Agenda of Extraordinary Council Meeting

Extraordinary Council Meeting item: 5.1

7 July 2021

TITLE:	Oruku Landing Conference and Event Centre - Amending Resolution
From:	Ben Lee, GM - Strategy, Governance and Engagement and Darryl Jones, Economist
Authorised by:	Malcolm Nicolson, Chief Executive Officer, on 2 July 2021

Executive summary/Whakarāpopototanga

The purpose of this report is to seek council’s approval to delete one of the seven conditions of funding associated with the $6 million in grant funding to be provided to Whangarei District Council (WDC) for the Oruku Landing Conference and Events Centre (the Project) that was approved at the council meeting on 19 May 2021. The condition to be removed is (g), which requires the commencement of authorised piling for the construction of the adjacent hotel by no later than 31 March 2023.

WDC and Northland Development Corporation (NDC) have requested that council remove this condition because while it remains in place WDC will assume for the purposes of its planning and funding of the Project that the $6 million allocated by council will not be available because the construction of the hotel is beyond the control of WDC, i.e., WDC will need to budget that the $6 million will not be provided when considering any necessary rating, borrowing, etc., to ensure that they have provided enough funding to cover the Project costs. NDC have also provided council with an update on developments relating to the construction of the hotel. A decision on this matter is required at this time because a WDC council decision on their involvement in the Project is being sought at an extraordinary council meeting on Tuesday 13 July 2021.

Under section 24.6 of council’s Standing Orders, council, on a recommendation in a report by the Chairperson, Chief Executive, or any committee or subcommittee, may revoke or alter all or part of a resolution passed by a previous meeting. The Chief Executive must give at least two clear working days’ notice of any meeting that will consider a revocation or alteration recommendation. These requirements have been met. Staff recommend condition (g) be deleted.

Recommendations

1. That the report ‘Oruku Landing Conference and Event Centre - Amending Resolution’ by Ben Lee, GM - Strategy, Governance and Engagement and Darryl Jones, Economist and dated 29 June 2021, be received.

2. That the 19 May 2021 council resolution be amended as follows:

2. That council approves the provision of $6 million (plus GST if any) in grant funding for the Oruku Landing Conference and Event Centre (the Project) as proposed in the Long Term Plan 2021-2031 Consultation Document and supporting information, with the following conditions.

a. Whangarei District Council maintains its existing commitment to take responsibility for the Project, including paying for all cost overruns, and owning it as a council asset.

b. Crown Infrastructure Partners maintains its current funding commitment of $60 million to the Project. Any reduction in the quantum of this commitment will be matched by a proportional decrease in council’s funding commitment.

c. The funding will only be used to contribute towards the cost of the internal physical fit-out of the Centre.

d. The funding will be provided once the building structure is complete and the fit-out is required, and not before the commencement of the 2023/24 financial year.

e. That council receive detailed fit-out design and costings prior to making any payment.

f. A set of social procurement requirements for the Project are developed in conjunction with Whangarei District Council and Crown Infrastructure Partners.

~~g. Authorised piling for the hotel construction has commenced no later than 31 March 2023.~~ [Condition deleted]

Options

No.

Option

Advantages

Disadvantages

Agree to the deletion of condition (g).

WDC can include NRC’s $6 million grant funding contribution alongside central government’s $60 million “shovel ready” commitment when estimating the balance of funding that it is potentially required to provide.

This increases the likelihood that WDC will agree to proceed with the Project.

Removes pressure on those involved in the development of the proposed hotel immediately adjacent to the Project.

Do not agree to the deletion of condition (g).

Maintains pressure on those involved in the development of the proposed hotel immediately adjacent to the Project.

WDC will not include NRC’s $6 million grant funding contribution alongside central government’s $60 million “shovel ready” commitment when estimating the balance of funding that it is potentially required to provide, i.e., it will need to budget for $6 million more.

This increases the risk that the Project does not proceed.

The staff’s recommended option is Option 1: agree to the removal of condition (g) requiring authorised piling for the hotel construction to have commenced no later than 31 March 2023. While council added this condition to create an incentive for the hotel to be developed alongside the Project, it has had the unintended consequence of WDC not accounting for this funding when determining its funding commitment for the Project because the condition is dependent on the actions of a third party outside WDC’s control. Consequently, the balance of funding required to be budgeted by WDC will be $6 million more. This increases the risk that the Project will not go ahead. If the project does not proceed, then Whangarei and the wider Northland community will lose the economic benefits associated with the Project.

Considerations

1. Environmental Impact

There are no environmental impacts resulting from a decision to delete condition (g).

2. Community views

As part of the LTP 2021-2031 consultation process, council received 171 submissions on the proposal to provide $14 million in grant funding as a contribution to the development of the Project. While eight submissions noted that the Project would be an important catalyst for the proposed private-sector hotel development alongside the Project, and together create the biggest economic impact, none suggested that council’s funding for the Project be tied to the construction of the hotel.

3. Māori impact statement

There are no known impacts on Māori which are different to the general population relating to the decision to delete condition (g).

4. Financial implications

There are no financial implications associated with the decision to delete condition (g). Council has already approved the $6 million in grant funding in the LTP 2021-2031.

5. Implementation issues

There are no known implementation issues for council associated with the decision to delete condition (g).

6. Significance and engagement

In relation to section 79 of the Local Government Act 2002, the decision to remove condition (g) is considered of low significance when assess against council’s significance and engagement policy. While the quantum of funding provided was the subject of public consultations, the conditions associated with the provision of that funding are part of council’s day-to-day activities.

7. Policy, risk management and legislative compliance

The policy or legislative requirements that is relevant to this decision concern section 24.6 of council’s Standing Orders which sets out the process for revocation or alteration of a resolution passed by a previous meeting. This process has been met by this paper. The decision to remove condition (g) alters the risk profile of the Project by increasing the likelihood that WDC will agree to proceed with the development of the Project. This has a flow-on effect of increasing the likelihood that the proposed hotel will also occur as it is not likely to be developed in the absence of the Project.

Background/Tuhinga

At its meeting on 19 May 2021, council made the following decision:

a. Whangarei District Council maintains its existing commitment to take responsibility for the Project, including paying for all cost overruns, and owning it as a council asset.

c. The funding will only be used to contribute towards the cost of the internal physical fit-out of the Centre.

d. The funding will be provided once the building structure is complete and the fit-out is required, and not before the commencement of the 2023/24 financial year.

e. That council receive detailed fit-out design and costings prior to making any payment.

f. A set of social procurement requirements for the Project are developed in conjunction with Whangarei District Council and Crown Infrastructure Partners.

g. Authorised piling for the hotel construction has commenced no later than 31 March 2023.

3. That council requests Whangarei District Council consider appointing an expert in the development and/or running of event and conference centres be brought on as a Member of their Oruku Landing Project Control Group in place of an NRC councillor.

4. The council delegate authority to the Chief Executive to prepare and sign a funding agreement with WDC to support these decisions including, among other things, an appropriate schedule of payments and reporting requirements.

The provision of $6 million in grant funding in year 3 (2023/24) was then confirmed when council adopted the LTP 2021 – 2031 at its meeting on 22 June 2021.

WDC and NDC have subsequently raised concerns about condition (g). Their concern is that the condition relies on an action (the construction of the hotel) that is outside WDC’s control. WDC are therefore excluding council’s $6 million contribution when determining the quantum of funding it needs to contribute to the Project because of the risk of the condition not being met and therefore council’s funding not being provided. WDC have requested that condition (g) be deleted. A decision on this matter is required at this time because a WDC council decision on their involvement in the Project is being sought at an extraordinary council meeting on Tuesday 13 July 2021.

Council can amend the condition (or any other condition for that matter) by council decision without public consultation. It is only the $6 million contribution that was set in the LTP. The quantum can only be changed by undertaking the necessary Local Government Act consultation process.

Condition (g) was included to address council’s interest in seeing the proposed hotel developed alongside the Project. Since council made its decision in May, new information has been provided by NDC which is relevant to condition (g) and the likelihood of the hotel being constructed. The information is:

1. Accor have sent a final heads of agreement to NDC, further to the memorandum and draft heads of agreement previously held, advancing the relationship.

2. Accor have introduced Apollo Capital as a suitable investor to come on board with NDC.

3. Tupu Tonu (Ngāpuhi Investment Fund Limited) are exploring the possibility of taking a stake in the hotel.

4. NDC have indicated there are still many other funding options to explore for the hotel, including via Accor.

5. The resource consent application for the Oruku Landing precinct development, comprising both the Project and hotel, has been lodged with the Ministry for the Environment to go through the ‘fast-track’ consenting process. According to NDC, the application is on hold pending WDC council confirmation of their financial commitment. It will then go to the Minister for the Environment to approve the application going through the fast-track process. If approved, NDC have advised it will likely take 6-8 weeks to go through the process.

6. NDC have gone unconditional on the purchase the land for both the hotel and the Project. If the Project proceeds, the land for the Project will be on-sold to WDC.

Staff are of the view that condition (g) should be deleted. In addition to the progress on the hotel outlined above, the condition essentially nullifies council’s $6 million contribution, and the shortfall would need to be covered elsewhere for the Project to be able to proceed. It has been made clear by WDC and NDC that if the condition remains, council’s $6 million would not be included in the budget and may compromise the entire project (as proposed). WDC are already taking on considerable risk by owning the Project.

Attachments/Ngā tapirihanga

Nil