Agenda of Joint Regional Economic Development Committee

Joint Regional Economic Development Committee

30 September 2021

Joint Regional Economic Development Committee Agenda

Meeting to be held remotely

on Thursday 30 September 2021, commencing at 10.00am

Recommendations contained in the agenda are NOT decisions of the meeting. Please refer to minutes for resolutions.

MEMBERSHIP OF THE Joint Regional Economic Development Committee

Chairperson, Councillor Justin Blaikie

Councillor Terry Archer	Councillor Anna Curnow	Councillor David Clendon
Councillor John Vujcich	Councillor Peter Wethey

RĪMITI (Item) Page

1.0 Ngā Mahi Whakapai/Housekeeping

2.0 Ngā Whakapahā/apologies

3.0 Ngā Whakapuakanga/declarations of conflicts of interest

4.0 Ngā Whakaae Miniti (Confirmation of Minutes)

4.1 Confirmation of Minutes - 30 July 2021 3

5.0 Receipt of Action Sheet

5.1 Receipt of Action Sheet 8

6.0 Reports

6.1 Northland Inc Limited Statement of Intent 2022-2025: Letter of Expectations discussion 11

6.2 Northland Inc Limited Directors: Review of remuneration 13

6.3 Investment and Growth Reserve: Allocation of funding for Regional Economic Development Strategy 16

Joint Regional Economic Development Committee item: 6.1

30 September 2021

TITLE:	Northland Inc Limited Statement of Intent 2022-2025: Letter of Expectations discussion
From:	Emmanouela Galanou, Economic Policy Advisor and Darryl Jones, Economist
Authorised by Group Manager/s:	Ben Lee, GM - Strategy, Governance and Engagement, on 24 September 2021

Whakarāpopototanga / Executive summary

The purpose of this report is to initiate the discussion by the Joint Regional Economic Development Committee (JREDC) on Northland Inc Limited’s Statement of Intent (SOI) 2022-2025. This discussion will guide the preparation of a letter of expectations to Northland Inc on their SOI 2022-2025. While a letter of expectations is not a legislative requirement associated with the preparation of a SOI, it is considered a useful mechanism for ensuring that the purpose and role of the CCO is clearly understood. Since a draft SOI is legislatively required to be delivered by a CCO to its shareholders by 1 March, it has been the adopted practice of Northland Regional Council (NRC) to send a letter of expectations in December. Staff recommend that minimal changes to the current SOI be suggested in a letter of expectation.

Ngā mahi tūtohutia / Recommendation

That the report ‘Northland Inc Limited Statement of Intent 2022-2025: Letter of Expectations discussion’ by Emmanouela Galanou, Economic Policy Advisor and Darryl Jones, Economist and dated 13 September 2021, be received.

Background/Tuhinga

According to Schedule 8 from the LGA 2002, council-controlled organisations (CCO) such as Northland Inc are required to provide a Statement of Intent to council or appointed joint committees on an annual basis, outlining their strategic approach and priorities for the next three years. A letter of expectations provides the owners of a CCO the opportunity to give direction to a CCO as it prepares the SOI.

Following the discussion on the letter of expectations at this JREDC meeting, staff will prepare and circulate a draft letter of expectations for review by JREDC members in November 2021. A final version of the letter of expectations will be provided to the JREDC for their approval at the next formal meeting scheduled for 10 December. The figure below illustrates the process that will be used by the JREDC to provide direction to Northland Inc in shaping their SOI 2022-2025.

Diagram, text

Description automatically generated

Staff recommend that minimal changes to the SOI be suggested by the JREDC through the letter of expectations. This recommendation is made in recognition of: (a) the significant revision to Northland Inc’s SOI made for 2021-2024, (b) the alignment of the current SOI with councils’ Long Term Plans, (c) the need to allow time for Northland Inc to operate under the significantly revised SOI and the new ownership structure, and (d) the forthcoming development of a regional economic development strategy. Among the suggestions that could be made, staff offer the following points for JREDC discussion.

· Rectify the small grammatic inconsistencies, for example in the use of the phrase “Te Tai Tokerau”.

· Reflect on the economic development learnings from the latest COVID-19 lockdown.

· Consider the development of a Te Tai Tokerau specific doughnut economic diagram.

· Consider including appropriate and specific high-level regional outcomes that Northland Inc’s work should be contributing to (this would be useful for the preparation of the regional economic development strategy).

· Note that there is limited funding available in the IGR to make any further operational funding increases and ask Northland Inc to review their operational funding requirements to potentially allow for more funding to be available for Enabling Investment allocation.

Attachments/Ngā tapirihanga

Nil

Joint Regional Economic Development Committee item: 6.2

30 September 2021

TITLE:	Northland Inc Limited Directors: Review of remuneration
From:	Emmanouela Galanou, Economic Policy Advisor and Darryl Jones, Economist
Authorised by Group Manager/s:	Ben Lee, GM - Strategy, Governance and Engagement, on 24 September 2021

Executive summary/Whakarāpopototanga

The purpose of this report is to seek the approval of the Joint Regional Economic Development Committee (JREDC) to undertake a review of the remuneration paid to the directors of Northland Inc Limited. Directors’ remuneration levels were last reviewed and changed in 2018. The outcome of the review will be presented back to the JREDC in time so that any decisions can be incorporated into the final Statement of Intent 2022-2025 of Northland Inc to be delivered by 30 June 2022.

Recommendation(s)

1. That the report ‘Northland Inc Limited Directors: Review of remuneration’ by Emmanouela Galanou, Economic Policy Advisor and Darryl Jones, Economist and dated 21 September 2021, be received.

2. That the Joint Committee approve the decision to review the remuneration paid to the directors of Northland Inc Limited.

3. That the Joint Committee approve the allocation of up to $2,000 (excluding GST) from the Investment and Growth Reserve to cover costs associated with the review.

Options

No.

Option

Advantages

Disadvantages

Approve the review of Northland Inc’s directors’ remuneration and provide up to $2,000 from the IGR to assist with costs associated with the review.

Appropriate timing to review the directors’ remuneration considering Northland Inc’s transition to a joint CCO and the three-year elapse from the previous review.

Ensure remuneration levels are competitive in the market.

Changes in the current directors’ remuneration will have an impact on Northland Inc’s operational budget.

Don’t approve the review of Northland Inc’s directors’ remuneration.

No financial implication incurred for the shareholders and / or Northland Inc.

Further delay in undertaking the review will require a larger increase in the future to ensure remuneration is competitive in the market.

An uncompetitive remuneration may limit potential directors from applying.

The staff’s recommended option is Option 1. The review of Northland Inc’s directors’ remuneration ensures that directors’ remuneration is competitive in the market and provides a signal from shareholders to directors that their work is valued.

Considerations

1. Environmental Impact

There are no environmental risks or negative impacts associated with this decision.

2. Community views

There are no community views on this issue that need to be considered.

3. Māori impact statement

There is no need for Māori views to be considered in relation to this matter.

4. Financial implications

The review of Northland Inc’s directors’ remuneration could have financial implications to the organisation’s operational budget as remuneration is paid out of operational funding. In the event that Northland Inc’s operational budget is inadequate due to the increase suggested by the review, additional funds from the Investment and Growth Reserve (IGR) may be required.

In undertaking a review, it will be necessary to obtain information from organisations such as The Institute of Directors New Zealand. Based on experience, it is anticipated that the cost of acquiring this information would be around $2,000. Staff request that funding for the purchase of this information be allocated from the IGR.

A decision to allocate funding to assist with undertaking the review is inconsistent with the criteria and procedures for the allocation of funding from the IGR (IGR criteria) approved by NRC on 22 June 2021. The IGR criteria provides for three categories of funding allocation: Northland Inc operational funding, Project Development funding and Enabling Investment funding. Funding to assist with the review does not meet the criteria of any of these categories.

The paragraphs above identify the inconsistency and the reasons for the inconsistency. In terms of an intention to amend the policy, staff recommend that this decision be considered as a one-off request. However, staff suggest that the next time the IGR criteria is reviewed, potentially following the completion of a regional economic development strategy, that the JREDC considers the establishment of a new funding category that allows for small administrative allocations such as that associated with this decision.

5. Implementation issues

The remuneration review will be undertaken with the support of NRC’s Human Resource Manager. They recently undertook a similar process to review the remuneration of Marsden Maritime Holdings directors, a subsidiary organisation of NRC. In terms of the process timeline, the review should be completed by March 2022 so that any financial implications can be included in the final version of Northland Inc’s Statement of Intent 2022-2025.

6. Significance and engagement

This matter does not trigger council’s Significance and Engagement Policy, and no public consultation is required for the Joint Committee to make the decisions detailed in this report.

7. Policy, risk management and legislative compliance

Under Section 7(d) of Northland Inc Limited Shareholders’ Agreement signed on 1 July 2021, matters such as the remuneration of directors and any increase in the remuneration of such persons requires Joint Committee approval.

Background/Tuhinga

Northland Inc’s directors’ remuneration was last reviewed, and an increase approved by NRC on 21 June 2018. This lifted the directors’ remuneration per individual from $13,125 to $18,000 per year, and from $22,000 to $27,000 per annum for the Chair.

Since a three-year period has elapsed since the last review, staff recommend that the JREDC considers the review of the directors’ remuneration that is more closely in line with the recent changes applied; these being Northland Inc’s transition to a jointly owned council-controlled organisation, which suggests higher expectations from the regional community towards the services delivered by Northland Inc.

Attachments/Ngā tapirihanga

Nil

Joint Regional Economic Development Committee item: 6.3

30 September 2021

TITLE:	Investment and Growth Reserve: Allocation of funding for Regional Economic Development Strategy
From:	Emmanouela Galanou, Economic Policy Advisor and Darryl Jones, Economist
Authorised by Group Manager/s:	Ben Lee, GM - Strategy, Governance and Engagement, on 24 September 2021

Executive summary/Whakarāpopototanga

The purpose of this paper is to seek agreement from the Joint Regional Economic Development Committee (JREDC) to allocate $80,000 (plus GST) from the Enabling Investment category of the Investment and Growth Reserve (IGR) to Northland Inc Limited as a co-funding contribution to assist with the preparation of a regional economic development strategy. Northland Inc have estimated a budget of $200,000 to prepare the strategy. The remaining funding will come from the Ministry of Social Development (MSD) ($100,000) and the Whangarei District Council (WDC) ($20,000).

At its meeting on 25 May 2020, the Northland Mayoral Forum tasked the Chief Executives to develop a regional economic development strategy as part of a broader proposal for the joint delivery of local government economic development services in Northland. An update on the regional economic development strategy, including this proposed funding split, was provided to the Northland Mayoral Forum at its meeting on 30 August 2021. The Forum reiterated their support for the preparation of a regional economic development strategy and the proposed funding approach.

The allocation of this funding is recommended by the board of Northland Inc (Attachment 1). Staff have assessed the request and conclude that while funding is available, the allocation is inconsistent with the current criteria and procedures for the allocation of Enabling Investment funding from the IGR as agreed to by Northland Regional Council (NRC) on 22 June 2021 (Attachment 2). This is because the funding is not being used to fund either the construction of public or community held infrastructure or for the development of regionally strategic sectors as identified in Northland Inc’s Statement of Intent (clause 10.b.). However, Section 80(1) of the Local Government Act 2002 provides for the JREDC to make an inconsistent decision under specific conditions, and these conditions have been met within the content of this agenda item.

Staff recommend that council supports the allocation of funding to support the preparation of a regional economic development strategy. Representatives from Northland Inc will be in attendance to answer any questions regarding this request and provide an update on progress with the development/funding of the strategy.

Recommendation(s)

1. That the report ‘Investment and Growth Reserve: Allocation of funding for Regional Economic Development Strategy’ by Emmanouela Galanou, Economic Policy Advisor and Darryl Jones, Economist and dated 21 September 2021, be received.

2. That $80,000 (excluding GST) be allocated as Enabling Investment funding from the Investment and Growth Reserve to Northland Inc Limited as a co-funding contribution for the preparation of a regional economic development strategy.

Options

No.	Option	Advantages	Disadvantages
1	Allocate $80,000 in funding	Provides significant support for the preparation of a regional economic development strategy. Allows Northland Inc to begin work immediately on the strategy.	Reduces the funding available to allocate to future Enabling Investment projects.
2	Allocate a lesser amount of funding	Provides some support for the preparation of a strategy. Limits the reduction in funding available for future Enabling Investment projects	Preparation of a regional economic development strategy will be significantly impaired.
3	Not allocate funding	Maintains funding in the IGR to allocate to future Enabling Investment projects.	Preparation of a regional economic development strategy will not occur.

The staff’s recommended option is Option 1, to allocate $80,000 (plus GST). This allocation will enable Northland Inc to commence work on the strategy, giving then certainty to reach out to other parties that need to be involved that it is going to be developed.

Considerations

1. Environmental Impact

The preparation of a regional economic development strategy itself does not have any environmental risks or impacts. However, consideration of how economic development can take place in Northland within a sustainable environment, will be a key consideration and outcome of the strategy.

2. Community views

The concept of developing a regional economic development strategy has been discussed with a variety of government entities and private sector organisations who have all expressed strong support for the preparation of a regional economic development strategy and a willingness to be involved. There are many initiatives, strategies, and work programmes that the strategy will need to consider and build on.

3. Māori impact statement

A regional economic development strategy will have a significant impact on Māori. Therefore, their involvement as partners in its preparation will be paramount to its successful implementation. Initial discussions on the concept of developing a regional economic development strategy have taken place through such forums as ILGACE, and with various leaders (Chairs and CEOs) of Tai Tokerau iwi. Once funding has been assured, Northland Inc will reach out to Māori to be partners in co-designing and preparing the strategy.

4. Financial implications

Table 1 sets out the forecast cash flow balance of the IGR based on current funding commitments, detailing income and withdrawals for the various committed projects and funding for the operation of Northland Inc. Based on current forecasts, there is enough money in the IGR to allocate $80,000 for the preparation of the strategy in 2021/22. However, an allocation of $80,000 represents 42% of the funding available for allocation in 2021/22, leaving approximately $110,000 available to allocate to other Enabling Investment projects that may come forward during the year.

Table 1. Investment and Growth Reserve cash flow balance
based on current funding commitments

The split in local government funding for the strategy, being an allocation of $80,000 from the IGR and a $20,000 contribution from WDC, is in-line with the original funding formula used for the joint delivery of local government economic development activities agreed to by the Mayoral Forum in May 2020. The original formula proposed a 60/40 split between NRC/and the three district councils be achieved by year 6 of the 2021-2031 long term plan period (2026/27) and continue onwards. The district council’s 40% share was spilt among the three council’s based on population: 51% WDC, 36% FNDC and 13% KDC. Under this formula, WDC would have been contributing 20.4% of the total funding into the IGR from 2026/27 onwards. Dividing $20k by 20.4% gives a total local government contribution of $98,039, meaning a combined contribution of (rounding) $80,000 from the other three councils NRC, KDC and FNDC which is being provided for through this funding allocation decision.

5. Implementation issues

The preparation of the strategy will be implemented by Northland Inc. While they have not been involved in the preparation of a regional economic development strategy, they have recently completed several strategy level documents including a Tai Tokerau Northland Destination Marketing Plan and a Tai Tokerau Northland International Education Strategy. These were prepared in close collaboration with a range of other parties including central government, tangata whenua and the private sector.

The JREDC will be provided with regular updates and opportunities to provide input into the strategy through the schedule of meetings set in place for 2021/22. There may be an opportunity in the future for a member of the JREDC to sit on a yet to be appointed governance group alongside representatives from tangata whenua, central government, the private sector, and Northland Inc.

6. Significance and engagement

In relation to section 79 of the Local Government Act 2002, this decision is of low significance when assessed against significance and engagement policy of Northland Regional Council (NRC) as the allocation of funding from the IGR has been specifically considered and provided for in NRC’s Long Term Plan.

7. Policy, risk management and legislative compliance

Making this decision is inconsistent with the criteria and procedures for the allocation of funding from the IGR (IGR criteria) approved by NRC on 22 June 2021 (Attachment 2). The IGR criteria provides for three categories of funding allocation: Northland Inc operational funding, Project Development funding and Enabling Investment funding. Northland Inc are requesting that $80,000 be provided as Enabling Investment funding.

The decision is inconsistent with the IGR criteria because the scope of work that is being proposed, the preparation of a regional economic development strategy, is outside the type of projects that are eligible for Enabling Investment grant funding. Specifically, under clause 10(b), the project must align with the Joint Regional Economic Development Committee’s priorities for economic development (as set from time to time), including:

i. the construction of public or community held infrastructure; or

ii. the development of regionally strategic sectors as identified in Northland Inc’s Statement of Intent.

Furthermore, it is also outside the purpose of the Project Development funding category. Clause 5(a) of the IGR criteria states that “Project Development funding cannot be used to fund the preparation of a strategy”.

Section 80(1) of the Local Government Act 2002 provides for a local authority to make a decision that is inconsistent with policy provided when making the decision, the local authority clearly identifies: (a) the inconsistency; (b) the reasons for the inconsistency; and (c) whether there is any intention to amend the policy or plan to accommodate the decision. The paragraphs above identify the inconsistency and the reasons for the inconsistency. In terms of an intention to amend the policy, staff consider this decision to be a one-off request and therefore there is no intention to change the current IGR criteria.

Attachments/Ngā tapirihanga

Attachment 1: Northland Inc Board Meeting 21 September 2021 item 5.2 Regional Economic Development Strategy ⇩

Attachment 2: Investment and Growth Reserve Criteria - version 5 adopted 22 June 2021 ⇩

TITLE:	Confirmation of Minutes - 30 July 2021
From:	Emmanouela Galanou, Economic Policy Advisor and Darryl Jones, Economist
Authorised by Group Manager/s:	Ben Lee, GM - Strategy, Governance and Engagement, on 24 September 2021

TITLE:	Receipt of Action Sheet
From:	Emmanouela Galanou, Economic Policy Advisor; Glenn Johnson, Compliance Specialist and Darryl Jones, Economist
Authorised by Group Manager/s:	Ben Lee, GM - Strategy, Governance and Engagement, on 24 September 2021