dealt with at the next available council meeting. It is appropriate that this be dealt with now.

Independent Review of Directors Fees

3. Following the presentation of the paper to Council by HBRIC Ltd in April 2013, and the resolution of Council for the paper to ‘lie on the table’, it was deemed prudent by Council staff to commission an independent review of Directors fees for the HBRIC Ltd Independent Directors. On this basis the Institute of Directors (IoD) was commissioned to provide this review for the two non-executive directors and chair of HBRIC Ltd.

4. This independent review provides a basis for an increased fee level for the period until financial and contractual close of the RWSS has been achieved. At this point it is recommended that the HBRIC Ltd fees again be externally reviewed and benchmarked to provide a basis for a revised fee.

5. The approach used by the IoD in advising on remuneration is to establish comparisons with other organisations as well as general levels of directors’ remuneration in New Zealand. In carrying out the review the IoD considered the following information and data:

5.1. Information supplied by Council in relation to Director time commitments and the governance structure of HBRIC Ltd.

5.2. Data from the IoD directors’ fees survey.

5.3. Data, where available, from similar organisations.

5.4. Data from organisations of similar size to HBRIC Ltd.

5.5. Other data on relevant fees that the IoD holds confidentially.

5.6. Comparable remuneration reports and recommendations by the IoD.

6. The benchmarking data from the IoD directors’ fees survey includes information about 1,610 directorships, covering a wide cross-section of organisations. The IoD have reviewed the survey data to find comparators to HBRIC Ltd in a variety of criteria and assessed this data in terms of the level of remuneration for directors and chairs, and the hours of work associated with the remuneration levels.

Findings from Independent Review from the IoD

7. A copy of the IoD Review of Board Remuneration for HBRIC Ltd is provided in Attachment 1 of this paper. The key findings of this report are as follows:

7.1. Current fees for HBRIC Ltd directors and chair are low against benchmark comparators, whereas hours of the role are at the upper quartile.

7.2. After consideration of the time commitments required by HBRIC Ltd directors to carry out their Board functions and the nature of the work carried out by HBRIC Ltd, the IoD have recommended the following fee ranges:

7.2.1. Base director fee $30,000 - $35,000

7.2.2. Base chair fee $54,000 - $63,000

7.3. The IoD note that the above recommendation is informed by what commercial organisations of similar characteristics would pay for similar duties.

7.4. The IoD fees recommendation is based on a combination of:

7.4.1. An understanding of the nature of the organisation and its risk and political environment.

7.4.2. Data from similar organisations and sectors.

7.4.3. The fact that directors and chair hours are at the upper quartile range of hours for comparable sectors.

7.4.4. Application of a standard factor of 1.8 times the base director fee to calculate the chair fee. This makes an allowance for additional hours spent by the chair in meeting preparation and follow-up plus an allowance for other demands and expertise required of the role.

7.5. The top range of the recommendation from the IoD is marginally less than the recommendations provided in the HBRIC Ltd paper to Council in April 2013 which proposed a base director fee of $37,500 and base chair fee of $65,625.

Backdating of Director Remuneration

7.6. Should Council approve an increase in the level of director remuneration for Independent Directors then a decision on the date to which this applies will be need to be determined.

7.7. Should Council agree to backdate Directors remuneration to 1 April 2013, this being the month the original proposal was notified to Council, the financial impact for the remaining three months of the 2012/13 financial year to 30 June 2013 would be in the range of $15,625 - $20,375. These amounts are calculated using the recommended base fee ranges provided in the IoD independent review. There is considered to be sufficient flexibility in the 2013/14 HBRIC Ltd budget to absorb this increase and still meet the projected dividends to be paid to Council as set out in the HBRIC Ltd 2013/14 Statement of Intent.

7.8. An increase in Directors remuneration for the full 12 months of the 2013/14 financial year has been provided for in the 2013/14 HBRIC Ltd budget at the level recommended in the HBRIC Ltd paper presented to Council in April 2013, so any increase in fees would not have a financial impact in the current financial year.

HBRIC Ltd Constitution

8. The Company Constitution incorporates matters dealing with Directors’ Remuneration. The relevant clause is 12.1 of the Constitution and reads as follows:

8.1. The remuneration of Independent Directors will be set by Council triennially on the recommendation of the Board based on market rates. No Directors Fees will be payable to any Councillor Directors.

9. Should Council approve an increase in the level of director remuneration for Independent Directors then a special resolution would need to be adopted to amend the Constitution as it currently reads.

10. On the advice of Stuart Webster of Sainsbury Logan & Williams the resolution to be adopted would be to amend the wording of Clause 12.1 of the Constitution to read:

10.1. The remuneration of Independent Directors will be set by the Council triennially (or such other times as the Council may, in its absolute discretion, resolve) on the recommendation of the Board based on market rates. No Directors Fees will be payable to any Councillor Directors.

Councillor Director Remuneration

11. As outlined in section 1 of this paper the policy regarding the payment of fees to Councillor Directors was dealt with at the meeting in April 2013, with Council determining there was no appetite to change this situation.

12. For information purposes only the IoD has provided some information in relation to this issue which can be found in appendices 1 and 2 of their attached Review of Board Remuneration for HBRIC Ltd.

Decision Making Process

13. Council is required to make a decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained in Part 6 Sub Part 1 of the Act in relation to this item and have concluded the following:

13.1. The decision does not significantly alter the service provision or affect a strategic asset.

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

13.3. The decision does not fall within the definition of Council’s policy on significance.

13.4. The persons affected by this decision are those persons appointed by Council to the Board of HBRIC Ltd.

13.5. Options that have been considered are to continue with the current director fee levels or increase to be in line with market rates.

13.6. The decision is not inconsistent with an existing policy or plan.

13.7. 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

That Council:

2. Agrees that Clause 12.1 of the HBRIC Ltd Constitution be amended to read as follows:

The remuneration of Independent Directors will be set by the Council triennially (or such other times as the Council may, in its absolute discretion, resolve) on the recommendation of the Board based on market rates. No Directors Fees will be payable to any Councillor Directors.

Noting that it is a resolution of the sole shareholder and therefore was a special resolution of the shareholder holding 100% of the shares of HBIRC Ltd.

3. Agrees that in recognition of the high workloads associated with the RWSS currently being undertaken by the HBRIC Ltd Board, that from 1 April 2013 until financial and contractual close of the RWSS has been achieved and Council approves moving from a Transition Board to a full Board, the base director fee be increased to $35,000 per annum and the base chair fee be increased to $63,000 per annum.

Heath Caldwell

Management Accountant

Paul Drury

Group Manager

Corporate Services

Liz Lambert

Interim Chief Executive

Attachment/s

1 View

HBRIC Ltd Directors' Remuneration

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 28 August 2013

SUBJECT: Financial Report for 12 Months Ended 30 June 2013 - Draft Annual Report 2012/13 Adoption for Audit

Reason for Report

1. The purpose of this paper is to provide explanations covering variances both from the re-forecast budgets and from Annual Plan budgets for year ended 30 June 2013. Further, to provide the draft Annual Report to allow Council to adopt it for forwarding to the Audit Office to form the basis of their audit.

Comment

2. The financial information provided in Attachment 1 is not part of the formal Annual Report publication and is provided to Councillors to clarify variances, actual (from reforecast and Annual Plan) to budgets. The Draft Annual Report is provided as attachment 2, which has only been distributed to Councillors and is available to members of the public on request and on HBRC’s website as part of this Agenda.

HBRC Financial Overview

3. The financial overview for the year ended 30 June 2013 (Attachment 1) is set out in a similar format as HBRC receives during the year. The emphasis in this report is to detail and provide explanations for variances (actual compared to reforecast) in projects within each group of activity and for flood control and drainage scheme reserves and other scheme reserves. All these variances affect public good funding.

Draft Annual Plan Document

4. The Chairman and Chief Executive Commentary provides the introduction to the performance overview, and provides the issues raised in the “Right Debate” section of the Long Term Plan and how these have been achieved during the 2012/13 year.

5. The Service Performance – Groups of Activity section of the report covers the extent to which HBRC has been able to deliver on the levels of service provision and performance targets as set out in the Annual Plan for 2012/13 under each group of activity.

6. The Management Statements section covers Maori Contributions to HBRC decision making processes, Council Controlled Organisations, and implementation of national policy statements and environmental standards.

7. The Financial Statements section reports HBRC’s financial results, including the cash flow statement and notes to the accounts.

8. The final audited Annual Report will be tabled for adoption at HBRC’s September meeting.

Regional Disaster Damage Reserve

9. At this time of year HBRC needs to consider whether to tag operating cash balances to fund a shortfall, if any, in investments for Disaster Damage Reserve. HBRC has resolved that this reserve should maintain a balance of funds of between $2.75m and $3.75m. HBRC set this reserve limit at their meeting on 28 February 2007. This level reflects HBRC’s decision to continue as a member of the Local Authority Protection Programme (LAPP), which provides a 40% cover for damage to insured infrastructure assets, the remaining 60% is covered by Central Government. HBRC resolved at its Corporate and Strategic Committee meeting on 30 January 2013, not to renew the commercial insurance for infrastructure assets effective from the 2013/14 financial year.

10. The Regional Disaster Damage Reserve was established to meet 60% of the unfunded portion (namely that which is not met from other funding sources) of asset reinstatement cost following a disaster event. This is a discretionary funding pool of last resort and was designed as a contribution towards the cost of reinstatement of infrastructure assets to an equivalent standard to that in place before damage was incurred.

11. The market value of investments held in the Regional Disaster Damage Reserve is $3.572m at 30 June 2013. At that date the fund is therefore within the reserve limits set by HBRC and therefore it is proposed that no action should be taken to tag any cash operating balances to increase the value of this fund.

12. HBRC has committed to utilising approximately $720,000 from the Regional Disaster Reserve fund as a contribution towards the rebuilding of the Makara dam. Therefore during the 2013/14 year shares and stocks will be realised to provide the $720,000. Even after the sale to provide the $720,000, the reduced level of the fund will still be within the reserve limits set by HBRC.

Revaluation of HBRC's Assets

13. The following HBRC asset groups are subject to revaluation and have been incorporated where available in the draft Annual Report figures presented to this meeting. These asset groups are:

13.1. Infrastructure Assets These assets were last revalued as at 30 June 2011; HBRC's current policy is to revalue these assets every three years, therefore the next revaluation is due on 30 June 2014.

13.2. Hydrological Assets These assets are revalued every three years and they are due to be revalued at 30 June 2013. This work is still being progressed but will be available for the auditors during September 2013.

13.3. Operational Assets include land, buildings, plant and equipment, have been revalued at 30 June 2013 and these revised figures have been included in the draft financial statements. HBRC’s current policy is to revalue land and buildings to fair value every three years for Annual Report purposes.

13.4. The Dalton Street building and land for the Regional Council head office was revalued by Telfer Young at $6.7m as at 30 June 2013. This figure includes $845,000 already spent on remediation works on the building. This revaluation figure, when compared to the current book value of $8.4m, shows a decrease of $1.7m. An analysis of this variance is as follows.

Item	$
HBRC’s valuers, Telfer Young, indicated in their valuation report that there has been a softening of values through the recession because investors are being more discerning in their purchases and they have commented that demand for both industrial and commercial accommodation has fallen over the last year.	-$300,000
Remediation works still to be completed during 2013/14 in order to bring the building up to full market standard.	-$1,400,000
Net	-$1,700,000

13.5. At the completion of the remediation works the value of the building will be shown in HBRC’s books at $8.1m. HBRC’s valuers have validated this figure as the value based on a sale and lease back transaction.

13.6. Investment Properties – Leasehold Land The main investment properties held by HBRC are the leasehold land in Napier and Wellington. The table below sets out the percentage changes in lessor's interest for both Napier and Wellington leasehold property.

	Napier Leasehold		Wellington Leasehold
	No. of Lessees	$	No. of Lessees	$
Valuation (Lessor's Interest) 30 June 2012	830	56.1m	12	11.0m
Valuation (Lessor's Interest) 30 June 2013	630	48.0m	12	11.4m
Number of lessees freeholding ¹	200	12.3m	-	-
Increase in valuation over the 12 months to 30 June 2013 adjusted for sales	-	+$4.2m (10%)	-	+0.3m (3%)
Comparative for year ended 30 June 2012	-	-6.4m (10%)	-	-0.1m (1%)

¹ The number of leasehold properties owned by HBRC fell from 563 (30 June 2012) to 434 (30 June 2013), a decrease of 129 properties

13.7. Napier leasehold property has shown an increase in valuation over the 12 months to 30 June 2013, this increase is $4.2m or 10%. The main reason for this increase is the strengthening of land values now that the discounts provided by HBRC up to the year ending 30 June 2012 no longer have a depressing effect on land valuations.

13.8. Port of Napier Ltd Shareholding HBRC shareholding of 100% in the Port of Napier Ltd is revalued every three years. The revaluation on 31 March 2012 states that HBRC’s investment in the Port of Napier Limited is $177.4m. This shareholding now 100% held by Hawke’s Bay Regional Investment Company Limited (HBRIC Ltd).

13.9. It is HBRC’s policy to revalue the shareholding in Napier Port every three years, the next revaluation is due on 31 March 2015.

General Funded Operating End of Year Position

14. HBRC's General Funded Operating result, subject to final audit processes, for the year ended 30 June 2013 is shown in Attachment 1 as a deficit of $167,600. When this is compared to the forecast end of year surplus position of $2,100, the result is a deterioration from forecast in the year end position of $169,700.

15. The final impact of HBRC's favourable year end position on cash operating balances still needs to be finalised as part of the Annual Report preparation. However, it is estimated that the forecast cash operating balance will be approximately $5m at the end of 2012/13 and reduce to $4.3m at the end of 2013/14. HBRC’s policy is to ensure that cash operating balances are maintained at a level of at least $4m in order to fund normal HBRC operations - this level avoiding the need for bank overdrafts.

16. It should be noted that the operating statement set out in Attachment 5 and included as part of the formal Annual Report to proceed to Audit, shows an operating result that differs from the general funded operating end of year position as presented to HBRC. There are a number of reasons for this difference, the major reasons being the losses/gains in fair value of HBRC’s investment properties, which includes the substantial decrease in value of HBRC’s Dalton Street property, and the targeted rates which have been set to fund the capital purposes of HBRC, both being shown in the income statement in the Annual Report but do not affect the end of year position from a general funded operating perspective.

Decision Making Process

17. HBRC is required to make a decision in accordance with Part 6 Sub-Part 1, of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained within this section of the Act in relation to this item and have concluded the following:

17.1. Section 97 covering significant changes in the intended level of service provision for a group of activity do not apply.

17.2. Sections 83 and 84 which set out the procedures to be followed where a special consultative procedure is to be used or adopted does not apply.

17.3. The decision does not fall within the definition of HBRC's policy on significance.

17.4. No options are available to HBRC for this item. The Annual Report is required under Section 98 of the Local Government Act 2002.

17.5. This report, when adopted, is available for any person requiring a copy of this report.

17.6. Section 80 of the Act covers decisions that are inconsistent with existing policy or plan and does not apply.

17.7. HBRC can exercise its discretion under Section 79 (1)(a) and 83(3) of the Act and make a decision on this issue without conferring directly with the community or others due to the nature and significance of the issue to be considered and decided, and also HBRC's understanding of the issues that persons likely to be affected by or have an interest in the decisions to be made.

Recommendations

That Council:

1. Confirms the decisions to be made are not significant under the criteria contained in HBRC’s adopted "policy on significance"; and HBRC can exercise its discretion under Sections 79(1)(a) and 82(3) of the Local Government Act 2002 and make decisions on those issues without conferring directly with the community and persons likely to be affected by or to have an interest in the decision due to the nature and significance of the issue to be considered and decided.

2. Adopts the Draft Annual Report for the period 1 July 2012 to 30 June 2013, subject to any adjustments required by HBRC, for the purposes of audit, with a view to Council adopting the final report at its meeting on 25 September 2013.

3. Resolves that $97,451 profit on external work undertaken by HBRC's Operations Group during the year ended 30 June 2013 be used by HBRC to increase the cash operating balances available to fund general funded operating expenditure.

Paul Drury

Group Manager

Corporate Services

Liz Lambert

Interim Chief Executive

Attachment/s

1	Financial Overview		Under Separate Cover
2	Draft Annual Report 2012-13		Under Separate Cover

Funding Impact Statement

Attachment 1

Details of Rates Calculated within each District and City General and Uniform Annual General Rates
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 value per property	2012/13 Rate

General Rate
	Napier City	Land Value		0.00715	$318.424	$7.15	$370,525
	Hastings District	Land Value		0.00710	$546.530	$7.10	$609,378
	Wairoa District	Land Value		0.00765	$75.904	$7.65	$77,960
	Central H B District	Land Value		0.00764	$176.847	$7.64	$202,282
	Taupo District	Land Value		0.0084	$4.976	$8.40	$5,111
	Rangitikei District	Land Value		0.01597	$2,681	$15.97	$2,865
	Estimate of Projected Valuation			0.0076	$1,125,362		$1,225,695

Uniform Annual General Rate
	Napier City	Fixed Amount	26,220	25.54	$669,659	25.54	$662,005
	Hastings District	Fixed Amount	30,696	25.54	$783,457	25.54	$770,616
	Wairoa District	Fixed Amount	5,360	25.54	$ 136,894	25.54	$135,340
	Central H B District	Fixed Amount	6,176	25.54	$157,735	25.54	$155,944
	Taupo District	Fixed Amount	24	25.54	$613	25.54	$606
	Rangitikei District	Fixed Amount	6	25.54	$153	25.54	$152
	TOTAL		68,482		$1,748,511		$1,724,713

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 land value per property	2012/13 Rate
SUBSIDISED PUBLIC TRANSPORT
	Napier City	Land Value		0.02567	$1,001,918	$25.67	$973,529
	Hastings District	Land Value		0.02549	$780,582	$25.49	$705,471
	Estimate of Projected Valuation			0.02735	$1,782,500		$1,679,000

RIVER CONTROL			Benefit

Heretaunga Plains Flood Control Scheme
	Napier City	Capital Value	Direct	0.01123	$723,673	$11.23	$705,188
	Napier City	Capital Value	Indirect	0.00275	$266,657	$2.75	$260,426
	Hastings District	Capital Value	Direct	0.01095	$844,427	$10.95	$802,602
	Hastings District	Capital Value	Indirect	0.00269	$405,386	$2.69	$385,769
	Estimate of Project Valuation		Direct	0.01136
	Estimate of Project Valuation		Indirect	0.00279
	TOTAL				$2,240,143		$2,153,985
	Central H B District	Land Value	F1 100	0.62338	$124,902	$625.19	$118,911
	Central H B District	Land Value	F2 75	0.46753	$185,752	$468.89	$177,529
	Central H B District	Land Value	F3 50	0.31169	$87,810	$312.60	$83,216
	Central H B District	Land Value	F4 25	0.15584	$115,642	$156.30	$110,956
	Central H B District	Land Value	F5 10	0.06234	$68,724	$62.44	$65,681
	Central H B District	Land Value	F6 1	0.00623	$81,057	$6.24	$77,971
	Central H B District	Land Value	U1 25	0.15584	$34,853	$155.30	$32,726
	Central H B District	Land Value	U2 15	0.09351	$5,194	$93.78	$4,931
	Central H B District	Land Value	U3 10	0.06234	$13,120	$62.52	$13,100
	Central H B District	Land Value	U4 1	0.00623	$7,261	$6.25	$7,121
	Hastings District	Land Value	F5 10	0.06234	$1,180	$58.33	$1,127
	Hastings District	Land Value	F6 1	0.00623	$2,395	$5.85	$2,279
	TOTAL				$727,891		$695,548

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type		Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 capital value per property	2012/13 Rate
RIVER CONTROL				Benefit

Wairoa River & Streams Scheme
	Wairoa District		Capital Value		0.0095	$158,287	$9.50		$143,897

Central & Southern Area Rivers & Streams
		Napier City	Capital Value		0.000871	$83,778	$0.87		$82,287
		Hastings District	Capital Value		0.00085	$127,065	$0.85		$122,056
		Central HB District	Capital Value		0.000885	$32,753	$0.88		$32,203
		Taupo District	Capital Value		0.000924	$741	$0.95		$680
		Rangitikei District	Capital Value		0.001524	$359	$1.52		$343
		Estimate of Projected Valuation			0.000861	$244,696			$230,651

STREAMS AND DRAINS

- Napier, Meeanee & Puketapu		Napier City	Land Value	Urban	0.027	$688,240	$26.67	$661,663
		Napier City	Land Value	Industrial	0.10798	$172,812	$106.65	$166,564
		Hastings District	Land Value	Rural	0.027	$13,438	$26.48	$12,629
		TOTAL				$874,490		$840,856

Karamu & Tributaries		Hastings District	Land Value	Urban	0.03716	$809,442	$34.64	$770,600
		Hastings District	Land Value	Industrial	0.14865	$292,811	$138.57	$279,164
		TOTAL				$1,102,253		$1,049,764

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 capital value per property	2012/13 Rate
STREAMS AND DRAINS
Raupare Enhancement	Hastings District	Area	1097 hectares	12.65	$13,877	$12.65/hectare	$13,877
Raupare Twyford	Hastings District	Land Value	Rural	0.0912	$192,371	$84.99	$187,345
Haumoana	Hastings District	Land Value	Rural	0.1163	$136,980	$108.39	$132,348
Tutaekuri, Waimate & Moteo	Hastings District	Land Value	Rural	0.151	$202,062	$140.75	$195,229
Pakowhai Brookfields	Hastings District	Land Value	Rural	0.1951	$139,093	$181.90	$135,041
Puninga	Hastings District	Land Value	Rural	0.2551	$76,653	$237.81	$74,061
Brookfields Awatoto	Napier City	Land Value	Urban	0.19741	$98,251	$195.02	$95,080
	Napier City	Land Value	Industrial	0.78964	$54,449	$780.07	$52,457
	TOTAL				$913,736		$885,438

Muddy Creek	Hastings District	Land Value	Urban	0.10963	$203,619	$109.63	$199,694
	Hastings District	Land Value	Industrial	0.43852	$34,888	$438.52	$34,136
	TOTAL				$238,507		$233,830

Karamu Drainage Maintenance	Hastings District	Fixed Amount	5,569	10.00	$55,966	10.00	$53,301
Karamu Enhancement	Hastings District	Fixed Amount	5,569	9.39	$52,319	9.39	$49,828

Poukawa Drainage Special Rating Scheme	Hastings District	Land Value	PO1	0.55322	$26,564	$553,22	$26,043
	Hastings District	Land Value	PO2	0.09222	$1,393	$92,22	$1,366
	Hastings District	Land Value	PO3	0.01844	$542	$18.44	$532
	TOTAL				$28,499		$27,941

Porangahau Flood Control	Central HB District	Land Value		0.0137	$39,621	$13.70	$37,378
Maraetotara Flood Maintenance	Hastings District	Capital Value		0.0904	$11,402	$9.04	$11,070
Kairakau Community Scheme	Central HB District	Uniform Charge	80 Rating Units	117.76	$9,421	117.76	$9,200

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 capital value per property	2012/13 Rate
DRAINAGE SCHEMES

Paeroa Drainage Scheme Special Rating Area
	Wairoa District	Area Basis	P1	6734.93	$13,349	$67.35	$13,106
	Wairoa District	Area Basis	P2	4377.71	$5,864	$43.78	$5,734
	Wairoa District	Area Basis	P3	3030.72	$1,681	$30.31	$1,650
	Wairoa District	Area Basis	P4	2357.23	$1,442	$23.57	$1,410
	Wairoa District	Area Basis	P5	336.75	$746	$3.37	$729
	TOTAL				$23,082		$22,629

Ohuia Whakaki Drainage Rating Scheme
	Wairoa District	Area Basis	A	11840.69	$35,078	$118.41	$33,568
	Wairoa District	Area Basis	B	9472.55	$8,185	$94.72	$7,832
	Wairoa District	Area Basis	C	7104.42	$4,998	$71.04	$4,783
	Wairoa District	Area Basis	D	3552.21	$12,557	$35.52	$12,017
	Wairoa District	Area Basis	E	1184.07	$2,746	$11.84	$2,628
	TOTAL				$63,564		$60,828

Upper Makara Stream Catchment Special Rating Scheme
	Central HB District	Area Basis	A	13908.07	$7,539	$139.08	$3,337
	Central HB District	Area Basis	B	11126.46	$21,122	$111.26	$8,679
	Central HB District	Area Basis	C	9040.25	$32,019	$90.40	$11,553
	Central HB District	Area Basis	D	4867.83	$6,421	$48.68	$2,259
	Central HB District	Area Basis	E	695..4	$16,047	$6.95	$4,526
	Central HB District	Area Basis	F	278.16	$12,671	$2.78	$4,446

					$95,819		$34,800

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount per Hectare	2012/13 Rate
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount per Hectare	2012/13 Rate
DRAINAGE SCHEMES
Esk River & Whirinaki Stream Maintenance Scheme
	Hastings District	Area Basis	E1	4025.7366	$9,040	$40.25	$9,040
	Hastings District	Area Basis	E2	1700.04	$2,510	$17.00	$2,510
	Hastings District	Area Basis	R11	4180.5	$1,291	$41.80	$1,291
	Hastings District	Area Basis	R12	13371.394	$623	$133.71	$623
	Hastings District	Area Basis	R13	43231.387	$623	$432.31	$622
	TOTAL				$14,087		$14,086

	Hastings District	Area Basis	W1	16512.31	$5,099	$165.12	$4,881
	Hastings District	Area Basis	W2	11066	$515	$110.66	$515
	Hastings District	Area Basis	W3	3577.7	$515	$35.77	$515
	Hastings District	Area Basis	W4	17765.5	$2,700	$177.65	$2,520
	Hastings District	Area Basis	W5	369.2241	$147	$3.69	$147
	Hastings District	Area Basis	W6	4460.5963	$147	$44.60	$147
	Hastings District	Area Basis	W7	1582.792	$147	$15.83	$147
	TOTAL				$9,270		$8,872

Te Ngarue Stream Flood Protection Scheme
	Hastings District	Area Basis	TN	2916.28	$2,773	$26.16	$2,773
	Hastings District	Area Basis	TN1	18431.79	$155	$184.31	$155
	TOTAL				$2,928		$2,928

Kopuawhara Stream Flood Control Maintenance Scheme
	Wairoa District	Area Basis	A	14903.75	$1,821	$149.04	$1,716
	Wairoa District	Area Basis	B	5961.5	$3,693	$59.61	$3,482
	Wairoa District	Area Basis	C	2980.75	$2,160	$29.80	$2,036
	Wairoa District	Area Basis	D	745.18	$749	$7.45	$706
	TOTAL				$8,423		$7,940

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount 4.047 hectare (10acre) property	2012/13 Rate
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount 4.047 hectare (10acre) property	2012/13 Rate
BIOSECURITY

Plant Pest Strategy
	Napier City	Area Basis	4,474	43.90	$1,964	$1.78	$1,897
	Hastings District	Area Basis	365,205	43.90	$160,283	$1.78	$154,958
	Wairoa District	Area Basis	270,247	43.90	$118,638	$1.78	$114,584
	Central HB District	Area Basis	302,866	43.90	$132,958	$1.78	$128,415
	Taupo District	Area Basis	21,900	43.90	$9,614	$1.78	$9,286
	Rangitikei District	Area Basis	17,912	43.90	$7,863	$1.78	$7,595
	TOTAL		982,604		$431,320		$416,735

Regional Animal Pest Management Strategy
	Napier City	Area Basis	4,475	145.00	$6,488	$5.87	$6,238
	Hastings District	Area Basis	299,017	145.00	$433,577	$5.87	$415,684
	Wairoa District	Area Basis	207,503	145.00	$300,879	$5.87	$289,259
	Central HB District	Area Basis	295,417	145.00	$428,354	$5.87	$411,811
	Taupo District	Area Basis	7,996	145.00	$11,594	$5.87	$11,146
	Rangitikei District	Area Basis	17,912	145.00	$25,972	$5.87	$24,969
	TOTAL		832,320		$1,206,864		$1,159,107

Bovine TB Vector Control
	Napier City	Area Basis	4,426	57.32	$2,537	$2.24	$2,451
	Hastings District	Area Basis	392,528	57.32	$224,996	$2.24	$217,401
	Wairoa District	Area Basis	275,758	57.32	$158,063	$2.24	$152,715
	Central HB District	Area Basis	302,978	57.32	$173,666	$2.24	$167,789
	Taupo District	Area Basis	34,922	57.32	$20,017	$2.24	$19,340
	Rangitikei District	Area Basis	17,912	57.32	$10,266	$2.24	$9,920
	TOTAL		1,028,524		$589,545		$569,616

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount 4.047 hectare (10acre) property	2012/13 Rate

BIOSECURITY

Pest Control - Forestry
	Napier City	Area Basis	0
	Hastings District	Area Basis	65,998	50.6	$33,414	$2.05	$34,322
	Wairoa District	Area Basis	62,744	50.6	$31,748	$2.05	$31,748
	Central HB District	Area Basis	7,307	50.6	$3,678	$2.05	$3,678
	Taupo District	Area Basis	13,903	50.6	$7,035	$2.05	$7,035
	Rangitikei District	Area Basis
	TOTAL		149,952		$75,875		$76,783

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type		Districts		Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 land value per property	2012/13 Rate
Groups of Activities / Rate Type		Districts		Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 land value per property	2012/13 Rate
CLEAN HEAT & SOLAR HOT WATER SCHEME
Healthy Homes	Napier City			Land Value		0.0087	$355,913	$8.87	$362,281
(Clean Heat Financial Assistance)	Hastings District			Land Value		0.00864	$314,726	$8.64	$308,358
	Estimate of Projected Valuations					0.00927	$670,639		$670,639

Rates to repay loans to homeowners for clean heat, insulation and Solar Hot Water Scheme			$10 per $100 loan			$10		$10.00 per $100 loan

Details of Targeted Rates Calculated within each District and City
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 land value per property	2012/13 Rate
Groups of Activities / Rate Type	Districts	Rates set on	Differentials	Calculation Factor	Estimated Rates Revenue 2013-14	Estimated Amount of $100,000 land value per property	2012/13 Rate
ECONOMIC DEVELOPMENT
	Napier City	fixed Amount	23,736	16.56	$393,068	$16.56	$398,059
	Hastings District	fixed Amount	28,762	16.56	$476,251	$16.56	$488,956
	Wairoa District	fixed Amount	4,930	13.00	$64,090	$13.00	$68,890
	Central HB District	fixed Amount	6,025	16.56	$99,774	$16.56	$106,174
	Taupo District	fixed Amount	17	16.56	$282	$16.56	$413
	Rangitikei District	fixed Amount	4	16.56	$66	$16.56	$108
	TOTAL		63,474		$1,033,531		$1,062,600

	Napier City	Capital Value	Commercial/	0.01254	$201,354	$12.54	$212,930
	Hastings District	Capital Value	Industrial	0.01223	$216,554	$12.23	$218,556
	Wairoa District	Capital Value		0.01685	$9,734	$16.85	$7,010
	Central HB District	Capital Value		0.1273	$15,299	$12.73	$16,904
	TOTAL				$442,941		$455,400

EMERGENCY MANAGEMENT
	Napier City	Fixed Amount	26220	14.63	$383,598	$14.63	$341,908
	Hastings District	Fixed Amount	30696	14.63	$448,849	$14.63	$397,876
	Wairoa District	Fixed Amount	5360	14.63	$90,355	$14.63	$69,894
	Central HB District	Fixed Amount	6176	14.63	$78,417	$14.63	$80,535
	TOTAL		68452		$1,001,219		$890,213

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 28 August 2013

SUBJECT: Stock grazing on HBRC owned or administered land

Reason for Report

1. At its meeting on 14 August, the Environment and Services Committee considered a Notice of Motion from Councillor Douglas stating that:

1.1. ‘Given the general guidance of this Council to remove stock from riparian strips and conscious that Tukituki River Catchment Plan Change 6 will require and enforce stock exclusion under certain circumstances covered by Plan Change 6, this Council shall forthwith cease all Council initiated action for stock to be grazed in Council owned riparian strips immediately or where no contract exists, progressively where termination notice shall be given.”

2. The Committee resolved to recommend to Council that staff report back on stock exclusion issues at remaining sites where Council permits stock to graze in areas where water access is possible.

3. This report proposes a programme to exclude cattle as soon as possible from areas where access to a waterway is possible, and the cost implications, allowing for a situation consistent with guidelines to farmers re-stock exclusion.

Background

Proposed Plan Change 6 Requirements

4. Where more than 60% of land within a single paddock adjoining a water body has a slope of 15 degrees or less all livestock shall be excluded from:

4.1. Any lake, wetland and permanently flowing river and their margins by 31 December 2017;

4.2. Any intermittently flowing river and its margin by 31 December 2022.

5. Notwithstanding conditions (above), grazing of a permanently fenced riparian margin may occur for weed control purposes provided that:

5.1. The period of grazing does not exceed 7 days;

5.2. The fenced riparian margin shall not be grazed more than once and only during the period 1 November to 30 April.

6. The Regional Resource Management Plan defines riparian margin as “a strip of land of varying width adjacent to a waterway and which contributes or may contribute to the maintenance and enhancement of the natural function, quality and character of the waterway and its margins.

Stock grazing on HBRC owned or administered land

7. There are three areas where HBRC owns and administers land where stock could have access to a water way. These are associated with the Upper Tukituki Flood Control Scheme, the Heretaunga Plains Scheme – Rivers, and the Karamu Stream.

Upper Tukituki Scheme

8. The Upper Tukituki Scheme includes approx 112km of river channel and 212km of river berm. A number of relatively small areas of berm land are leased for grazing. All HBRC managed lease areas are fenced such that stock do not have access to any waterway.

Heretaunga Plains - Rivers

9. The Heretaunga Plains – Rivers includes approx. 104km of river channel and 129km of river berm.

10. HBRC only allow cattle to be grazed in these areas as sheep are more difficult to control and contain and their grazing damages the live willow edge protection areas.

11. Currently there are four grazing areas within the Scheme that are not fenced and where cattle could enter the waterway. This involves 9.4km of river berm length. These areas are (refer attached map);

11.1. Area 1. Ngaruroro River at Chesterhope bridge (Right Bank)

11.2. The public access area at Chesterhope bridge will continue to be designated as a no grazing area. Stock will only be permitted to graze the area during a flood event when the lower berms downstream of the bridge are either under water or too waterlogged for grazing.

11.3. When it is necessary for cattle to graze in this area, staff propose that:

11.3.1. public vehicle access be stopped. This will require a gate to be installed at the entrance to the area.

11.3.2. a temporary electric fence be erected for a short duration to contain stock on the unflooded part of the berm, and removed once the cattle are back in the lease area.

11.4. Area 2. Ngaruroro River, x/s 4 to x/s 12 Left bank

11.4.1. The banks are relatively steep throughout this reach with most sections high and steep enough to prevent stock accessing the waterway. The river is an incised channel with no gravel islands to attract cattle into the waterway so they generally do not enter the water.

11.4.2. This area is also a silt extraction area and the berms are being gradually lowered as a result of this extraction. Stock water is generally available in hollows left from silt extraction. Fencing off the lowered river edge is undertaken as extraction projects are completed.

11.5. Area 3. Ngaruroro River, x/s 4 to x/s 11 Right bank

11.5.1. This reach is similar to Area 2, the banks are relatively steep, there are no gravel islands in the river and cattle generally do not enter the water. This area is also a silt extraction area and the berms are being gradually lowered as a result of this extraction.

11.6. Area 4. Tutaekuri / Ngaruroro confluence

11.6.1. This area includes the old Tutaekuri River channel and the Ngaruroro River below the confluence of the two rivers. The Ngaruroro banks are steep and generally prevent cattle from gaining access to the waterway. The banks along old Tutaekuri channel are not so steep and it is reasonably easy in places for cattle to gain access to the water.

Proposal

12. The areas that require fencing have been prioritized and the proposal is based on a three stage programme as follows:

12.1. Priority 1 - This includes all of Area 4 and part of Area 3. These sections have low areas that cattle can get access to the water, plus they are relatively public areas in close proximity to the S.H.2 bridges. It is proposed that this work could be undertake over this summer.

12.2. Priority 2 - To complete the fence along the Right bank, Area 3. Currently silt extraction is being undertaken in this area so fencing would need to follow the extraction operation. It is proposed that the fencing be undertaken in the 2014-15 year to give sufficient time for more silt extraction to be completed.

12.3. Priority 3 - To complete the fence along the Left bank, Area 2. Currently silt extraction is being undertaken in this area so fencing will again need to follow the extraction operation. It is proposed that the fencing be undertaken in the 2015-16 year to give sufficient time for the silt extraction to be completed.

Financial Implications

13. It is proposed to erect standard post and two wire fences (one live, one dead) consistent with the type of fencing used elsewhere on the river systems. The estimate also allows for preparation work that is required to clear and level the ground along the intended fence alignment. Two electric fence units will also need to be purchased.

Priority	Area	Length (m)	Estimate	Year
1	Old Tutaekuri/Ngaruroro/Puninga	2800	$34,000	2013-14
2	Ngaruroro Right bank	2800	$32,000	2014-15
3	Ngaruroro Left bank	3800	$43,000	2015-16
	total	9400	$109,000

14. Note that the 9.4km total length is greater than previously stated figure of 7 km as this now includes areas that in the past were not considered for fencing because cattle simply could not access the water due to the height and steepness of the banks. As it would be difficult to only fence various sections this proposal is now based on fencing the entire river length regardless. This work programme could be undertaken within existing budgets. It should be noted that these estimates assume silt extraction is undertaken by commercial extractors prior to fencing. If the programme is to be completed more quickly additional costs will be incurred.

Maintenance

15. There will be an increased maintenance and inspection cost following the construction of these fences. As there is no edge protection planting along the riverbanks to provide some buffer to protect the fence there is a heightened risk of damage with each flood event. Experience has shown that the existing fences in the lower reaches of the Tutaekuri and Ngaruroro rivers always require repairs after even minor flood events so the annual repair bill will increase significantly.

Karamu Stream

16. The Karamu Stream and some of its tributaries include areas where Council-owned land along waterways is grazed as a means of managing the land.

17. There are 13 existing licences along the Karamu, Irongate, Awanui, Louisa, Upper Te Waikaha and Karewarewa, which all expire on 30 June 2015. Three recently relinquished licences have been replaced with informal occupation arrangements pending this review. In some cases licence areas are unoccupied, as there is currently no suitable tenant.

18. In the case of the new Lower Awanui Stopbanks, a decision was made not to graze this area, and the new banks are currently mown three times each year.

19. At present there are no hard-and-fast rules about preventing stock access to the active channel. In some instances the topography of the land naturally prevents any access to the channel, but in other cases this can only be achieved by fencing. In a small number of cases the water’s edge has been fenced to solve individual problems where stock have been able to cross the channel and mix with stock on another tenancy.

20. The development and implementation of the “Te Karamu” project which commenced about 6 years ago has reduced the area of some grazing licences, and one has been terminated completely.

Mowing

21. The new Awanui Stream stopbanks are currently mown 3 times each year, which provides a reasonable standard of vegetation control.

Spraying

22. The Council has a programme of spraying throughout the Karamu system, to control Plant Pests such as Fennel, Hemlock, Nettle, Blackberry, and Willow. In the event of grazing being discontinued, this programme will need to be increased, and extended to cover other plant species that are palatable to stock, but which could become a nuisance if left to spread. A detailed analysis has not been done of the likely cost increase.

Good neighbour

23. Throughout the length of the waterway HBRC needs to be mindful of its obligations as a good neighbour. Given that the boundaries between Council land and its neighbours generally comprise a simple post-&-wire fence, Council will need to maintain its land such that it does not become a nuisance to neighbouring properties.

Hydraulic efficiency

24. It is important that hydraulic efficiency of the channel is maintained. The Karamu channel flood capacity is taken into account for enhancement work associated with the Te Karamu project.

Fencing

25. It is possible to establish fencing back from the water’s edge along most of the areas currently being grazed. Council has fenced part of the Irongate Steam, and one section of the Karamu, and one licensee on the Karamu has fenced most of his licence area at his own expense.

26. Based on the preliminary assessment, if all licence areas were fenced, some 50 km of fence would be required to secure about 120 ha of grazing land. This would have at an estimated establishment cost of $100,000 to $250,000 depending on the extent and standard of fencing determined necessary.

27. Because of the cost involved and the limited area available for grazing, staff propose to discuss responsibility for fencing of the waterway should licensees wish to continue to graze the land. A decision will need to be made on a case by case basis as the economics of grazing each licence area is different, as will the cost of maintaining the land by alternative means if it is not grazed. Conversations with each licensee and informal grazer have commenced. Licences where cattle are currently able to access the water will be dealt with as a priority and may be terminated by giving 3 months notice if agreement is unable to be reached within the next 2 months.

28. There are instances where livestock cannot access the active channel because of the nature of its banks, and it is considered that these areas could continue to be grazed without the need for fencing. These areas will need to be assessed more fully with the respective licensees.

29. Other issues to be resolved include the provision of stock water, and the supply of power for electric fences where these are the best fencing option. These items have not yet been explored in detail.

Sheep v Cattle

30. At present the choice of whether to graze sheep or cattle is made by the licensee. There are areas that are more suited to light cattle, and some licensees have a preference for cattle because they are less prone to worrying by dogs, particularly near the urban areas. Cattle are also easier to manage for Licensees who are not bona fide livestock farmers and do not have the handling facilities necessary for good sheep husbandry. However there are areas where sheep have been grazed successfully over many years, and some Licensees have indicated that they will be happy to make a change from cattle to sheep given reasonable time to do so.

31. All of the Karamu catchment Licences expire in 2015. At that stage Council has a further opportunity to consider whether new licences exclude cattle or all livestock.

Decision Making Process

32. Council is required to make a decision in accordance with Part 6 Sub-Part 1, of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained within this section of the Act in relation to this item and have concluded that, as this report is for information only and no decision is to be made, the decision making provisions of the Local Government Act 2002 do not apply.

Recommendation

1. That Council receives the “Stock grazing on HBRC owned or administered land” report.

Mike Adye

Group Manager

Asset Management

Liz Lambert

Interim Chief Executive

Attachment/s

1 View

Fencing Proposal

Date Received	Response Due	Request ID	Requested by	Request summary	Executive Responsible Response	Delegated To	Action Taken	Date complete
25/7/13	22/8/13	OIR-13-037	Karaitiana Taiuru	Public Internet domain names, moderation policy, bilingual name	Viv Moule	Kahl O	info sent	30/7/13
30/7/13	27/8/13	OIR-13-038	Megan Hunt	All the studies/reports on the Ruataniwha water storage project which have not been released to the public	Liz Lambert	Drew B	DrewB responding, reports being reviewed, SallyCh coordinating
1/8/13	29/8/13	OIR-13-039	Lawrence Gullery - HBToday	Remuneration package of Interim Chief Executive, role and key performance indicators, timeframes, investment company's managing director's remuneration & AN’s key performance indicators.	Viv Moule		Requested Legal Opinion. Information sent	13/8/13
12/8/13	9/9/13	OIR-13-040	Aimee Gulliver	Quality of water in rivers, lakes and recreational coastal areas, number and type of complaints lodged with the Council regarding water bodies and "no data" question	Iain Maxwell	Annette B	Clarification email sent 12/8/13, replied, working on, response sent	16/8/13
14/8/13	11/9/13	OIR-13-041	Megan Bartrum - LGNZ	Council’s electricity usage	Diane W	Annette B	Asked StaceyR to complete survey attached to request

Explanation of Rating Method
Types of Rates	Groups of Activities Funded	Types of land to be Funded	Basis of Rating
General Funding Rates
General Rates Uniform Annual General Charges	Strategic Planning Land Drainage & River Control Regional Resources Regulation Biosecurity Emergency Management Transport Governance & Community Engagement.	All Rateable Rating Units within the region.	Land Value Fixed Amount
Targeted Rates
Subsidised Public Transport	Public Transport System and Total Mobility programme for disabled persons.	Those Rating Units within the urban areas of Napier, Hastings & Havelock North including Clive Township but excluding Bay View.	Land Value
Heretaunga Plains Control Scheme	Catchment Works Direct Benefit F1 Indirect Benefit F2	Rating Units receiving direct benefit within Napier City and Hastings District from flood control measures. All Rating Units within Napier City and Hastings District.	Capital Value
Upper Tukituki Catchment Control	Catchment Works	All Ratings Units in Central Hawke’s Bay District on a graduated basis. Also, Rating Units on the southern boundary of Hastings District Council.	Land Value
Central & Southern Rivers & Streams	Catchment Works	All Ratings Units in the region excluding Wairoa District.	Capital Value
Wairoa River & Stream	Catchment Works	All Rating Units in the Wairoa District.	Capital Value
Various Stream & Drainage Schemes	Catchment Works	Rating Units identified receiving benefit from specific stream and drainage works. Some on graduated basis.	Land Value and Area

Continued: Explanation of Rating Method
Types of Rates	Groups of Activities Funded	Types of land to be Funded	Basis of Rating
Targeted Rates
Animal and Plant Pest Control	Biosecurity Regional Animal Pest Management Strategy	All rateable rural land containing 4.0469 hectares in the region excluding Rating Units greater than 200 hectares where more than 90% of the land is covered in indigenous vegetation which will be zero rated. A differential rate will be applied to those Rating Units that have between 40 and 400 hectares where more than 75% of the land is covered in production forestry, also any production forestry Rating Units over 400 hectares.	Area
Bovine TB Vector Control	Bovine TB Vector Control	All rateable rural land containing 4.0469 hectares in the region other than property titles subject to QEII Open Space Covenants which are zero rated.	Area
Plant Pest Strategy	Regional Plant Pest Management Strategy	All rateable rural land containing 4.0469 hectares in the region excluding Rating Units greater than 200 hectares where more than 90% of the land is covered in indigenous vegetation which will be zero rated.	Area
Healthy Homes - Clean Heat Financial Assistance	Management of the scheme to encourage the replacement of open fire or wood burners with more efficient form of heating and where necessary the installation of insulation.	All Rating Units in Napier and Hastings within the affected airshed.	Land Value
Clean Heat & Insulation Loans	Repayment of loans to ratepayers to insulate homes and replace open fires or non-compliant woodburners.	Those ratepayers who have opted for a loan to be repaid over 10 years with interest as a fixed amount through a Targeted Differential rate.	Dollar Amount

Continued: Explanation of Rating Method
Types of Rates	Groups of Activities Funded	Types of land to be Funded	Basis of Rating
Economic Development Rate	To fund economic and tourism development in the region.	30% of the total rates are funded by the Commercial/Industrial Rating Units based on the Capital Value. The remaining 70% is collected from residential and rural Rating Units as an Uniform Annual Charge. The Wairoa District ratepayers’ contribution is limited to 5% of the total rate.	Capital Value Fixed Amount
Emergency Management	Funding of the Hawke’s Bay Civil Defence Emergency Management (CDEM) Group Office to manage the provision of effective CDEM consistent with the CDEM Act 2002.	All Rating Units in the region with the exception of Rangitikei and Taupo districts.	Fixed Amount

Group	Area of Activity	Activity Status Update
Asset Management & Biosecurity	Land Management Upper Makara Scheme Open Spaces Forestry	- Tukituki Plan Change - detailed discussions with the wider stakeholder group underway. Internal HBRC project team “Tukituki implementation committee” meetings underway. - Design and investigation work to be completed. Tender documents and consent documents to be processed and tender for dam repair let prior to summer. - Regional Park Network Plan being developed. This will be followed by individual management plans for each of the open space areas. - Review of portfolio being undertaken. Management Plan for Tangoio Soil Conservation Reserve to be reviewed and updated.
Corporate Services		- Report on possible sale of the Wellington leasehold properties being prepared for the November 2013 Council meeting. - Final audited Annual Report for adoption – September 2013 Council meeting.
External Relations/ Interim Chief Executive		- Planning induction/education programme for new and returning councillors following local body elections - Working with OTS on draft Regional Planning Committee Bill - Finalisation and publication of 2012/13 Annual Report
Resource Management	Resource Consents Client Services Compliance Science	- Consents to be notified – Karamu group - Consents notified – Tukituki group, Poukawa group, WDC coastal protection Mahia - In The Zone newsletter will be distributed 30 August - IVR Low Flow Notification System to be implemented end of September 2013 - Agreement has been reached with Chevron to mediate the Hyderabad Road site without the need for enforcement action. Agreement will be finalised in the next 2 weeks. - Detailed planning of science investigations for the TANK Plan Change continue, with emphasis on development of a coupled surface-groundwater model - Investigation of groundwater levels across the regional boundary in the Taharua River and upper Waipunga River catchments (to be jointly undertaken by HBRC and BOPRC science teams). - Planning for preparation of a number of science reports continue – a key prerequisite is modification of the existing Hilltop software platform to enable quality coding of water quality data. - Planning various workstreams associated with the Tukituki Plan Change implementation continue, with emphasis on strategies to minimise phosphorus mobilisation.
Strategic Development	Resource Management Planning Transport	- Revised NPSFM Implementation Programme annual report to be incorporated into Council’s Draft Annual Report – see separate paper on Council agenda. - Revised report on Regional Planning Committee’s 2012/13 activities to be presented to Regional Planning Committee meeting on 11 September 2013. - RPS Change 5 appeal negotiations to be scheduled in September. - Tukituki Catchment Plan Change 6 submissions closed 2 August (384 received). EPA has notified summary of those submissions. Further submissions are due by 5pm 30 August 2013. - TANK meeting scheduled for 17 Sept 2013. - HPUDS Implementation Working Group meeting scheduled for 5 Sept 2013.

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED	REASON FOR PASSING THIS RESOLUTION	GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION
Proxy for the HBRIC Ltd Annual General Meeting	7(2)(b)(ii) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of that information is necessary to protect information which otherwise would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information.	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.