Agenda of Finance and Performance Committee

PALMERSTON NORTH CITY COUNCIL

Finance and Performance Committee MEETING

16 October 2017

Order of Business

Pursuant to Sections 46A(7) and 46A(7A) of the Local Government Official Information and Meetings Act 1987, to receive the Chairperson’s explanation that specified item(s), which do not appear on the Agenda of this meeting and/or the meeting to be held with the public excluded, will be discussed.

Any additions in accordance with Section 46A(7) must be approved by resolution with an explanation as to why they cannot be delayed until a future meeting.

Any additions in accordance with Section 46A(7A) may be received or referred to a subsequent meeting for further discussion. No resolution, decision or recommendation can be made in respect of a minor item.

3. Public Comment

To receive comments from members of the public on matters specified on this Agenda or, if time permits, on other Committee matters.

(NOTE: If the Committee wishes to consider or discuss any issue raised that is not specified on the Agenda, other than to receive the comment made or refer it to the Chief Executive, then a resolution will need to be made in accordance with clause 2 above.)

4. Confirmation of Minutes Page 7

“That the minutes of the Finance and Performance Committee meeting of 18 September 2017 Part I Public be confirmed as a true and correct record.”

5. Forest Post Harvest Native Forest Revegetation Page 15

Memorandum, dated 8 September 2017 from the Water & Waste Services Manager, Robert van Bentum and the Water Asset Engineer, Dora Luo.

6. Arena Masterplan Steering Group Page 31

Memorandum, dated 29 September 2017 from the Manager - Venues PN, John Lynch.

7. Treasury Report for 3 months ended 30 September 2017 Page 37

Memorandum, dated 5 October 2017 from the Strategy Manager Finance, Steve Paterson.

8. Quarterly Performance and Finance Report - Quarter Ending 30 September 2017 Page 49

Memorandum, dated 6 October 2017 from the Financial Accountant, Keith Allan and the Head of Community Planning, Andrew Boyle.

9. Committee Work Schedule Page 121

10. Exclusion of Public

To be moved:

“That the public be excluded from the following parts of the proceedings of this meeting listed in the table below.

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under Section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:

General subject of each matter to be considered		Reason for passing this resolution in relation to each matter	Ground(s) under Section 48(1) for passing this resolution
11.	Minutes of the Finance and Performance Committee meeting - Part II Confidential - 18 September 2017	For the reasons setout in the Finance and Performance Committee minutes of 18 September 2017, held in public present.
12.	Central Energy Trust Wildbase Recovery - Solar panel options	Third Party Commercial and Commercial Activities	s7(2)(b)(ii) and s7(2)(h)
13.	Purchase Arena Land	Third Party Commercial and Commercial Activities	s7(2)(b)(ii) and s7(2)(h)
14.	Purchase of Land to Extend Walkways Network	Third Party Commercial	s7(2)(b)(ii)
15.	Award of Contract 3377 - James Line Upgrade	Negotiations	s7(2)(i)

This resolution is made in reliance on Section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by Section 6 or Section 7 of that Act which would be prejudiced by the holding of the whole or the relevant part of the proceedings of the meeting in public as stated in the above table.

Also that the persons listed below be permitted to remain after the public has been excluded for the reasons stated.

Chief Executive (Heather Shotter), Chief Financial Officer (Grant Elliott), General Manager, City Enterprises (Ray McIndoe), General Manager, City Future (Sheryl Bryant), General Manager, City Networks (Ray Swadel), General Manager, Customer Services (Peter Eathorne), General Manager, Libraries and Community Services (Debbie Duncan), Human Resources Manager (Wayne Wilson) and Communications and Marketing Manager (or their representative (name)) because of their knowledge and ability to provide the meeting with advice on matters both from an organisation-wide context (being members of the Council’s Management Team) and also from their specific role within the Council.

Legal Counsel (John Annabell), because of his knowledge and ability to provide the meeting with legal and procedural advice.

Governance and Support Team Leader (Kyle Whitfield) and Committee Administrators (Penny Odell, Carly Chang and Rachel Corser), because of their knowledge and ability to provide the meeting with procedural advice and record the proceedings of the meeting.

Senior Property and Parks Planner (Aaron Phillips), Energy – Ssystems Support Officer (Eva Johnston), Poperty Officer (Bryce Hosking), Leisure Assets Officer (Bryan Way), Roading Manager (Jon Schwass) and Property and Park Manager (John Brenkley) because of their knowledge and ability to assist the meeting in speaking to their report and answering questions, noting that such officer will be present at the meeting only for the item that relate to their respective report.

[Add Third Parties], because of their knowledge and ability to assist the meeting in speaking to their report/s [or other matters as specified] and answering questions, noting that such person/s will be present at the meeting only for the items that relate to their respective report/s [or matters as specified].

PALMERSTON NORTH CITY COUNCIL

Palmerston North City Council

Minutes of the Finance and Performance Committee Meeting Part I Public, held in the Council Chamber, First Floor, Civic Administration Building, 32 The Square, Palmerston North on 18 September 2017, commencing at 9.02am

Members

Present:

Councillor Susan Baty (in the Chair), The Mayor (Grant Smith) and Councillors Brent Barrett, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

Apologies:

Councillor Jim Jefferies (for lateness).

At the beginning of the meeting Councillor Rachel Bowen congratulated the ‘Play Palmy’ on behalf of the Council for it’s award om the ‘Right to Play’ programme category at the International Play Association Conference in Calgary, Canada

Councillor Jim Jefferies entered the meeting at 9.42am during consideration of clause 58. He was not present for clauses 55 to 57 inclusive.

55-17

Apologies

Moved Susan Baty, seconded Leonie Hapeta.

The COMMITTEE RESOLVED

1. That the Committee receive the apologies.

Clause 55-17 above was carried 15 votes to 0, the voting being as follows:

For:

The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

56-17

Confirmation of Minutes

Moved Vaughan Dennison, seconded Gabrielle Bundy-Cooke.

The COMMITTEE RESOLVED

1. That the minutes of the Finance and Performance Committee meeting of 21 August 2017 Part I Public be confirmed as a true and correct record.

Clause 56-17 above was carried 12 votes to 0, with 3 abstentions, the voting being as follows:

For:

The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Lorna Johnson, Duncan McCann, Karen Naylor and Bruno Petrenas.

Abstained:

Councillors Leonie Hapeta, Aleisha Rutherford and Tangi Utikere.

57-17

Palmerston North Airport Ltd - Comment on Annual Report for 12 months ended 30 June 2017 & Instructions Relating to Annual Meeting

Memorandum, dated 31 August 2017 from the Strategy Manager Finance, Steve Paterson.

Moved Tangi Utikere, seconded Leonie Hapeta.

The COMMITTEE RECOMMENDS

1. That the Annual Report and Financial Statements of Palmerston North Airport Limited for the year ended 30 June 2017 be received.

2. That the Council shareholder representative be instructed to support the proposed resolutions to be considered at the Annual Meeting of Palmerston North Airport Limited to be conducted by way of resolution in writing.

Clause 57-17 above was carried 15 votes to 0, the voting being as follows:

For:

58-17	Recommendation for Adoption 2016/17 Annual Report Memorandum, dated 5 September 2017 from the Financial Accountant, Keith Allan. Councillor Jim Jefferies entered to the meeting at 9:42am During discussion Elected Members decided that in the public interest that the Councillor Portfolios be included in the “Year in Review” of the 2016/17 Annual Report.
	Moved Vaughan Dennison, seconded Lew Findlay QSM. The COMMITTEE RECOMMENDS 1. That the Committee recommend to Council that the 2016/17 Annual Report and 2016/17 Summary Annual Report be adopted. 2. That the Committee note that an Auditor’s “opinion” from Audit New Zealand would be expected to be received immediately following recommended adoption by Council on 25 September 2017 and Council signing of the reports. 3. That delegated authority is given to the Chairperson and Deputy Chairperson of the Finance and Performance Committee to make minor amendments to the 2016/17 Annual Report and 2016/17 Summary Annual Report. 4. That the Committee note that recommendation 2 be varied in that the Statement of Compliance and Responsibility will also be signed by Grant Elliott, Chief Financial Officer.
	Clause 58-1 to 58-4 inclusive above were carried 16 votes to 0, the voting being as follows: For: The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Jim Jefferies, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.
	Moved Leonie Hapeta, seconded Brent Barrett. 5. That the Councillor Portfolios be included on page 9 of the “Year in Review”.
	Clause 58.5 above was carried 15 votes to 1, the voting being as follows: For: The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Jim Jefferies, Lorna Johnson, Duncan McCann, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere. Against: Councillor Karen Naylor.

59-17	Capital New Programme Adjustments for 2017-18 Memorandum, dated 14 August 2017 from the Water & Waste Services Manager, Robert van Bentum. Elected Memebers decided that it would be useful for the Chief Executive to report back on a process around reallocating and prioritising underspend on programmes.
	Moved Gabrielle Bundy-Cooke, seconded Jim Jefferies. The COMMITTEE RECOMMENDS 1. That a new 2017/18 Rubbish and Recycling Capital New Programme called “Awapuni Lease Property Improvements” with a budget of $40,000 be created by utilising savings of $40,000 from Water Capital New Programme 610 – “Turitea Valley Road / Pacific Drive New Water Supply Link.” 2. That a new 2017/18 Water Capital New Programme called “Turitea WTP Access Road Retaining Wall” with a budget of $180,000 be created by utilising savings of $180,000 from Water Capital New Programme 610 – “Turitea Valley Road / Pacific Drive New Water Supply Link”. 3. That the budget for the 2017/18 Wastewater Capital New Programme “1048 Totara Road WWTP – Construction of New Food Waste Facilities” be revised from $101,000 to $150,000 by utilising savings of $49,000 from Water Capital New Programme 610 – “Turitea Valley Road / Pacific Drive New Water Supply Link.” 4. That the budget for the 2017/18 Wastewater Capital New Programme “570 Totara Road WWTP – Replacement of Inlet Screens (Growth)” be revised from $385,000 to $475,000 by utilising savings of $90,000 from Water Capital New Programme 610 – “Turitea Valley Road / Pacific Drive New Water Supply Link”.
	Clause 59.1 to 59.4 inclusive above were carried 16 votes to 0, the voting being as follows: For: The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Jim Jefferies, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.
	Moved Lorna Johnson, seconded Leonie Hapeta. 5. That the Chief Executive report back on a process for reallocation and prioritisation of underspending on programmes.
	Clause 59.5 above was carried 10 votes to 6, the voting being as follows: For: Councillors Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Lorna Johnson, Karen Naylor, Aleisha Rutherford and Tangi Utikere. Against: The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Jim Jefferies, Duncan McCann and Bruno Petrenas.

60-17

Victoria Esplanade Erosion

Report, dated 17 August 2017 from the Parks & Property Manager, John Brenkley.

Moved Grant Smith, seconded Aleisha Rutherford.

The COMMITTEE RECOMMENDS

1. That Council contribute $125,000 to Horizons RC to rock line the riverbank below the Victoria Esplanade to prevent further erosion occurring in this location as an accommodated operational cost within the City Reserves General Activity. Furthermore it be noted that this contribution is unbudgeted and that the activity will be monitored and any likely overspend be reported back.

Clause 60-17 above was carried 14 votes to 2, the voting being as follows:

For:

The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Jim Jefferies, Lorna Johnson, Duncan McCann, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

Against:

Councillors Leonie Hapeta and Karen Naylor.

61-17

Committee Work Schedule September 2017

Moved Susan Baty, seconded Jim Jefferies.

The COMMITTEE RESOLVED

1. That the Finance and Performance Committee receive its Work Schedule dated September 2017.

Clause 61-17 above was carried 16 votes to 0, the voting being as follows:

For:

The Mayor (Grant Smith) and Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Jim Jefferies, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

Exclusion of Public

62-17

Recommendation to Exclude Public

Moved Susan Baty, seconded Aleisha Rutherford.

The COMMITTEE RESOLVED

“That the public be excluded from the following parts of the proceedings of this meeting listed in the table below.

General subject of each matter to be considered		Reason for passing this resolution in relation to each matter	Ground(s) under Section 48(1) for passing this resolution
11.	Minutes of the Finance and Performance Committee meeting - Part II Confidential - 21 August 2017	For the reasons setout in the Finance and Performance Committee minutes of 21 August 2017, held in public present.
12.	Increase in Leased Reserve Land for Hokowhitu School Pool	Commercial Activities	s7(2)(h)
13.	Sale of land - request to amend settlement date	Negotiations	s7(2)(i)

Also that the persons listed below be permitted to remain after the public has been excluded for the reasons stated.

Chief Executive (Heather Shotter), Chief Financial Officer (Grant Elliott), General Manager, City Enterprises (Ray McIndoe), General Manager, City Future (Sheryl Bryant), General Manager, City Networks (Ray Swadel), General Manager, Customer Services (Peter Eathorne), General Manager, Libraries and Community Services (Debbie Duncan), Human Resources Manager (Wayne Wilson) and Communications Advisor (or their representative (Brigette Marulli de Barletta) because of their knowledge and ability to provide the meeting with advice on matters both from an organisation-wide context (being members of the Council’s Management Team) and also from their specific role within the Council.

Legal Counsel (John Annabell), because of his knowledge and ability to provide the meeting with legal and procedural advice.

Parks and Property Manager (John Brenkley), Property Officer (Bryce Hosking), Strategy Manager – Finance (Steve Paterson) , because of their knowledge and ability to assist the meeting in speaking to their report and answering questions, noting that such officer will be present at the meeting only for the item that relate to their respective report.

Clause 62-17 above was carried 16 votes to 0, the voting being as follows:

For:

The public part of the meeting finished at 11.31am

Confirmed 16 October 2017

Chairperson

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 16 October 2017

TITLE: Forest Post Harvest Native Forest Revegetation

DATE: 8 September 2017

AUTHOR/S: Robert van Bentum, Water & Waste Services Manager, City Networks

Dora Luo, Water Asset Engineer, City Networks

RECOMMENDATION(S) TO Council

1. That Council note that an additional operational budget of $36,000 spread over 5 years starting from the 2018/19 year following completion of the planned pine forest harvest operations in the Turitea Water Supply Catchment, will be presented for funding consideration in the 2018-28 Long Term Plan.

1. ISSUE

1.1 At the Finance and Performance Committee meeting of 15 August 2016 and the subsequent Council August 2016 meeting, Council approved the harvest of pine trees from Stand 7 of Turitea West and the remainder of Turitea East with the land to be left to regenerate into native vegetation.

1.2 The Stand 7 forest is located within the Turitea water catchment and reserve. Stand 7 is over-mature and showing evidence of significant wind damage. Access issues and in particular concerns about potential damage to the water treatment plant access road and the pipeline below, had previously delayed the harvest.

1.3 Approval was given in August 2016 to proceed with the harvest however the very wet weather during the summer of 2016-17 resulted in the tree harvest being postponed until the summer of 2017-18. A further slip has occurred on the access road during the winter of 2017. Council at its 25th September 2017 meeting has approved a new programme to construct a retaining wall to repair the road, and enable forest harvest to proceed.

1.4 The August 2016 Finance and Performance Committee meeting, made a further recommendation which was adopted by Council, “That a native seed replant be scoped, budgeted and engaged following harvest.”

1.5 Officers engaged the consultants Groundtruth to assess the requirements for post-harvest intervention to ensure the native regrowth would be effective. The consultant’s report has been completed and is attached to this memorandum. This memorandum outlines the key findings and recommendations.

2. BACKGROUND

2.1 Groundtruth was engaged to provide an overview of the best approach to achieving rapid native forest regenerations and to assess the risks and advantages of different methods of achieving this outcome.

2.2 The key objectives of rapid native forest regeneration include ensuring soil stability following harvest to avoid soil loss and sediment loss in the catchment and to the dams, increasing the biodiversity values of the area and achieving rapid vegetation growth which suppresses weed growth. The work included several site visits as well as a desk based assessment.

2.3 Key observations reported on by Groundtruth in respect of the Turitea West Block include the extensive existing native species understorey, the presence of larger native trees in the Tutaewhare Stream gully and the presence of areas of gorse and Himalayan honeysuckle weeds which may slow but will not prevent native regeneration. The report notes that the greatest risk of pine regeneration will occur on the drier ridges however as the Turitea West Block is broadly south facing pine regeneration is likely to be less of an issue. The report identified the most significant erosion risk is an existing slip adjacent to the access road. Some intervention to reduce erosion in this area would be worthwhile.

2.4 Groundtruth assessed that provided harvest operations were carefully undertaken, growth of existing native species would be adequate in most areas. They recommend active management in some areas to control radiata pine regrowth through pulling or spraying from 6 months until 3 years after harvest. In addition they recommend spot weed control by spraying of dense patches of gorse, blackberry and other weeds, as well as some provision for planting of native species in areas where grasses have established and native vegetation is sparse. The suggested budget for the active management is $36,000 spread over the 5 years following harvest. The assessment is that replanting across the whole area is not a sensible alternative and even the native planting that is proposed, is likely to quickly overtopped and replaced by naturally regenerated seedlings.

2.5 Officers have reviewed the report and recommendations and consider them practical. The additional work can be undertaken cost effectively by either City Enterprises staff or existing contractors by way of variations to existing contracts and scopes of work.

3. NEXT STEPS

3.1 Officers are currently advancing work to repair the access road and plan for a summer tree harvest. Subject to Council approval, Officers propose to make provision for the additional cost in the Water Source Turitea Sub-activity within the 2018-28 Long Term Plan budgets.

4. Compliance and administration

Does the Committee have delegated authority to decide? If Yes quote relevant clause(s) from Delegations Manual <Enter clause>	No
Are the decisions significant?	No
If they are significant do they affect land or a body of water?	No
Can this decision only be made through a 10 Year Plan?	No
Does this decision require consultation through the Special Consultative procedure?	No
Is there funding in the current Annual Plan for these actions?	No
Are the recommendations inconsistent with any of Council’s policies or plans?

Attachments

Turitea West Native Forest Revegetation Report 20170630 ⇩

Robert van Bentum

Water & Waste Services Manager

Dora Luo

Water Asset Engineer

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 16 October 2017

TITLE: Arena Masterplan Steering Group

DATE: 29 September 2017

AUTHOR/S: John Lynch, Manager - Venues PN, City Enterprises

ECOMMENDATION(S) TO Council

1. That the Arena Masterplan Steering Group be formed to provide direction, advice, feedback and endorsement to Arena Masterplan projects.

2. That the Terms of Reference for the Arena Masterplan Steering Group be approved.

3. That the membership of Arena Masterplan Steering Group be reviewed at the beginning of each election cycle.

4. That Nominations be sought from 2 elected members to join the Mayor on the Arena Masterplan Steering Group.

1. BACKGROUND

The original Arena Masterplan was adopted by Palmerston North City Council (PNCC) in 2014. It formed part of the current Long Term Plan.

In April 2016 an MOU between PNCC and Sport Manawatu was entered into to establish a relationship between the parties in order to;

· Collaborate to develop Central Energy Trust Arena as the city’s central sports hub with development of Sports House and associated activities for the Manawatu at Central Energy Trust Arena;

· Recognise both parties’ common interests;

· Develop mutual benefits from collaboration and co-operation to increase programmes and participation in recreation and the activation of the site;

This MOU recognises Sport Manawatu as a key stakeholder in delivery of the Arena Masterplan and projects moving forward as it was not envisaged in the original masterplan.

On 7 August 2017 a workshop with Councillors reviewed the Masterplan and options for inclusion in the Long Term Plan 2018-28. A preferred option was identified which includes Sports House located adjacent to Cuba Street in the Eastern corner of the precinct. Sports House is very much a key priority in the updated Masterplan and the preferred option identified.

The Masterplan is currently being finalised with assistance from McIndoe Urban Architects to include the detailed requirements for Sports House. These are being worked through with the Sport Manawatu Board to ensure all parties are comfortable with the final plan. This work is expected to be complete by the end of October 2017. The final Masterplan will be presented to the Sport and Recreation Committee on 4 December 2017.

The Mayor has proposed a formalised Steering Group be established to keep some focus with key partners/ stakeholders and drive the external funding and investment that is critical to the success of the various projects in the Masterplan. With the anticipated adoption of the updated Arena Masterplan in November, the formation of the Arena Masterplan Steering Group and its Terms of Reference now will enable the Steering Group to be established ahead of the confirmation of the Masterplan in November.

The Terms of Reference outlines the purpose and scope of the Steering Group, roles and responsibilities. Key stakeholders have been identified as being pivotal to the success of the Masterplan and future developments at Central Energy Trust Arena

2. NEXT STEPS

Adopt the attached Arena Masterplan Steering Group Terms of Reference

3. Compliance and administration

Does the Committee have delegated authority to decide?	No
Are the decisions significant?	No
If they are significant do they affect land or a body of water?	No
Can this decision only be made through a 10 Year Plan?	No
Does this decision require consultation through the Special Consultative procedure?	No
Is there funding in the current Annual Plan for these actions?	Yes
Are the recommendations inconsistent with any of Council’s policies or plans?	No

Attachments

Arena Masterplan Steering Group (AMSG) Terms of Reference ⇩

John Lynch

Manager - Venues PN

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 16 October 2017

TITLE: Treasury Report for 3 months ended 30 September 2017

DATE: 5 October 2017

AUTHOR/S: Steve Paterson, Strategy Manager Finance, City Corporate

RECOMMENDATION(S) TO Finance and Performance Committee

1. That the performance of the treasury activity for the 3 months ending 30 September 2017 be noted.

2. That it be noted that as at 30 September 2017 the treasury policy targets were complied with except for the following:

a. the three to five year and five year plus fixed rate maturity profile band targets of 15% to 60%

b. The maximum investment with a registered bank not exceeding $10m;

and that as the level of non-compliance was minimal, and that it is expected the policy targets will be met by 31 December 2017 no specific action is intended at this stage.

1. ISSUE

To provide an update on the performance of the Investment Fund (“the Fund”) and the Council’s Term Debt portfolio for the 3 months ended 30 September 2017.

2. BACKGROUND

2.1 Investment Fund

In November 2008 Council endorsed an orderly exit strategy for the Fund which embraced holding the investments in bonds to maturity or when they could be sold without realising a loss (ie if the yields fall below the purchase price).

This strategy has been encapsulated in subsequent 10 Year and Annual Plans and the realisation process is nearing an end. The bond portfolio is managed directly by the Council with the assistance of MCA Ltd as investment advisors.

2.2 Term Debt

The Council’s Annual Budget for 2017/18 forecast additional debt of $19m would need to be raised during the year to fund the $39.5m of new capital expenditure programmes (including assumed carry forwards from 2016/17). In June 2017 the Council resolved to specifically authorise the raising of up to $19m of additional debt.

Council’s Financial Strategy (updated version adopted 24 June 2015) contains the following ratios which the Council has determined to be prudent maxima:

• Net debt as a percentage of total assets not exceeding 20%

• Net debt as a percentage of total revenue not exceeding 175%

• Net interest as a percentage of total revenue not exceeding 15%

• Net interest as a percentage of annual rates income not exceeding 20%

The Treasury Policy (embracing the Liability Management and Investment Policy) also contains a number of other criteria regarding debt management.

3. Performance

3.1 Investment Fund

Fund performance is monitored and reviewed by Council’s investment advisor and Council’s own staff. Attached as schedule 4 is a consolidated report prepared by Council’s investment advisor covering the period 1 July 2017 – 30 September 2017. The overall market value of the Fund is summarised in the following table:

Market Value at 1 Jul 17 $m

Market Value at 30 Sep 17 $m

NZ Bonds

$2.71

$0.72

# - a $2 million bond investment matured in August 2017 and was repaid to the Council

Realised Fund earnings from interest and dividends for the 3 months totalled $21k. $2.021m was distributed back to the Council during the period including $2m of maturing investments.

3.2 Term Debt

Schedule 1 attached shows the details of Council’s debt as at 30 September 2017. Debt levels were within the policy parameters outlined in clause 2.2. of this report.

The summarised gross term debt movements are shown in the following table:

Annual Budget for year (2017/18)

$000

Actual – 3 months (2017/18)

$000

Opening Debt Balance at 1 July 2017

New Debt #

Debt repayments #

101,600

19,000

97,000

12,000*

Closing Balance

Comprising:

Bank advance (on call)

Commercial paper

LGFA short term advance

LGFA & Council stock

120,600

109,000

10,000

99,000

# A portion of the Council’s debt is drawn on a daily basis – daily drawdowns & repayments are not included in these figures but the net draw or repayment for the year to date is shown as part of new debt or debt repayment as appropriate.

* This $12m new debt was raised to pre-fund debt maturing in December 2017. The sum has been placed on short term deposit (at 3.03% pa) in the interim. This return is higher than the cost of the borrowing during this period ($6m @ 2.5586% and $6m @ 2.506%).

Net debt at 30 September 2017 was $92.75m (ie gross $109m less investment fund of $0.7m less short term deposits of $13m and call investment of $3.25m) compared with $93.665m at 1 July 2017 (ie. gross $97m less investment fund of $2.71m and call investment of $0.625m).

Council’s Treasury Policy prescribes under the counterparty credit risk section that investments for any registered bank will not exceed $10m. As at 30 September 2017 $16.25m was invested with Westpac - $12m of this relates to the pre-funding of debt maturing in December 2017. The investment level will therefore return within policy parameters before 31 December 2017.

Movements in recent years are shown in the following graph:

Actual finance costs incurred during the 3 months (including interest, line fees & the effects of swaps) amounted to $1.465m compared with the budget for the year of $6.462m.

The Council has entered a number of financial instruments related to its debt portfolio utilising swap trading lines established with Westpac and ANZ. The details of these are shown in Schedule 2 attached.

The value of these instruments is measured in terms of its “mark-to-market” ie the difference between the value at which the interest rate was fixed and the current market value of the transaction. Each of these transactions was valued at the date they were fixed and again at the reporting date. Financial reporting standards require the movement in values to be recorded through the Council’s Statement of Comprehensive Income (Profit & Loss Account). They have been revalued as at 30 September 2017 and show a decrease in book value of $181k for the quarter.

The Council’s Treasury Policy contains guidelines regarding the measurement of treasury risk as follows:

a. Interest rate risk is managed by the Council maintaining the ratio of debt that is subject to floating versus fixed interest rates within pre-set limits.

b. Funding and liquidity risk is managed by the Council maintaining a pre-set portion of its debt in a range of maturity periods eg < 1 year, 1 – 3 years, 5 years +.

The position compared to the policy is illustrated in the graphs in Schedule 3. The overall ratio of fixed v floating interest rate debt is based on the assessed level of total debt in 12 months’ time. At the present time we are using a rolling 12 month projection of $105m for this assessment. This is considerably less than assumed in the Annual Budget and reflects that at the present time actual capital expenditure (and as a consequence total debt) is less than the budget assumption.

As at 30 September 2017 all of the policy targets except two had been met. The policy requires 15% to 60% of debt within the three to five year maturity band and 15% to 60% of the five year plus maturity band to be fixed. The actuals were 12% and 62% respectively.

The policy bands are considered still to be appropriate and the level of non-compliance is minimal. Following discussions with Council’s advisors no specific action is being proposed at this stage as the position is expected to right itself by 31 December, though we continue to monitor market conditions.

Council’s credit lines with the banks include a $25m four year credit facility with Westpac Bank (maturing 31 July 2020) and a revolving $25m three year facility with ANZ Bank (maturing 31 March 2020).

4. CONCLUSION & NEXT STEPS

Realised interest and dividends returns for the 3 months from the Fund of $21k equates the budget.

Finance costs for the 3 month period (including interest, line fees & the effect of swaps) was $1.465m compared with budget for the year of $6.462m.

In conjunction with Council’s treasury advisors hedging instruments are regularly reviewed in an effort to ensure the instruments are being utilised to best advantage as market conditions change. The level of hedging cover is also reviewed as the forecasts of future debt levels are revised

Following the latest annual review published on 18 April 2017 Council’s S&P Global Rating’s credit rating remains unchanged at AA / A-1+.

Council’s borrowing strategy is continually reviewed, in conjunction with Council’s treasury advisors, to ensure best advantage is taken of this quality credit rating.

A further performance report will be provided after the end of the December 2017 quarter.

Attachments

Schedules 1 - 4 ⇩

Steve Paterson

Strategy Manager Finance

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 16 October 2017

TITLE: Quarterly Performance and Finance Report - Quarter Ending 30 September 2017

DATE: 6 October 2017

AUTHOR/S: Keith Allan, Financial Accountant, City Corporate

Andrew Boyle, Head of Community Planning, City Future

RECOMMENDATIONS TO Finance and Performance Committee

1. That the Committee receive the September 2017 Quarterly Performance and Financial Report and note:

a. The September 2017 financial performance and operating performance.

b. The September 2017 capital expenditure programme progress together with those programmes identified as unlikely to be completed this financial year.

1. ISSUE

To provide a quarterly update on performance and financial achievements for the period ending 30 September 2017. This is the first quarterly report for the year.

2. BACKGROUND

Synopsis

Cost of services delivered year to date: - Operating-controllable variance - With interest and rates included	$1.1m fav $1.5m fav	Services are being delivered within budget with some higher revenues received, part with higher offsetting costs, and a reduced call for some service delivery costs.
Percent of full year capital expenditure budget completed: - Renewal - New	12.5% 5.3%	Compares with amounts completed same time in 2016/17: 14.8% 10.4%
Operating cash flows variance to budget	$2.3m fav	Favourable to budget with favourable operating variance plus a favourable working capital requirement.
Increase in net debt	$5.9m fav	Lower due to favourable operating variance and lower capital expenditure.

3. NEXT STEPS

Details of operating and financial performance are included in the following sections.

4. Compliance and administration

Does the Committee have delegated authority to decide? If Yes quote relevant clause(s) from Delegations Manual <Enter clause>	Yes
Are the decisions significant?	No
If they are significant do they affect land or a body of water?	No
Can this decision only be made through a 10 Year Plan?	No
Does this decision require consultation through the Special Consultative procedure?	No
Is there funding in the current Annual Plan for these actions?	Yes
Are the recommendations inconsistent with any of Council’s policies or plans?	No

Attachments

1.	Section one and two September 2017 Finance report ⇩
2.	Section three September 2017 Finance Report ⇩

Keith Allan

Financial Accountant

Andrew Boyle

Head of Community Planning

Susan Baty (Chairperson)
Jim Jefferies (Deputy Chairperson)
Grant Smith (The Mayor)
Brent Barrett	Lorna Johnson
Rachel Bowen	Duncan McCann
Adrian Broad	Karen Naylor
Gabrielle Bundy-Cooke	Bruno Petrenas
Vaughan Dennison	Aleisha Rutherford
Lew Findlay QSM	Tangi Utikere
Leonie Hapeta