Agenda of Finance and Performance Committee

PALMERSTON NORTH CITY COUNCIL

Finance and Performance Committee MEETING

19 February 2018

Order of Business

NOTE: The Finance and Performance Committee meeting coincides with the ordinary meeting of the Audit and Risk Committee meeting. The format for the meeting will be as follows:

- Audit and Risk Committee will open and adjourn immediately to Finance and Performance Committee

- Finance and Performance Committee will open, conduct its business and then close.

1. Apologies

2. Notification of Additional Items

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 December 2017 Part I Public be confirmed as a true and correct record.”

5. Gordon Kear Forest Page 13

Memorandum, dated 2 February 2018 from the Business Development Executive, Fiona Dredge.

6. Quarterly Performance and Financial Report - Quarter Ending 31 December 2017 Page 45

Memorandum, dated 2 February 2018 from the Financial Accountant, Keith Allan and the Head of Community Planning, Andrew Boyle.

7. Treasury Report for 6 months ended 31 December 2017 Page 127

Memorandum, dated 8 February 2018 from the Strategy Manager Finance, Steve Paterson.

8. Committee Work Schedule - February 2018 Page 139

9. 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
10.	Minutes of the Finance and Performance Committee meeting - Part II Confidential - 18 December 2017	For the reasons setout in the Finance and Performance Committee minutes of 18 December 2017, held in public present.

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.

[Add Council Officers], 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 December 2017, commencing at 9.00am

Members

Present:

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

Apologies:

The Mayor (Grant Smith) (Early Departure) and Councillors Vaughan Dennison, Leonie Hapeta and Duncan McCann (Early Departure).

Councillor Duncan McCann left the meeting at 9.24am during consideration of clause 104. He was not present for clauses 104 to 108 inclusive.

The Mayor (Grant Smith) left the meeting at 9.29am during consideration of clause 104. He was not present for clauses 104 to 108 inclusive.

101-17

Apologies

Moved Susan Baty, seconded Jim Jefferies.

The COMMITTEE RESOLVED

1. That the Committee receive the apologies.

Clause 101-17 above was carried 14 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, Lew Findlay QSM, Jim Jefferies,, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

102-17

Confirmation of Minutes

Moved Lorna Johnson, seconded Tangi Utikere.

The COMMITTEE RESOLVED

1. That the minutes of the Finance and Performance Committee meeting of 20 November 2017 Part I Public be confirmed as a true and correct record.

Clause 102-17 above was carried 11 votes to 0, with 3 abstentions, the voting being as follows:

For:

Councillors Brent Barrett, Susan Baty, Adrian Broad, Gabrielle Bundy-Cooke, Lew Findlay QSM, Jim Jefferies, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas and Tangi Utikere.

Abstained:

The Mayor (Grant Smith) and Councillors Rachel Bowen and Aleisha Rutherford.

103-17

Planning Fees & Charges - Confirmation Following Public Consultation

Memorandum, dated 4 December 2017 from the Strategy Manager Finance, Steve Paterson.

Moved Tangi Utikere, seconded Lorna Johnson.

The COMMITTEE RECOMMENDS

1. That the following charges for Planning Services be approved effective from 1 January 2018:

· Boundary activities (under section 87BA of the Resource Management Act 1991) – a fixed fee and deposit of $270.

· Marginal/temporary breaches (under section 87BB of the Resource Management Act 1991) – a fixed fee and deposit of $270.

· Hearing commissioners appointed at the request of applicants (under section 357AB of the Resource Management Act 1991) – charge at cost plus disbursements of the independent commissioner.

Clause 103-17 above was carried 14 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, Lew Findlay QSM, Jim Jefferies, Lorna Johnson, Duncan McCann, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

104-17	Update of Treasury Policy (incorporating Liability Management & Investment Policy) Memorandum, dated 4 December 2017 from the Strategy Manager Finance, Steve Paterson. Councillor Duncan McCann left the meeting at 9:24am The Mayor (Grant Smith) left the meeting at 9:29am
	Moved Karen Naylor, seconded Lorna Johnson. The COMMITTEE RECOMMENDS 1. That the updated Treasury Policy (incorporating the Liability Management and Investment Policy pursuant to section 102 of the Local Government Act 2002) as attached to this report be adopted. 2. That it be noted the Council will be reviewing the specific borrowing limits contained in clause 3.6.1 of the Policy as part of the process of developing its Financial Strategy for the 2018-28 10 Year Plan and that if the outcome of this is there are changes to these limits the Policy will be updated to include them.
	Clauses 104.1 and 104.2 above were carried 12 votes to 0, the voting being as follows: For: Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Lew Findlay QSM, Jim Jefferies,, Lorna Johnson, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.
	Moved Brent Barrett, seconded Lorna Johnson. The COMMITTEE RECOMMENDS 3. Clause 4.1.4 to be the following: The Council seeks to invest in an ethical manner, which it defines as meaning that it will invest in entities that engage in activities that demonstrate a positive approach to the environment, society and governance. The Council will not invest where there are significant legal or ethical concerns, and will specifically exclude investment in the following areas: • the manufacturing or development of controversial weapons • the manufacturing of tobacco • the production of fossil fuels • generating revenue from the operation of casino gambling.
	Clause 104.3 above was carried 11 votes to 1, the voting being as follows: For: Councillors Brent Barrett, Susan Baty, Rachel Bowen, Gabrielle Bundy-Cooke, Lew Findlay QSM, Jim Jefferies, Lorna Johnson, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere. Against: Councillor Adrian Broad.

105-17

Central Energy Trust Wildbase Recovery Naming Rights Memorandum of Understanding and Update

Report, dated 27 November 2017 from the Senior Property & Parks Planner, Aaron Phillips.

Moved Aleisha Rutherford, seconded Lew Findlay QSM.

The COMMITTEE RECOMMENDS

1. That the Central Energy Trust Wildbase Recovery Naming Rights Memorandum of Understanding as appended to the report dated 27 November 2017 be approved for signing.

2. That Council note progress on the construction of Central Energy Trust Wildbase Recovery facility in the Victoria Esplanade.

Clause 105-17 above was carried 12 votes to 0, the voting being as follows:

For:

Councillors Brent Barrett, Susan Baty, Rachel Bowen, Adrian Broad, Gabrielle Bundy-Cooke, Lew Findlay QSM, Jim Jefferies, Lorna Johnson, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

106-17

Conference Opportunity - Digital Nations 2030

Memorandum, dated 4 December 2017 from the Governance & Support Team Leader, Kyle Whitfield.

Moved Susan Baty, seconded Aleisha Rutherford.

The COMMITTEE RESOLVED

1. That the Committee approve the attendance of up to 2 elected member(s) to attend, with expenses paid, the Digital Nations 2030 conference being held in Auckland on 19-20 February 2018.

2. That registrations of interest be invited from elected members wishing to attend, with expenses paid, and advise the Governance and Support Team Leader, Kyle Whitfield, by 12 noon Friday 22 December 2017.

Clause 106-17 above was carried 12 votes to 0, the voting being as follows:

For:

107-17

Committee Work Schedule

Moved Karen Naylor, seconded Rachel Bowen.

The COMMITTEE RESOLVED

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

Clause 107-17 above was carried 12 votes to 0, the voting being as follows:

For:

Exclusion of Public

108-17

Recommendation to Exclude Public

Moved Brent Barrett, seconded Rachel Bowen.

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 - 20 November 2017	For the reasons set out in the Finance and Performance Committee minutes of 20 November 2017, held in public present.
12.	Library Redevelopment Project - Update	Commercial Activities	s7(2)(h)

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 (Sandra Crosbie)) 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.

Manager, Service Delivery (Linda Moore), 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.

WT Partnership (Warren Wilkes) and Athfield Architects (Jon Rennie), 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].

Clause 108-17 above was carried 12 votes to 0, the voting being as follows:

For:

The public part of the meeting finished at 9.50am

Confirmed 19 February 2018

Chairperson

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 19 February 2018

TITLE: Gordon Kear Forest

DATE: 2 February 2018

AUTHOR/S: Fiona Dredge, Business Development Executive, City Corporate

RECOMMENDATION(S) TO Council

1. That Council retains ownership of the Gordon Kear property, including the pine plantation, as it has a number of current and potentially strategically important social and environmental values combined with providing a commercial return from the forestry investment.

2. That Council considers ways to enhance the community environmental values of the property including biodiversity, recreation and water supply in order to maximise value to the city.

3. That Council continues to carefully manage the commercial forest estate to maximise overall return at low risk.

4. That Council maintains a watching brief on opportunity and benefits from the sale of the house and small holding.

1. ISSUE

In 2008, Council considered a report that discussed the future use of the Gordon Kear Forest land following harvest. Council resolved to replant the forest every winter immediately following the harvest of each area and to review its long term ownership once the harvest was complete. The resolution required any such review “to consider the community value of Gordon Kear Forest in terms of recreational opportunities and environmental services.”

2. BACKGROUND

The Gordon Kear property was purchased by Council in 1975 and a commercial pine plantation established on approximately two thirds of the land. The remaining area of approximately 250 hectares is native forest and shrublands.

In 2006 part of the pine plantation and land was exchanged for what is now Arapuke Forest Park. The exchange enabled Council to develop recreation in and around Arapuke Forest Park and to continue to focus on commercial outcomes in Gordon Kear Forest.

The total area of the Council-owned Gordon Kear property post-exchange is 678 hectares.

Preparation for clearfell harvest of the pine plantation began in 2007 with road lining (recovery of trees along access tracks to allow road construction). Clearfell harvest was undertaken between 2009 and 2016 and is now complete.

Replanting of plantation areas occurred each winter following harvest and is also now complete. The total area planted in radiata pine is currently 401 hectares.

The commercial pine plantation and majority of the Gordon Kear land are included in Council’s Treasury Policy as investment assets. The principal reason for investment is as an alternative funding source for future city development and net proceeds of harvest or sale are used to repay debt. Forestry is a long term investment with 28-30 years between planting and harvesting/realisation of the investment. The harvest of the second rotation tree crop may be completed around 2044.

Officers engaged the consultants Groundtruth to review Council’s long term ownership of the property. In carrying out the review, the consultant was provided with Council strategies and plans, previous reports and other information related to the commercial pine plantation and the property as a whole. The consultant also met with staff in areas such as planning, policy, water supply, and recreation in order to complete some of the key sections in the report. A copy of the consultant’s report is attached to this memorandum.

In summary, Groundtruth have concluded that the Gordon Kear property has a number of current and potentially strategically important social and environmental values. These include biodiversity, water supply, recreation, soil and water protection and carbon. In addition, the commercial pine plantation is expected to provide a return of around 6% over the current rotation, which is noted as being in line with other forestry investments of the same type in New Zealand.

Groundtruth’s recommendation is that Council maintains ownership of the Gordon Kear property. Other key recommendations are set out in section 5 of the attached report and are included as Recommendations to Council in this memorandum.

3. NEXT STEPS

Pruning of commercial plantation areas identified as suitable for clearwood (free of knots or blemishes caused by the original branches) and thinning (removal of trees not selected for the final crop) will be carried out. This work commenced during 2016/17 and is expected to continue for at least ten more years, subject to Council’s approval to retain the property.

4. 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?	n/a
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

Groundtruth Report Gordon Kear Property Ownership Review ⇩

Fiona Dredge

Business Development Executive

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 19 February 2018

TITLE: Quarterly Performance and Financial Report - Quarter Ending 31 December 2017

DATE: 2 February 2018

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

Andrew Boyle, Head of Community Planning, City Future

RECOMMENDATION(S) TO Council

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

a. The December 2017 financial performance and operating performance.

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

2. That the Committee recommend to Council that the capital expenditure carry forward values in the 2017/18 Annual Budget, as varied August 2017, for programme 368, Central Energy Trust Wildbase Recovery Centre, be increased by a further $533,499 to the amount of the remaining programme budget.

1. ISSUE

To provide a quarterly update on the performance and financial achievements of the Council for the period ending 31 December 2017. This is the second quarterly report for the year.

2. BACKGROUND

Cost of services delivered year to date: - Operating-controllable variance - Variance with interest and rates included	$0.4m fav $1.2m 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	33.5% 20.8%	Compares with amounts completed same time in 2016/17: 32.1% 19.4%
Operating cash flows variance to budget	$2.4m fav	Favourable to budget with favourable operating variance plus a favourable working capital requirement.
Increase in net debt	$8.1m 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	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?	No

Attachments

1.	Section one, two, December 2017 Quarterly Performance and Finance Report ⇩
2.	Section three, December 2017 Quarterly Performance and Finance Report ⇩

Keith Allan

Financial Accountant

Andrew Boyle

Head of Community Planning

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 19 February 2018

TITLE: Treasury Report for 6 months ended 31 December 2017

DATE: 8 February 2018

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 6 months ending 31 December 2017 be noted.

1. ISSUE

To provide an update on the performance of the Investment Fund (“the Fund”) and the Council’s Term Debt portfolio for the 6 months ended 31 December 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 – 31 December 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

Market Value at 31 Dec 17 $m

NZ Bonds

$2.71

$0.72

$nil

# - bond investments of $2m and $0.75m matured and were repaid to the Council in August 2017 and December 2017 respectively

Realised Fund earnings from interest and dividends for the 6 months totalled $30k. $2.78m was distributed back to the Council during the period including $2.75m of maturing investments. The Fund is therefore now fully realised.

3.2 Term Debt

Schedule 1 attached shows the details of Council’s debt as at 31 December 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

Actual – 6 months (2017/18)

$000

Opening Debt Balance at 1 July 2017

New Debt #

Debt repayments #

101,600

19,000

97,000

12,000*

97,000

12,000*

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

97,000

10,000

87,000

# 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 was 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 31 December 2017 was $94m (ie gross $97m less short term deposits of $1m and call investment of $2m) 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 related to the pre-funding of debt maturing in December 2017. The investment level returned within policy parameters before 31 December 2017.

Movements in recent years are shown in the following graph:

Actual finance costs incurred during the 6 months (including interest, line fees & the effects of swaps) amounted to $2.934m 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 31 December 2017 and show an increase in book value of $131k for the quarter, but a reduction of $439k for the year to date.

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 31 December 2017 all of the policy targets had been met.

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 dividend returns for the 6 months from the Fund of $30k equates the budget.

Finance costs for the 6 month period (including interest, line fees & the effect of swaps) was $2.934m 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 March 2018 quarter.

Attachments

Schedules 1 to 4 ⇩

Steve Paterson

Strategy Manager Finance

Susan Baty (Chairperson)
Jim Jefferies (Deputy Chairperson)
Grant Smith (The Mayor)
Adrian Broad	Leonie Hapeta
Gabrielle Bundy-Cooke	Lorna Johnson
Vaughan Dennison	Karen Naylor
Lew Findlay QSM	Bruno Petrenas