Agenda of Extraordinary Council Meeting

Extraordinary Council Meeting item: 3.1

6 May 2020

TITLE:	Council deliberations on the Annual Plan 2020/21
ID:	A1302781
From:	Kyla Carlier, Corporate Planning Manager and Jonathan Gibbard, Group Manager - Strategy, Governance and Engagement

Executive summary/Whakarāpopototanga

The purpose of this report is to provide background information and present staff advice and recommendations, and to present financial considerations to assist council’s deliberation on the Annual Plan 2020/21.

This is the second annual plan process carried out following the Long Term Plan in 2018, and offers an opportunity to make any adjustments required to the budget.

This annual plan consultation process was unique in that, after development of proposals and well into the pubic consultation process, a national state of emergency was declared due to the rapidly developing situation with Covid-19. This situation has caused significant immediate economic impacts, and further impacts are forecast.

These impacts are given due consideration here, resulting in recommendations for a plan that differs from what was originally proposed, and a rate increase reduced from the 8.6% consulted on to 4.5%.

Council’s deliberation of planned spend and rates for the 2020/21 year must be carried out in consideration of the significant loss in investment and other income that is now forecast as a result of Covid-19, and the impact of this on council’s spend and activities. Council activities are subsidised with investment income gained from an extensive portfolio, and consideration of how to manage a significant decrease in investment income is something that spans the breadth of council’s activities. These considerations are addressed in this report.

Recommendations

1. That the report ‘Council deliberations on the Annual Plan 2020/21’ by Kyla Carlier, Corporate Planning Manager and Jonathan Gibbard, Group Manager - Strategy, Governance and Engagement and dated 6 April 2020, be received.

2. That the CEO be directed to prepare the final annual plan following the Council’s decisions below, for Council adoption in June 2020.

3. That the council notes that the amounts set out in the report are based on best estimate forecasts at the time of writing, and that the CEO be given delegated authority to approve changes required to revise the financial statement and rating information within the final Annual Plan 2020/21 to give effect to the council’s deliberations, with final amounts presented for council approval in June 2020.

Background/Tuhinga

Annual Plan process

The purpose of this annual plan is to set out any differences from what was proposed in the Long Term Plan 2018-2028, and to highlight the impact on council’s budget and regional rates. Annual plan consultation processes focus on proposed changes – they are not generally intended to invite feedback on all areas of council activity, which is more appropriately addressed during a long term plan process.

Several changes to the budgets for 2020/21 were proposed in the Annual Plan 2020/21 consultation, with a suite of new spend to enable council to both ‘keep up the pace’ of current work and ‘gear up for change’ and prepare for the next long term plan. The proposals added an extra $1.4 million to council’s operating budget for the year and $265,000 of capital spend. This added 4.6% to the LTP-approved 4% increase in rates for the year, for a total increase of 8.6%. The extra averaged out at $13.60 per household, for a year-on-year average increase of just over $30.

Consultation overview

Council invited feedback on proposals for the Annual Plan 2020/21 and User Fees and Charges during a month-long period running from 26 Feb – 27 March 2020. The consultation processes for both documents were carried out in tandem. This is the usual process for these annual reviews and offers synergies in terms of resources as well as producing a complete budget.

An annual plan consultation document was produced that summarised the proposals, with more detailed information and financials to support the proposals included in a supporting information document, and a full draft user fees and charges document that included a statement of proposal outlining proposed changes.

Twenty submissions were received during the consultation period, which included feedback on both consulted and non-consulted topics. The non-consulted topics broadly fall in to two categories – those relating to Covid-19, and all others.

Members of the community were offered an opportunity to talk to councillors about the proposals during the consultation period. Interest was registered, however it transpired that the interested parties were seeking clarification on matters outside of NRCs areas of work, and following a conversation with them they decided not to register.

Covid-19

Toward the end of the public consultation process on the proposed annual plan, the situation with Covd-19 escalated quickly, resulting in nationwide lockdown and declaration of a state of emergency. In the last week of consultation submissions on the annual plan proposals changed markedly as the economic impact of Covid-19 emerged, with increasing pressure on all councils across New Zealand not to increase rates as planned, or to roll out a rates freeze.

The economic impacts of Covid-19 have been significant for council, with economic modelling and budget re-forecasting showing an estimated nett revenue decrease of approximately $3,357,000. In addition, allowance must be made for an estimated increase in bad debts provision of $681,000, and for anticipated movements on reserve balances. If no budgetary alterations were made, an overall rate increase of approximately 13.8% would be required to achieve a balanced budget under these economic circumstances.

In response to this sudden decrease in revenue, a review of all annual plan proposals was carried out by staff to determine where proposals could be deferred without causing significant material negative impact to levels of service. Staff also reviewed all work programmes that were approved for year three (2020/21) of the Long Term Plan 2018-2028, and the business-as-usual budget to determine what spend can be delayed or placed on hold, pending clarity on future income streams.

As a result of these reviews, staff recommend that the rate increase for the 2020/21 year be decreased from the 8.6% consulted on in the annual plan consultation to 4.5%. This is 0.5% above the amount previously approved for 2020/21 in the Long Term Plan 2018-2028.

Where it is recommended that proposals are not funded, it is intended that the proposals still be carried out at a later date or incorporated into other programmes of work as part of the LTP, depending on the economic situation and council’s future investment income.

Consulted topics

‘Keeping up the pace’

Recommendations:

4. That council does not support provision of $101,000 of ongoing operational expenditure, and $4,700 of one-off capital expenditure for a Kaiarahi Mahere Māori – Māori technical advisor, as detailed the supporting information document.

5. That council does not support provision of $7000 of ongoing operational expenditure for Northland Māori representation on national committee ‘Te Maruata’ as detailed in the supporting information document.

6. That council does not support provision of $30,000 of ongoing operational expenditure for Tangata whenua capability and capacity as detailed in the supporting information document.

7. That council does not support provision of $40,000 of ongoing operational expenditure, and $4,700 of one-off capital expenditure for a campaigns and engagement coordinator as detailed in the supporting information document.

8. That council does not support provision of $110,000 of one-off operational expenditure for pest plant prevention as detailed in the supporting information document.

9. That council does not support provision of $69,000 of ongoing operational expenditure and $4,700 of one-off capital expenditure for a junior hydrology officer as detailed in the supporting information document.

10. That council does not support provision of $17,000 of ongoing and one-off operational expenditure for off-site storage of consent files as detailed in the supporting information document.

11. That council does not support provision of $75,000 of one-off operational expenditure for data asset management as proposed in the supporting information document.

12. That council support provision of $300,000 of operational expenditure ongoing for three years, for technology upgrades, to be funded by the Council Services Rate.

This recommendation represents a change from the $500,000 proposed in the Annual Plan 2020/21 Consultation Document.

13. That council support provision of $35,000 of one-off capital expenditure for replacement engines for the vessel ‘Ruawai’ to be funded from retained earnings, with future depreciation of $3,500 to be funded from the Council Services Rate.

‘Gearing up for change’

Recommenations:

14. That council does not support provision of $7,000 of ongoing operational expenditure for water quality monitoring stations as detailed in the supporting information document.

15. That council does not support provision of $100,000 of operational expenditure, ongoing for three years, for the modelling of highly allocated aquifers as detailed in the supporting information document.

16. That council does not support provision of $20,000 of one-off operational expenditure for a national wells database as detailed in the supporting information document.

17. That council support provision of $50,000 of one-off operational expenditure for a freshwater quality accounting system, to be funded by the Freshwater Management Rate.

This recommendation represents a change from the $150,000 proposed in the Annual Plan 2020/21 Consultation Document.

18. That council support provision of $105,000 of one-off capital expenditure for water quality monitoring stations, to be funded by retained earnings.

19. That council support provision of $20,000 of one-off operational expenditure for Aupōuri groundwater analysis, to be funded from the Freshwater Management Rate.

20. That council support provision of $33,000 of one-off capital expenditure for lake level sensors, to be funded from retained earnings with future deprecation of $3,300 to be funded from the Council Services Rate.

21. That council support provision of $78,000 of one-off capital expenditure for expansion of the poplar and willow nursery, to be funded from retained earnings with future depreciation of $7,800 funded from the Council Services Rate.

22. That council support provision of $105,000 of one-off operational expenditure for a climate change adaptation strategy, to be funded from the Council Services Rate.

Feedback received – consulted topics

The Annual Plan 2020/21 Consultation Document set out changes to the Long Term Plan 2018-2028. These proposed changes were grouped in to two main areas: ‘keeping up the pace/keeping up the momentum’ - more investment to deliver on the LTP while responding to grant funding opportunities, and ‘gearing up for change/looking to future-proof’ - in recognition of the challenges council will be facing in the next long term plan .

Feedback on the consulted topics registered both support and opposition, as outlined below. Due to the manageable size of the attached summary of submissions document, only a very brief summary is presented here. On balance there was majority support for the proposals.

Discussion – ‘keeping up the pace’

Support our relationships with Māori ($142,700)

This consultation point comprises three initiatives: Kaiarahi Mahere Māori/Māori technical advisor, Tangata whenua capability and capacity, and Northland Māori representation on national committee ‘Te Maruata’. Seven comments were received, mostly in support and also questioning the details of the proposals. Not progressing with these may negatively impact hapū relationships and willingness to progress Mana Whakahono a Rohe agreements, and will limit council’s ability to ensure that processes are reflective of a māori world view. Considering submissions received in relation to the Covid-19 situation and the resulting economic pressures, staff recommend that council does not fund this proposal as part of the Annual Plan 2020/21 as a way to reduce the financial impact of rates on our community during this time and that this proposal be revisited as part of the LTP 2021 - 2031.

New investment in the way that we engage with our communities ($44,700)

Seven comments were received, with a mix of support and opposition, with some also questioning the details of the proposal including the small dollar value. This funding was for a half share of the position, with the other half to be funded by existing budget. Not funding this position will limit council’s capacity to undertake additional community awareness campaigns. Considering submissions received in relation to the Covid-19 situation and the resulting economic pressures, staff recommend that council does not fund this proposal as part of the Annual Plan 2020/21 as a way to reduce the financial impact of rates on our community during this time and that this proposal be revisited as part of the LTP 2021 - 2031.

Extra support for pest plant prevention ($110,000)

Nine comments were received in support of increased spend. Not proceeding with this funding will mean that surveillance and control inspections for eradication and progressive containment species will not be able to be completed. will Considering submissions received in relation to the Covid-19 situation and the resulting economic pressures, staff recommend that council does not fund this proposal as part of the Annual Plan 2020/21 as a way to reduce the financial impact of rates on our community during this time and that this proposal be revisited as part of the LTP 2021 - 2031.

Extra support for hydrology team ($73,700)

Six comments were received, with a mix of support and opposition to the proposed level of spend. Not funding this position will compromise council’s internal hydrologist training programme in the face of a national shortage of trained hydrologists. Considering submissions received in relation to the Covid-19 situation and the resulting economic pressures, staff recommend that council does not fund this proposal as part of the Annual Plan 2020/21 as a way to reduce the financial impact of rates on our community during this time and that this proposal be revisited as part of the LTP 2021 - 2031.

Changes to information technology and data management ($592,000)

This consultation point comprises three initiatives: technology upgrades, off-site storage of consent files, and data asset management. Eight comments were received, generally in support but advising prudence. Reducing funding in this area will slow implementation of the new enterprise system. Considering submissions received in relation to the Covid-19 situation and economic pressures, staff recommend that the spend on technology upgrades be reduced from $500,000 to $300,000 and that council do not fund the other two initiatives (Off-site storage of consent files) as part of the Annual Plan 2020/21.

Replacing the engines of the maritime vessel 'Ruawai' ($35,000)

Six comments were received, with a mix of support and opposition to the proposed spend. One comment requested electrification of vessels, and one questioned why the cost wasn’t previously budgeted. This one-off capital expenditure is required to maintain the value and usefulness of the vessel and does not directly impact rates. Staff recommend that council fund the proposal as part of the Annual Plan 2020/21.

Discussion – ‘gearing up for change’

Investment in water quality and quantity science ($435,000)

This consultation point comprises six initiatives:

- Freshwater quality accounting system ($150,000)

- Water quality monitoring stations ($112,000)

- Modelling highly allocated aquifers ($100,000)

- Aupōuri groundwater analysis ($20,000)

- National wells database ($20,000)

- Lake level sensors ($33,000)

Eight comments were received on the proposal, with seven in support and one in opposition. There was clear support to prioritise looking after water. Not proceeding with this work will impact decision-making on groundwater resource allocation and could result in a delay for some projects. Considering submissions received in relation to the Covid-19 situation and economic pressures, staff recommend that council fund half of this proposal as part of the Annual Plan 2020/21, and proceed with a reduced amount for the Freshwater quality accounting system ($50,000) Aupōuri groundwater analysis ($20,000), and Lake level sensors ($33,000).

The expansion of the council-owned poplar nursery ($78,000)

Four comments were received, with a mix of support and opposition to the proposed spend and questioning the use of poplars. This one-off capital expenditure is required to ensure sufficient supply of poplar poles in the future and does not directly impact rates. Staff recommend that council fund the proposal as part of the Annual Plan 2020/21.

Climate change adaptation strategy ($105,000)

Eight comments were received, mostly in support but noting that the issue may be too big to be addressed with this spend. Given the importance of planning for climate change, staff recommend that council fund the proposal as part of the Annual Plan 2020/21.

General

Feedback was also received that related to general rates increase and spending, with three submissions making comments that generally opposed additional spend and rates collection and increases, with no reference to Covid-19.

Non-consulted topics

Recommendations:

23. That council does not make any changes to the Annual Plan 2020/21 as a result of submissions on these topics: Regional sporting facilities rate, climate change, water shortages, Kauri die back, weeds on roadsides, monitoring staff, and Northland Inc.

24. That council support provision of $72,273 of ongoing operational expenditure, and $4,700 of one-off capital expenditure for a Monitoring Officer for Kaitaia, to be funded from the Freshwater Management Rate on the basis that this is not a significant and/or material change from the LTP 2018-28 for the 2020/21 year.

Feedback received

The submissions received covered a range a topics that were not set out in the consultation document. As they were not topics that feedback was being sought on in this annual plan consultation process, they are therefore considered to be ‘out of scope’.

These can be grouped in to four main areas, and are addressed here with brief staff recommendations:

· Regional sporting facilities rate

· Climate change

· Other comments

· The need for monitoring officers

Feedback was also received that related to Covid-19 and economic downturn. This feedback is discussed below, and in the overall assessment of all proposals.

Regional sporting facilities rate

Four submissions were received in support of the regional sporting facilities rate, with support for the ‘Northland Football Hub’ as a potential project. Council established a targeted rate in the Long Term Plan 2018–2028, known as the Regional Sporting Facilities Rate, to provide funding support to assist in the development of sporting facilities across Northland that are of regional benefit. Recipient projects were determined through the Northland Sports Facilities Plan process.

Staff recommend that this rate is continued as planned, and no further action is taken.

Climate change

Two submitters who commented on the proposal for a climate change adaptation strategy made additional comments about the seriousness of climate change, urging action.

Council’s climate change response is imbedded in many council activities, with the funding proposal included in this annual plan for a climate change adaptation strategy only a small part of the work being carried out or planned, within existing budgets. Gap analysis and program planning and design is currently being carried out, in preparation for the next long term plan.

Staff recommend no additional action, over and above that already planned and being carried out.

Other out of scope matters

Other comments were received on topics that were outside of the scope of the annual plan consultation topics (those being differences from the Long Term Plan 2018-2028), and outside of topics addressed elsewhere in this report. These comments were circulated to relevant members of staff, who assessed these and recommended no further action as part of this annual plan process. They are addressed briefly here.

· Water shortages – Council is leading an investigation into new water storage and distribution networks in Kaikohe and Dargaville areas. While intended primarily for horticultural land use it is also available for potable water supply should district councils wish to co-invest.

· Kauri die back being caused by borer beetles - The Ministry for Primary Industries manages the national mapping of kauri dieback disease, and staff are not aware of any science advice concerning the risk of beetles transferring the disease.

· Weeds on side of roads - Council manages weeds named in its Regional Pest Management Strategy on private land. As part of this strategy district councils are required to develop a management plan for road corridors and undertake control of selected weeds.

· Disputing Northland Inc - Northland Inc. provides a vital service for Northland, including providing business support in the current COVID-19 crisis. It was established as a council-controlled organisation (CCO) in accordance with the requirements of the Local Government Act 2002.

Comments that related to the activities of district councils included:

· A recreation centre for the elderly and disabled

· Fire bans

· Concerns regarding WDC roading

· Ruatangata community hall

· Gumtown road culverts

· Roadside tree planting

· Rubbish dumped on side of roads

· Dog park in Whangārei

· Greenhouse gas emissions

· Destruction of trees

· Water shortages

These submission points are included in the Summary of Submissions report, attached. Where appropriate, submitter comments have been passed on to the relevant district council. No further action is recommended.

Non-consulted proposal – monitoring officer

After the Annual Plan 2020/21 consultation document had been released for public feedback, it became clear that an additional environmental monitoring officer was needed to service the Kaitaia area, and further north. The consent monitoring workload in this area has increased significantly as a result of avocado growing developments and the associated use of groundwater from the Aupouri Aquifer, and the drought Northland experienced during the consultation period highlighted the need for immediate increased water monitoring in the area.

There is not currently an environmental monitoring role focused on monitoring resource consents and responding to environmental incidents in the Kaitaia area and further north. Much of that work has been done in the past by the Area Manager – Kaitaia Land Management, who now has an increasing role in the supervision of the upgrade of the Awanui Flood Scheme and is no longer available to undertake general monitoring work.

In addition, a submission was received during the annual plan process that noted the importance of monitoring, raising concern that self-monitoring doesn’t work, and requesting that the number of staff needs to be increased so that proactive monitoring can take place.

Staff recommend that this non-consulted proposal be included in the Annual Plan 2020/21. It is considered to not be a significant or material change from the Long Term Plan 2018-28 for the 2020/21 year and can therefore be included without prior consultation.

Financial Impact of Covid-19

Long Term Plan – pre-approved year three spend

Recommendations:

25. That council support the removal of $70,322 from the 2020/21 budget, previously approved in the Long Term Plan 2018-2028 for a far north nursery manager.

26. That council support the removal of $82,206 from the 2020/21 budget, previously approved in the Long Term Plan 2018-2028 for Eastern Bays Hill country staff.

27. That council support the removal of $41,854 from the 2020/21 budget, previously approved in the Long Term Plan 2018-2028 for Project costs associated with Northern Wairoa and lakes project.

28. That council support the removal of $86,385 from the 2020/21 budget, previously approved in the Long Term Plan 2018-2028 for Enviroschools staff position and programme costs.

29. That council support the removal of $68,880 from the 2020/21 budget, previously approved in the Long Term Plan 2018-2028 for sponsorship, intern and environmental awards funding.

30. That council support the removal of $104,004 from the 2020/21 budget, previously approved in the Long Term Plan 2018-2028 for painting of the Water Street building and vehicle costs.

31. That council record that it considers it can make the changes described in recommendations 25 to 30 without consultation, on the basis that in relation to what the Long Term Plan 2018-28 provides for the 2020/21 year, none of them are a significant change, and that they are not a material change, either by them self, or in combination with others.

Alterations to 2020/21 budget

Recommendations:

32. That, in consideration of the desired level of rate increase for the 2020/21 financial year, council support a reduction in the business-as-usual budget by $686,720.

33. That, in consideration of the desired level of rate increase for the 2020/21 financial year, council support a reduction in the recruitment budget by $411,449.

34. That council record that it considers it can make the changes described in recommendations 32 and 33 without consultation on the basis that in relation to what the Long Term Plan 2018-28 provides for the 2020/21 year, none of them are a significant change, and that they are not a material change, either by them self, or in combination with others.

Use of reserves and funds

Recommendations:

35. That, in consideration of the desired level of rate increase for the 2020/21 financial year, council support the allocation of $150,000 from the Equalisation Fund Reserve, to fund general operating activities.

36. That, in consideration of the desired level of rate increase for the 2020/21 financial year, council support the allocation of $1,700,000 from the Community Investment Fund, to fund the economic development activities.

37. That in consideration of the desired level of rate increase for the 2020/21 financial year, council support the allocation of $696,838 from the Community Investment Fund, and $250,000 from the Infrastructure Investment fund, to fund general operating activities ($401,686) and council’s Environment Fund ($545,152).

38. That council record that the allocation of gains from the Community Investment Fund described in resolution 37 is inconsistent with the assumptions made in the Long Term Plan 2018-2028, and the use of the fund for purposes other than economic development, but that this is not considered to be a material departure from the Long Term Plan 2018-2028. The use of the gains to fund activities is broadly consistent with the Revenue and Financing Policy and the achievement of objectives set out council’s financial strategy, and is required in response to the significant decrease in investment income experienced as a result of the economic downturn associated with Covid-19.

39. That in consideration of the desired level of rate increase for the 2020/21 year and the economic impacts of Covid-19 on council’s property investments, council support the allocation of $123,583 from the Property Reinvestment fund to fund general operating activities.

40. That council record that it considers it can make the allocation of funds described in recommendations 35 to 37 and 39, as the allocation is consistent with the purpose of the reserve (as applicable) or the use of investment returns to reduce targeted region-wide rates in council’s Revenue and Financing Policy in the case of the use of money from other funds.

Feedback recieved

The situation with Covid-19 changed rapidly during the Annual Plan 2020/21 consultation period, with the social and economic situation looking very different at the end of the submission period than when council was developing its proposals and going out for public consultation.

This is evidenced in the submissions received, with those received at the beginning of the process making little or no mention of COVID-19, and those received toward the end of the process focussing heavily on a possible economic downturn and the impact on council’s and ratepayers.

Eight submissions were received that specifically commented on Covid-19 and associated economic downturn. This included four blanket letters that were sent to all councils across New Zealand, that had similar requests for financial prudence and rate reductions or relief. These were received from:

· Local Government Business Forum

· Federated Farmers New Zealand

· Property Council of New Zealand

· Hospitality New Zealand

The submissions urged council to reduce proposed rates increases, by reviewing projects that are being considered as to whether they can be delayed or cancelled, making savings to existing programmes and focussing on core functions. They also suggested that council consider taking on more debt for capital investment, consider remissions or rebates for businesses adversely affected, and consider a more beneficiary-pays approach.

These comments have been considered and are addressed by staff in the overall re-consideration of annual plan proposals, and the additional considerations made below.

Long Term Plan 2018-2028 planned spend for 2020/21

The Long Term Plan 2018-2028 (LTP) was adopted by council in June 2018 after a comprehensive consultation process. This is a ten-year plan, which included a detailed budget for the first three years of the plan. The third year of the long-term plan is 2020/21, and is the yardstick against which the scale of changes represented in this annual plan consultation are measured.

Just over $700,000 of spend was approved for year three of the LTP, to come online in 2020/21. In response to the situation with Covid-19, and in addition to reviewing the proposed annual plan new initiatives, staff reviewed the spend for 2020/21 that was approved as part of the LTP.

Where possible, without significantly impacting work programmes and levels of service, this spend was reduced, in order to reduce the overall rate impact for the year.

As a result of the review, just over $450,000 of operational spend was identified as being able to be removed from the budget for the 2020/21 financial year. The LTP new initiatives to be removed are set out in the table below:

Far north nursery manager	$70,322
Eastern Bays Hill country staff	$82,206
Project costs associated with Northern Wairoa and lakes projects	$41,854
Enviroschools strategy and seminar costs	$86,385
Scholarship, intern and environmental awards funding	$68,880
Painting of Water Street building, vehicle costs	$104,004
Total	$453,651

Staff advice is that these changes are considered to be not material or significant, and therefore can be made now without consulting on them.

Business as usual budget

In any given year council will make changes to its business as usual budget as part of ordinary operations, to ensure the most effective placement and use of resources. Organisation-wide reductions of business as usual budgets are only carried out under extraordinary circumstances, such as those associated with the economic downturn resulting from the situation with Covid-19.

Due to the re-forecast decrease in investment income as a result of recent economic downturn, and considerable decrease in income that was budgeted to subsidise rates and fund council activities, a cross-organisation exercise was carried out to identify areas where projects could be combined, deferred, or where efficiencies can be found, to enable savings. This was carried out across many areas within each of council’s groups of activities, to reduce the impact on any one activity, and ensure that there is no significant impact on core functions.

Approximately $686,720 in funding has been identified as being able to be removed from the 2020/21 business usual budget, to help balance the loss of budgeted revenue.

Staff recommend that $686,720 of business as usual funding be removed from budgets for the 2020/21 year, with the final amount to be confirmed by council resolution in the process of adopting the final Annual Plan 2020/21, and that the projects be funded if council revenue is greater than expected during the 2020/21 year, as resolved by council at that time.

At present, staff advice is that these changes are considered to be not material or significant, and therefore can be made now without consulting on them. This advice will be updated when the Council comes to adopt the final annual plan.

Recruitment

Due to the re-forecast decrease in council revenue as a result of recent economic downturn, and significant decrease in income that was budgeted to subsidise rates and fund council activities, a critical re-evaluation of pending recruitment was carried out. This included identifying where positions were planned to contribute to work that is no longer able to be prioritised, where positions were part of larger teams where redeployment may be possible, or where external funding is a factor. Six vacant positions were identified as being able to be deferred for the 2020/21 year.

Staff recommend that planned recruitment in the order of $411,500 for six positions be removed from budgets for the 2020/21 year, with the final amount to be confirmed by council resolution in the process of adopting the final Annual Plan 2020/21, and that these positions be funded if investment income is greater than expected during the 2020/21 year, as resolved by council at that time.

At with the business as usual budget, staff advice is that these changes are considered to be not material or significant, and therefore can be made now without consulting on them. This advice will be updated when the Council comes to adopt the final annual plan.

Use of reserves and funds

Council maintains several reserves and investment funds, with funds being used to earn investment income, and some investment income transferred to reserves and held there to fund activities.

Generally, investment gains are re-invested to increase council’s portfolio, and these are not drawn upon unless required. Due to the re-forecast decrease in council revenue as a result of recent economic downturn, and a significant decrease in income that had been budgeted to subsidise rates and fund council activities, it is considered appropriate that these now be drawn upon.

Staff recommend that $150,000 be drawn from the Equalisation Fund Reserve, and that these funds be used to fund council’s operational activities, with the final amount to be confirmed by council resolution in the process of adopting the final Annual Plan 2020/21. This is consistent with the purpose of the Equalisation Fund Reserve and is consistent with council’s Revenue and Financing Policy, in particular the application of sources of funding for operating expenses.

Council maintains a specific reserve to fund economic development. The Investment and Growth Reserve is used to fund economic development activities and projects that contribute toward economic well-bring. This is usually funded by a transfer of $1.7M of council’s investment income, including a contribution from the Community Investment Fund, a fund that earns investment income every year. As with other portfolios, the Community Investment Fund is now forecast to experience a significant reduction in investment income. Rather than using investment income to provide this funding, staff recommend that $1.7M of the Community Investment Fund’s capital be transferred to the Investment and Growth reserve, to fund economic development activity for 2020/21.

Staff also recommend that $250,000 of additional accumulated gains are drawn upon from the Infrastructure Investment Fund and applied to general funding. This fund was established to spread the cost of large infrastructure projects and provide flexibly around the timing of these, and the use of investment income for general funding is consistent with council’s usual allocation of this fund. This movement in the Infrastructure Investment Fund will not materially impact the $17,000,000 of invested funds.

It is also recommended that, due to the substantial loss of income that council has experienced due to Covid-19, $696,838 of current year and historical gains from the Community Investment Fund are allocated to council’s general funding, to maintain a balanced budget. This is broadly consistent with the policy on the use of income from investments as set out in council’s Revenue and Financing Policy, is consistent with the council’s Statement of Investment Policy and Objectives (SIPO) and will retain the minimum balance required in the fund. It is however inconsistent with the significant financial forecasting assumptions that are set out in council’s Long Term Plan 2018-2028, which assume that any revenue that the fund earns over 7.5% will be either reinvested in the fund or directed to the Investment and Growth Reserve, and with the financial strategy in the Long Term Plan 2018-2028 which suggests the use of the fund is for economic development activities.

While these inconsistencies are noted, they are not considered to be a material departure from the Long Term Plan 2018-2028. Given the extraordinary economic circumstances that council is faced with, the requests from the community for rates increases to be kept as low as possible, and the one-off nature of the allocation, this inconsistency is considered acceptable, particularly to the extent that it is consistent with the objectives of externally managed funds in council’s financial strategy.

Staff also recommend that, due to the loss of rental income council has experienced due to the economic impacts of Covid-19, council retain $123,583 of funding from the Property Reinvestment fund to apply to general funds to make up for the loss of rental income. The rental income is usually applied to general funds. This is broadly consistent with the stated purpose of the fund.

Rates increase

Recommendation:

41. That council support an overall rate increase of 4.5% for the 2020/21 year to fund the annual plan proposals in recommendations 12, 13, 17 - 22, and 24 above, and proposals that were approved for year three of the Long Term Plan 2018-2028 and aren’t recommended for removal in 25 – 30 above, and to deliver a balanced budget.

This recommendation represents a change from what was proposed in the Annual Plan 2020/21 Consultation Document.

Considerations

1. Options

No.	Option	Advantages	Disadvantages
1	Support a revised 4.5% overall rate increase for the 2020/21 year.	Council can approve a lower than consulted rate increase for the year without significantly decreasing the level of service.	Some proposed initiatives and other projects will not be able to be progressed in the 2020/21 year unless investment portfolios return greater than forecast gains.
2	Support an 8.6% overall rate increase for the 2020/21 year, as consulted.	Council can deliver the proposed initiatives as consulted.	No allowance for the change in economic situation and submissions received requesting a reconsideration of rates increases.
3	Support an 0% overall rate increase for the 2020/21 year.	No rate increase for ratepayers in the region during the 2020/21 year.	Severe pressure on council’s budgets possibly resulting in a decrease of level of service or use of other funds inconsistent with their purpose and policy. Note: This decision would represent a material change to what was consulted on and council would need to undertake further consultation prior to making this decision.

Staff’s recommended option is Option 1.

2. Significance and engagement

Section 76AA of the Local Government Act 2002 (LGA) directs that council must adopt a policy setting out how significance will be determined, and the level of engagement that will be triggered. This policy assists council in determining how to achieve compliance with LGA requirements in relation to decisions.

The proposals set out in the Annual Plan 2020/21 Consultation Document triggered council’s significance and engagement policy, and a comprehensive process of consultation and engagement has now been carried out. The results of this engagement have been summarised in this document to inform council’s deliberations and decision-making process.

The process of deliberations assists council in achieving compliance with sections 77 of the LGA.

3. Policy, risk management and legislative compliance

Consultation on the annual plan proposals has been carried out pursuant to sections 95 and 95A of the LGA and in accordance with the principles of consultation (section 82 LGA)

Consideration of submissions through the process of deliberations will achieve compliance with section 77 of the LGA (Requirements in relation to decisions) and with council’s Significance and Engagement Policy, in particular ‘We will consult when we are required to by law, when a proposal is considered significant, and when we need more information on options for responding to an issue’.

Further considerations

4. Community views

A process of consultation has been carried out to inform the recommendations set out in this report. A summary of this consultation and the feedback received is included in this report, and in attachment 1 to this report.

Consultation was sought to inform council’s decisions on a specific set of proposals. Due to extraordinary circumstances that developed during the consultation period, the recommendations in this report are considerably different from the proposals that were included in the consultation. The changes made since consultation have been assessed against council’s Significance and Engagement Policy and for materiality, and an assessment has been made that no further consultation is required (for the reasons identified in the report above).

5. Financial implications

Financial impacts or implementation issues are addressed in recommendations included within this report.

Attachments/Ngā tapirihanga

Attachment 1: Annual Plan 2020/21 Consultation Summary of Submissions ⇩

Authorised by Group Manager

Name:	Malcolm Nicolson
Title:	Chief Executive Officer
Date:	01 May 2020

Extraordinary Council Meeting item: 3.2

6 May 2020

TITLE:	Council deliberations on the User Fees and Charges 2020/21
ID:	A1302962
From:	Robyn Broadhurst, Policy Specialist and Kyla Carlier, Corporate Planning Manager

Executive summary/Whakarāpopototanga

This report provides background information and presents staff advice and recommendations, to inform council’s deliberation on the Draft User Fees and Charges 2020/21 and Statement of Proposal, including three new charges.

Staff recommend council support the Draft User Fees and Charges 2020/21, inclusive of the three new charges.

Recommendations

1. That the report ‘Council deliberations on the User Fees and Charges 2020/21’ by Robyn Broadhurst, Policy Specialist and Kyla Carlier, Corporate Planning Manager and dated 7 April 2020, be received.

2. That Jonathan Gibbard, Group Manager – Strategy, Governance and Engagement be given delegated authority to approve any consequential amendments as a result of council decisions on submissions and any minor accuracy and grammatical amendments.

3. That council supports the inflationary increase in charges contained in the Draft User Fees and Charges 2020/21 by 2.2%, as set out in the schedule.

4. That council supports the Draft User Fees and Charges 2020/21 as notified, and direct staff to prepare the final user fees and charges for council adoption in June 2020.

Background/Tuhinga

Consultation was carried out on council’s Draft User Fees and Charges 2020/21 in conjunction with the process of consultation for the Annual Plan 2020/21. This is the usual process for these annual reviews and offers efficiencies in terms of staff resources and public participation as well as producing a complete budget. Consultation involved the production of a full draft user fees and charges schedule complete with a statement of proposal that highlighted the proposed new charges, plus amendments to existing charges.

Feedback on the proposals was sought during a month-long period running from 26 February – 27 March 2020. Twenty submissions were received during the consultation period, and no parties requested to speak with councillors about user fees and charges during this time. Six submissions related specifically to the draft user fees and charges. The feedback is summarised in the summary of submissions document (included as Attachment 1 to Item 3.1).

The annual review of user fees and charges ensures that changes can be made and that the charges do not become outdated.

The draft schedule for 2020/21 proposed three new fees and charges as follows:

· A navigation and safety services fee for larger ships anchoring outside of pilotage areas;

· A fee for the issuing of a Notice of Direction under the Biosecurity Act 2003; and

· A marine biosecurity charge for larger ships anchoring in Northland waters.

The draft schedule also included several minor amendments and updates including:

· Inflationary increase of 2.2%;

· Removal of outdated sections and subsequent updates;

· Simplification of staff charge out rates;

· Updating annual charges to a post billing model from the previous estimate-based model;

· Additional wording for clarity, adjustments for consistency and accuracy; and

· Minor typographical and referencing updates.

For a full list of amendments, please see the Draft User Fees and Charges 2020/21 Statement of Proposal. [included as Attachment 1].

Feedback received

The submission process funnelled feedback into that received on the three proposed new charges, and that received on the proposed amendments to existing charges.

Six comments were received on the three proposed new charges:

· Three submitters supported these;

· One submitter had no opinion;

· One submitter supported the navigation and safety services see for larger ships outside of pilotage areas, supported the marine biosecurity charge for larger ships, and questioned what a Notice of Direction was and who it applied to; and

· One submitter stated that user pays shouldn’t affect rates except more income should result in cheaper rates.

The submissions received on the proposed new charges demonstrated majority support. As outlined in the statement of proposal, a notice of direction is issued to those breaching rules under the Biosecurity Act 2003 and will be charged based on the actual time taken to process the notice.

Staff recommend that council supports the user fees and charges as notified, with no changes as a result of these submissions.

Five submissions were received on proposed amendments to existing charges:

· One submitter had no objections;

· One submitter requested clarification on changes to navigation fees;

· One submitter questioned why fees and charges were required if council simply wishes to improve the existing system of operations;

· One submitter stated more fees less rates increases; and

· One submitter raised concerns over the simplification to the staff charge-out rates resulting in higher fees, if the spread is calculated too simple. Submitter questioned that inspection fees are presumably on user pays, covering distances travelled, then states that a flat rate seems to spread costs over a wider user group creating losers and gainers.

The submissions received were more in question of the proposals than indicating clear support or opposition. The submitter who questioned clarification on changes to navigation fees also provided feedback specifically on these under the section for proposed new navigation charges, so it is deduced that the question related only to amendments. The amendments to navigation fees were only to provide more clarity by: specifying that all fees are GST exclusive; relate to all ships not just cruise ships; and that the Christmas Day surcharge applied to all public holidays.

The simplification to staff charge rates is a more accurate way of charging, resulting in actual and reasonable charges and more certainty for the user, and is not expected to result in higher fees on average.

Staff recommend that council supports the user fees and charges as notified, with no changes as a result of these submissions.

Considerations

1. Significance and engagement

Engagement with the community has now been carried out. The process of deliberations assists council in achieving compliance with section 77 of the LGA.

2. Policy, risk management and legislative compliance

Consultation on the Draft User Fees and Charges 2020/21 has been carried out pursuant to section 150 of the LGA and in accordance with section 83 of the LGA.

Consideration of submissions through the process of deliberations will achieve compliance with section 77 of the LGA – Requirements in relation to decisions – and with council’s Significance and Engagement Policy, in particular ‘We will consult when we are required to by law, when a proposal is considered significant, and when we need more information on options for responding to an issue’.

Attachments/Ngā tapirihanga

Attachment 1: Statement of proposal - Draft User Fees and Charges 20/21 ⇩

Authorised by Group Manager

Name:	Jonathan Gibbard
Title:	Group Manager - Strategy, Governance and Engagement
Date:	01 May 2020