Agenda of Finance and Performance Committee

PALMERSTON NORTH CITY COUNCIL

Finance and Performance Committee MEETING

23 April 2018

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. Declarations in Interest (if any)

Members are reminded of their duty to give a general notice of any interest

in items to be considered on this agenda and the need to declare these interests.

4. 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.)

5. Confirmation of Minutes Page 7

“That the minutes of the Finance and Performance Committee meeting of 19 March 2018 Part I Public be confirmed as a true and correct record.”

6. Central Energy Trust Wildbase Recovery - Solar electricity generation options Page 15

Report, dated 27 March 2018 from the Senior Property & Parks Planner, Aaron Phillips.

7. Alternate Access to Turitea Forest and Water Treatment Plant Page 55

Memorandum, dated 29 March 2018 from the Water & Waste Services Manager, Robert van Bentum and the Water Asset Engineer, Dora Luo.

8. The Options for the City Water Supply Associated with Gordon Kear Forest Page 65

Memorandum, dated 21 March 2018 from the Water & Waste Services Manager, Robert van Bentum and the Water Asset Engineer, Dora Luo.

9. Report on Proposal for 6 Month Trial of Free E-Waste Drop-off Service Page 75

Memorandum, dated 26 March 2018 from the Water & Waste Services Manager, Robert van Bentum and the Rubbish and Recycling Engineer, Natasha Hickmott.

10. Fees and Charges 2018 - Further activities Page 83

Memorandum, dated 9 April 2018 from the Strategy Manager Finance, Steve Paterson.

11. Treasury Report for 9 months ended 31 March 2018 Page 95

Memorandum, dated 6 April 2018 from the Strategy Manager Finance, Steve Paterson.

12. Quarterly Performance and Financial Report - Quarter Ending 31 March 2018 Page 105

Memorandum, dated 13 April 2018 from the Financial Accountant, Keith Allan and the Head of Community Planning, Andrew Boyle.

13. Work Schedule - April 2018 Page 195

14. 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
15.	Minutes of the Finance and Performance Committee meeting - Part II Confidential - 19 March 2018	For the reasons setout in the Finance and Performance Committee minutes of 19 March 2018, held in public present.
16.	Artifical Football Pitch Funding Costs	Negotiations	s7(2)(i)
17.	Purchasing Property to Partner with a Housing Provider - Follow-up Report	Commercial Activities	s7(2)(h)

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 & Parks Planner (Aaron Phillips), Policy Analyst (Ann-Marie Mori), Parks and Property Manager (John Brenkley), Strategy and Policy Manager (Julie Macdonald), Financial Accountant (Keith Allan), Property Officer (Bryce Hosking), Head of Planning Services (Simon Mori) 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.

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 19 March 2018, commencing at 9.00am

Members

Present:

Councillor Susan Baty (in the Chair), The Mayor (Grant Smith) and Councillors Adrian Broad, Gabrielle Bundy-Cooke, Vaughan Dennison, Lew Findlay QSM, Leonie Hapeta, Jim Jefferies, Lorna Johnson, Karen Naylor and Bruno Petrenas.

Non Members:

Councillors Brent Barrett, Rachel Bowen, Duncan McCann, Aleisha Rutherford and Tangi Utikere.

Councillor Rachel Bowen left the meeting at 9.55am at the conclusion of clause 12. She entered the meeting again at 10.29am during consideration of clause 14. She was not present for clause 13.

The Mayor (Grant Smith) left the meeting at 10.20am during consideration of clause 14. He entered the meeting again at 10.54am during consideration of clause 15. He was not present for clause 14.

Councillor Duncan McCann left the meeting at 11.41am during the consideration of clause 15.2. He entered the meeting again at 11.43am during consideration of clause 15.3. He was not present for clause 15.2.

8-18

Late Item - Fees and Charges Review

Moved Susan Baty, seconded Grant Smith.

The COMMITTEE RESOLVED

1. That subject to Section 46A(7) of the Local Government Official Information and Meetings Act 1987 and in accordance with the advice by the Chairperson the following item be considered as an urgent item:

(i) Report, dated 15 March 2018 and entitled “Fees and Charges Review” from the Strategy Manger Finance, Steve Paterson.

As the item was not available at the time of the Agenda was circulated; and consideration of the item was a matter of urgency, requiring a decision without delay to enable the Council to manage relationships, meet deadlines, finalise decisions and receive information within agreed timeframes.

Clause 8-18 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.

9-18

Confirmation of Minutes

Moved Lorna Johnson, seconded Gabrielle Bundy-Cooke.

The COMMITTEE RESOLVED

1. That the minutes of the Finance and Performance Committee meeting of 19 February 2018 Part I Public be confirmed as a true and correct record.

Clause 9-18 above was carried 15 votes to 0, with 1 abstention, 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, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.

Abstained:

Councillor Duncan McCann.

10-18

Palmerston North Airport Ltd - Interim Report for 6 months to 31 December 2017

Memorandum, dated 9 March 2018 from the Strategy Manager Finance, Steve Paterson.

Moved Lorna Johnson, seconded Aleisha Rutherford.

The COMMITTEE RECOMMENDS

1. That the Interim Report and Financial Statements of Palmerston North Airport Ltd for the period ended 31 December 2017 be received.

Clause 10-18 above was carried 16 votes to 0, the voting being as follows:

For:

11-18

Palmerston North Airport Ltd - Draft Statement of Intent for 2018/19

Memorandum, dated 2 March 2018 from the Strategy Manager Finance, Steve Paterson.

Moved Leonie Hapeta, seconded Tangi Utikere.

The COMMITTEE RECOMMENDS

1. That the Palmerston North Airport Ltd draft Statement of Intent for 2018/19 be received and its assumptions endorsed apart from the performance measure for targeted net worth which it be recommended to the Company be increased to $50 million.

Clause 11-18 above was carried 16 votes to 0, the voting being as follows:

For:

12-18

Central Energy Trust Wildbase Recovery Update and Cost to Complete

Report, dated 22 February 2018 from the Senior Property & Parks Planner, Aaron Phillips.

During discussion Elected Members noted that the required funds had reduced due to additional funding being received after the presentation of the report.

Moved Leonie Hapeta, seconded Lorna Johnson.

The COMMITTEE RECOMMENDS

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

2. That Council approve additional borrowing to fund up to $525,000 to complete construction to tendered specification for Central Energy Trust Wildbase Recovery.

Clause 12-18 above was carried 16 votes to 0, the voting being as follows:

For:

Councillor Rachel Bowen left the meeting at 9.55am

13-18

Water and Waste Capital New and Renewal 2017-18 Programme Adjustments

Memorandum, dated 9 March 2018 from the Water & Waste Services Manager, Robert van Bentum.

Moved Susan Baty, seconded Karen Naylor.

The COMMITTEE RECOMMENDS

1. That the budget for the 2017/18 Water Capital New “Programme 593 – Water Safety and Security Mitigation” be revised from $170,000 to $407,000 by approval of additional unbudgeted funding of $237,000.

2. That the budget for the 2017/18 Wastewater Capital New “Programme 630 – City Wide - Seismic Strengthening to Wastewater Structures” be revised from $100,000 to $200,000 by approval of additional unbudgeted funding of $100,000.

3. That a new 2017/18 Rubbish and Recycling Capital New Programme called “Materials Recovery Facility – Air Quality Improvements” with a budget of $50,000 be created by approval of unbudgeted funding of $50,000.

4. That the budget for the 2017/18 Wastewater Capital Renewal “Programme 621 - Digester Lid Refurbishment” be revised from $500,000 to $555,000 by approval of additional unbudgeted funding of $55,000.

5. That the budget for the 2017/18 Wastewater Capital Renewal Programme “1056 – Totara Rd Replacement of Inlet Screens be revised from $1,300,000 to $1,400,000 by approval of additional unbudgeted funding of $100,000.

Clause 13-18 above was carried 14 votes to 0, with 1 abstention, the voting being as follows:

For:

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

Abstained:

Councillor Leonie Hapeta.

14-18

Process for Reallocating and Prioritisation of Underspending on Programmes

Memorandum, dated 5 March 2018 from the Chief Financial Officer, Grant Elliott.

The Mayor (Grant Smith) left the meeting at 10.20am

Councillor Rachel Bowen entered the meeting again at 10.29am

Moved Susan Baty, seconded Vaughan Dennison.

The COMMITTEE RESOLVED

1. That the Committee receive the report entitled “Process for Reallocating and Prioritisation of Underspending on Programmes”.

Clause 14-18 above was carried 14 votes to 1, the voting being as follows:

For:

Councillors Brent Barrett, Susan Baty, 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.

Against:

Councillor Rachel Bowen.

15-18	Fees and Charges Review Report, dated 15 March 2018 from the Strategy Manager Finance, Steve Paterson. The Mayor (Grant Smith) entered the meeting again at 10.54am Meeting adjourned at 11.09am Meeting resumed at 11.25am During discussion the Committee talked about the fees and charges relating to e-waste. They requested that a financial report be brought back to the committee.
	Moved Brent Barrett, seconded Aleisha Rutherford. The COMMITTEE RECOMMENDS 1. That fees for household e-waste in categories of 'TV and Electronics', 'Consumer Electronics', and 'Other' excluding photocopiers, be set to $0 on a trial basis, for a 6 month period in FY19. Subject to a financial analysis report being brought back to Finance and Performance April 2018.
	Clause 15.1 above was carried 13 votes to 3, 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, Leonie Hapeta, Jim Jefferies, Duncan McCann, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere. Against: Councillors Vaughan Dennison, Lorna Johnson and Karen Naylor.
	Moved Tangi Utikere, seconded Lorna Johnson. Burial & Cremation 2. That the fees and charges for Burial and Cremation, be increased by 3%, be adopted and following public notification take effect from 1 July 2018. Councillor Duncan McCann left the meeting at 11.41am.
	Clause 15.2 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, Jim Jefferies, Lorna Johnson, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere.
	Moved Tangi Utikere, seconded Lorna Johnson. Councillor Duncan McCann entered the meeting again at 11.43am. Burial & Cremation 3. That the application of “Out of District surcharge” Chapel and Cremation services be reviewed and reported back to the April Finance and Performance Committee meeting.
	Clause 15.3 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.
	Moved Vaughan Dennison, seconded Lorna Johnson Event Recycling Fees 4. That the fees and charges for event recycling as proposed in Appendix 8 be adopted and take effect immediately.
	Clause 15.4 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, Jim Jefferies, Lorna Johnson, Karen Naylor, Bruno Petrenas, Aleisha Rutherford and Tangi Utikere. Note: Councillor McCann declared a conflict of interest and withdrew from discussion and voting on clause 15.4.
	Moved Vaughan Dennison, seconded Lorna Johnson 5. That the report be received and the current status of fees and charges be noted. Planning & Miscellaneous 6. That the Statement of Proposal (and the associated summary) to adopt updated fees and charges for Planning Services and Miscellaneous Services effective from 1 July 2018 as attached in Appendix 2, be approved for public consultation and the Chief Executive be authorised to undertake the necessary consultative process under sections 83 and 150 of the Local Government Act 2002. Building 7. That the fees and charges for Building Services, as proposed in Appendix 3 be adopted and following public notification take effect from 9 April 2018. Environmental Health 8. That the fees and charges for Environmental Health Services (in terms of regulation 7 of the Health (Registration of Premises) Regulations 1966 and regulation 83 of the Food Hygiene Regulations 1974) as proposed in Appendix 4, be adopted and following public notification, take effect from 1 July 2018. Animal Control 9. That the fees and charges for the Impounding of Animals (in terms of section 14 of the Impounding Act 1955) and for Dog Registration and Dog Impounding (in terms of section 37 of the Dog Control Act 1996) as proposed in Appendix 5 be adopted, and once following public notification, take effect from 1 July 2018. Service Connections 10. That the fees and charges for Service Connections, as proposed in Appendix 7 be adopted and take effect from 1 July 2018. E-Waste Charges 11. That the fees and charges for e-waste disposal as proposed in Appendix 8 be adopted and take effect from 1 July 2018.
	Clauses 15.5 to 15.11 inclusive 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.

16-18

Committee Work Schedule - March 2018

Moved Susan Baty, seconded Leonie Hapeta.

The COMMITTEE RESOLVED

1. That the Finance and Performance Committee receive its Work Schedule dated March 2018.

Clause 16-18 above was carried 16 votes to 0, the voting being as follows:

For:

Exclusion of Public

17-18

Recommendation to Exclude Public

Moved Susan Baty, seconded Duncan McCann.

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
12.	Purchase of Land to Extend Walkways Network	Third Party Commercial and Commercial Activities	s7(2)(b)(ii) and s7(2)(h)
13.	Purchasing Property to Partner with a Housing Provider	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) 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.

Property Officer (Bryce Hosking), Parks and Property General Manger (John Brenkley and Senior Communications Advisor (Sandra Crosbie) 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 17-18 above was carried 16 votes to 0, the voting being as follows:

For:

The public part of the meeting finished at 11.52am

Confirmed 23 April 2018

Chairperson

PALMERSTON NORTH CITY COUNCIL

Report

TO: Finance and Performance Committee

MEETING DATE: 23 April 2018

TITLE: Central Energy Trust Wildbase Recovery - Solar electricity generation options

DATE: 27 March 2018

AUTHOR/S: Aaron Phillips, Senior Property & Parks Planner, City Networks

RECOMMENDATION(S) TO Council

1. That Council adopt the option of installing a “15 kW 20º N tilt array system” of solar panels (Option 1) to the Central Energy Trust Wildbase Recovery Centre.

2. That Council approve an unbudgeted capital programme of $32,000 to specify, supply and install solar panels (Option1) to the Central Energy Trust Wildbase Recovery Centre, to be funded from additional borrowings.

Summary of options analysis for

Problem or Opportunity
OPTION 1:	Provide $30,000 worth of solar panels
Community Views	Community views have not been sought on this proposal.
Benefits	Provides for approximately 5% of the facilities power requirements.
Risks	Generation does not reach estimated values.
Financial	$30,000 is added to Council borrowings.
OPTION 2:	Provide $103,000 worth of solar panels
Community Views	Community views have not been sought on this proposal.
Benefits	Provides approximately 18% of the facilities power requirements
Risks	Generation does not reach estimated values.
Financial	$103,000 is added to Council borrowings.
OPTION 3:	Provide budget in-between options 1 and 2 at an amount determined by Council.
Community Views	Community views have not been sought on this proposal.
Benefits	Provides for between 5% and 18% of the facilities power requirements depending on the amount settled on.
Risks	Generation does not reach estimated values.
Financial	Between $30,000 and $103,000 is added to Council borrowings.
Contribution of Recommended Option to Council’s Strategic Direction	Sustainability Strategy 2010 includes the Sub-driver “Increase local green energy production for local use” under the driver “Sustainable energy use at Home and Work”.

Rationale for the recommendations

1. Overview of the problem or opportunity

1.1 Officers had suggested the removal of the provision of solar panels at Central Energy Trust Wildbase Recovery Centre as an optional item to keep the construction cost as close to budget as possible. Councillors determined removing the solar panels was unacceptable.

1.2 This report provides an independent assessment by ITP Renewables Consultancy of the options for provision of a solar array ranging from a minimum $30,000 array through to a whole of roof option costing an estimated $103,000 (refer Appendix A).

2. Background and previous council decisions

2.1 Resolution 40-17 Award of tender for Central Energy Trust Wildbase Recovery

2. “That $30,000 be added for solar electric panels in the project and that the Chief Executive be instructed to investigate further funding and report back on the project of solar electric panels.”

2.2 In October 2017 officers reported back on the proposals received for installing panels from two companies. The proposals contained conflicting advice and raised concerns about the reliability of assumptions and estimates.

2.3 During discussion, Elected Members asked that a full transparent public tender process be conducted and that a business case comes back to the Finance and Performance Committee.

2.4 Resolution 85-17

“That Council reaffirm its commitment to solar array on the roof of the Powerco Education Centre building at the Central Energy Trust Wildbase Recovery facility.”

3. Description of options

3.1 Option One: Provide $30,000 worth of solar panels

3.2 Option Two: Provide $103,000 worth of solar panels

3.3 Option Three: Provide budget in-between options 1 and 2 at an amount determined by Council.

4. Analysis of options

4.1 None of the options have been included in the total cost budgets presented to Council since the award of the tender for the Central Energy Trust Wildbase Recovery Centre project. When Council approves an option the final scale of the solar array will be known from which a separate budget for this work can be established.

4.2 Option One: Provide $30,000 worth of solar panels

The independent assessment (Appendix A) concludes:

“The financial analysis shows that under the current project budget of ~$30,000 PNCC should install a ~15 kWp North facing, 20° tilt PV array with polycrystalline panels and string inverters. Under the load profile assumed for modelling here, a system in this configuration would contribute around 5% of the sites annual energy requirements. Although this system will only offset a small amount of the sites annual energy consumption, all of the energy will be directly consumed by the facility which will provide maximum returns on the investment. This is the preferred and recommended option.”

Return on investment estimated at:

Results – 15 kW 20 degree PV arrray	Value
Simple payback	7 years
Internal rate of return	13%
Net present value	$24,903
Levelised cost of electricity	$0.194

4.3 Option Two: Provide $103,000 worth of solar panels

The independent assessment (Appendix A) concludes:

“Installing PV across the whole useable roof area will increase annual energy production of the system accounting for around 18% of the modelled annual loads; However, as panels will need to be oriented due West at a 3° tilt, in alignment with the roof, the IRR is reduced and the LCOE higher when compared to a North facing array. A ~50 kW PV array could be installed in this configuration at a capital cost of around $103,000.”

Return on investment is estimated at:

Results – 50 kW 3 degree PV array	Value
Simple payback	7.7 years
Internal rate of return	11.4%
Net present value	$67,926
Levelised cost of electricity	$0.206

4.4 Option Three: Provide budget in-between options 1 and 2 at an amount determined by Council.

Council could choose to allocate a budget between the full roof array and the minimum previously determined minimum level expected. The outputs, costs and benefits would be somewhere between Options One and Two.

5. Other

5.1 The independent report advises:

“For a project of this scale, an open tender procurement process is not recommended owing to the administrative overheads involved. Acquiring three quotes from experienced and reputable installers is more appropriate for the project budget. System specifications for quoting purposes should be prepared by an independent renewable energy consultant to ensure that the system supplier doesn’t have undue influence over the system configuration.

Once all the relevant approvals have been received, and an installer is contracted, a system of this size should take less than a week to install and commission.”

In addition to the construction budget an allowance for the system specification development would need to be made, estimated to cost $2,000.00.

5.2 The Project Investment Coordinator has sought further funding opportunities and advises that the Sargood Trust has recently confirmed funding of $25,000 a year for three years towards the operational costs of CET Wildbase Recovery, as well as an additional $10,000 towards the build cost. Unfortunately other funders have not been prepared to commit to these works including the Energy Efficiency and Conservation Authority (EECA).

6. Conclusion

6.1 An independent assessment has completed covering expected generation and cost. The associated cost-benefit analysis shows Option 1 to be the preferred option meeting 5% of the total energy requirement for CET Wildbase Recovery.

7. Next actions

7.1 Complete a system specification.

7.2 Seek three quotes.

7.3 Award and carry out the installation.

8. Outline of community engagement process

8.1 No community engagement is proposed for this work.

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

Independant solar assessment ⇩

Aaron Phillips

Senior Property & Parks Planner

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 23 April 2018

TITLE: Alternate Access to Turitea Forest and Water Treatment Plant

DATE: 29 March 2018

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

Dora Luo, Water Asset Engineer, City Networks

RECOMMENDATION(S) TO Council

1. That as part of its 2018/28 10 Year Plan deliberations Council give considerations to including a Year One (2018/19) Capital New Programme called “Alternate Access to Turitea Forest and WTP” with a budget of $225,000 on the basis that the road costs will be fully paid for from log sale proceeds from the harvest of Stands 7 and 8 of Turitea West Forest.

1. ISSUE

1.1 Water Works Road at the upper end of Turitea Road provides access to the Turitea Water Treatment Plant, the lower and upper dams and Turitea West Forest. The road which is narrow and winding as it follows the Turitea Stream, is subject to erosion from both over and under slips. Significant investment has been made over recent years on retaining walls to stabilise and hold the banks in place. There is an ongoing risk of further slips and therefore a chance that access will be cut off to important water supply infrastructure, which will impact on safe and reliable operation of the water treatment plant.

1.2 In 2016 Council approved the harvest of Stand 7 of Turitea West Forest, using Water Works Road for logging access. Since then wet weather, further slips and a major crack in the road have delayed the harvest. There are on-going concerns that slips and other issues associated with the road may result in it being similarly unavailable for logging purposes in future.

1.3 Plans are currently underway to install a duplicate water pipeline from the water treatment plant to the Ngahere Park reservoirs. This is a significant capital programme and will effectively close Water Works Road to traffic including logging traffic for up to four months next summer apart from a few brief periods when the road will be open to chemical delivery trucks.

1.4 In addition to the potential conflict of the duplicate water pipeline project works with logging of the forest, operator access to the water treatment plant will be disrupted during the duplicate pipeline project, such that a ferry transport system will need to be put in place to allow for day to day access for the treatment plant operators, laboratory staff and forest contractors.

2. BACKGROUND

2.1 Water Works Road currently provides the only access to the Turitea Water Treatment Plant, the lower and upper dams and Turitea West Forest. The sealed and unsealed sections of the road are prone to slips and drop outs. There have been 15 retaining walls constructed since 2012 and one major drop out.

2.2 Turitea West Forest is located immediately adjacent to the water supply dams. It comprises two stands established twenty years apart. Stand 7 is the older of the two stands and is overdue for harvest. The 42 year old stand has suffered wind damage and poses a potential threat to the water activity from falling trees and associated land slips. Access issues and in particular concerns about potential damage to Water Works Road and the pipeline below, had previously delayed the harvest.

2.3 In preparation for harvesting of Turitea West Forest, the width and structural capacity of the road was independently assessed in 2016 and confirmed as suitable for carrying logging traffic. Some minor upgrade works were identified to improve access for logging trucks and to protect water supply infrastructure.

2.4 At the Finance and Performance Committee meeting of 15 August 2016 and the subsequent August 2016 Council meeting, Council approved the harvest of Stand 7 of Turitea West Forest and the remainder of Turitea East Forest. New budget expenditure was approved for harvest related costs, to be funded from log sale proceeds when the harvest is carried out. Those costs included minor upgrade works for Water Works Road and for the internal forest access roads. These upgrade works were completed in 2016/17.

2.5 Very wet weather during the summer of 2016/17 resulted in the scheduled forest harvest being postponed. The subsequent extended wet autumn and winter in 2017 resulted in a new slip area developing. This was addressed along with construction of a new retaining wall. In December 2017, as final preparations with the logging crew were being made for harvesting over the 2017/18 summer, a further slip and major crack in the road were discovered. This meant that the road was unavailable for logging traffic while repair works were undertaken over the summer period.

2.6 Following completion of the road repair works in mid-February 2018, the window of time for safe harvesting of the logs during the summer and autumn period of the year had been lost. In addition the specialist forest harvest crew require to harvest the trees with the minimum of soil disturbance had been reassigned to another harvest contract. Officers were reluctantly forced to postpone harvest operations once more until at least the 2018-19 summer period.

3. Logging Operations Conflict with Duplicate Pipeline Project

3.1 The optimum time for forest harvest is when ground conditions are dry so given the latest postponement, the next possible harvest period is the summer of 2018/19 subject to access, ground conditions and log prices. However, potential logging over the 2018/19 summer conflicts with Capital Programme 91 – Turitea WTP – Duplicate Falling Main. This programme is addressing the current lack of redundancy in the water supply system given the entire Turitea supply is reliant on a single aging steel pipe connecting the water treatment plant to the reservoirs.

3.2 Programme 91 will fund the installation of a duplicate main to provide resilience and enhanced security to the water supply system and enable the existing pipeline to be inspected and rehabilitated, significantly reducing the risk of the Turitea supply being disrupted. The duplicate pipeline project is a priority as the existing pipe is assessed to be approaching the end of its useful life.

3.3 Installation of the duplicate trunk main will require long stretches of open trench along Water Works Road, which effectively means that the road will be closed to all traffic including logging traffic for up to four months. The exception to this will be the provision of short programmed windows when the road will be open to allow for chemical delivery. It is planned to provide for at least one chemical delivery day approximately every six weeks.

3.4 Some kind of ferry system will need to be arranged to allow for day to day access for the treatment plant staff, pest control contractors and laboratory staff. This is likely to comprise arrangements for personnel to be escorted by foot through the site, to a vehicle located on the treatment plant side.

3.5 While this arrangement will be workable for routine activities it will not be suitable for maintenance contractors given their requirement to transport plant and equipment to the plant. At present there is no feasible plan for managing maintenance access to the water treatment plant. Provision of an alternative route to the water treatment plant during the open trenching works along Water Works Road would provide an ideal solution to this problem.

3.6 It is proposed to complete the work in Water Works Road during the summer of 2018-19 as the banks above the road are prone to slips and rock falls during winter presenting a significant safety risk to workers on site. Furthermore, the surface shape of Water Works Road makes it likely that any rainfall during winter would be likely to be channelled into any open trench with a significant risk of destabilising the road formation. In an extreme event subsurface drainage may lead to a major slip failure of the road with very significant cost and disruption impacts for the water supply linkage.

3.7 It is possible to postpone the harvest of the forest until after the duplicate pipeline work is finished i.e. summer of 2019-20. However as previously mentioned, Stand 7 is already over-mature and has already suffered wind damage. Further delay introduces further risk of increased wind damage as areas within the stand are opened up. Further loss of trees could lead to the risk of further erosion and land slips compromising raw water quality in the dams.

3.8 There will also come a point in the future, if the stand is left unharvested and continues to suffer from more wind damage, that it becomes uneconomic to harvest. However it is considered that, postponing the harvest for another 1-2 years to allow the pipeline work to be completed is unlikely to increase those risks significantly.

4. Alternate Access

4.1 As reported, the width and structural capacity of Water Works Road has been independently assessed and confirmed as suitable for carrying logging traffic. However logging traffic access is subject to the road remaining free from both under or over-slips. There is however a preference to separate the dependency of the forest harvest from access via Water Works Road to simplify treatment plant operation, eliminate any conflict with the duplicate pipeline project and reduce the risk of damage by logging operations to the road and pipeline assets.

4.2 An option has been identified to create an alternate access both to Turitea West Forest and the Water Treatment Plant across neighbouring land. Council’s harvest manager, John Turkington Limited (JTL), has discussed the option of constructing an unsealed road with the two neighbours affected and they have agreed both to the concept and to progress the option in more detail.

4.3 The key elements of the proposed arrangement are as follows:

· The neighbouring land owners to provide access across their properties for Council and its contractors for the purposes of logging and access to the water treatment plant and dams in emergencies when Water Works Road is unavailable.

· Council to fund the construction of a metalled access track (shown as a solid beige line on the map in attachment 1) and upgrade of an existing track (shown as a red dotted line) across the neighbouring land immediately adjacent to Turitea West Forest.

· Construction to be undertaken by JTL’s roading contractor and managed by JTL including securing any consents required.

· Council to maintain the access track during any harvest period and at the end of the harvest return it to the same condition as immediately prior to harvest.

· The landowner to maintain the access track after harvest.

· Council to maintain the area described as Lot 5 - Driveway (and shown as a solid blue line on the map) during harvest and at the end of the harvest return it to the equivalent condition as immediately prior to harvest. Council also to continue maintaining it after harvest.

· All land and tracks to remain in the ownership of the existing landowners.

· Council’s right of access to be registered on the land titles.

4.4 The main benefits of creating an alternate access are as follows:

· Logging traffic is removed from Water Works Road and therefore any risk of damage to the road or the water main underneath is avoided.

· Alternate access to the Water Treatment Plant and dams is facilitated when major work is required on Water Works Road such as the duplicate water pipeline installation.

· Logging access is secured for the harvest of Stand 8 of Turitea West Forest in 5-7 years’ time.

· A long term emergency access to the Water Treatment Plant and dams is provided in the event that Water Works Road is unavailable for any reason.

4.5 The cost of creating the alternate access is estimated to be $225,000 excluding GST. This sum covers earthworks, supply and placement of road metal from offsite sources, surveying, legal costs and an allowance for road maintenance during and post the harvest period. It is proposed that these costs are funded from log sale proceeds when the harvest is carried out.

4.6 In the 2016 report to the Finance and Performance Committee, the business case at the time predicted a combined net surplus from log sale proceeds of $279,900 from the harvest of Stand 7 and the remainder of the Turitea East Forest after considering all harvest related costs. A conservative approach was taken in preparing the business case. For instance, three year average log prices were used even though log prices at the time indicated a better return could be achieved. Using today’s log prices that net surplus could be as much as $455,000. The log market is an important factor in achieving the predicted net stumpage and provision is made in the harvesting contract to avoid starting harvest operations if log prices are unacceptably low.

4.7 Based on current log prices the net cash return from the harvest allowing for deduction of the costs of the alternative access, are estimated at around $230,000. However the final cash return will depend on the log prices and actual harvest costs. Separate to the cash returns, Council records the value of the forest in its accounts as an asset. The latest valuation of the Stand 7 forest in 2016-17 records a book value for the forest of $390,000.

4.8 The impact of deducting the alternative access costs from the harvest revenue will be a reduction in the net cash return to the harvest and a small loss on the book value of the forest assets recorded against Council’s value of assets. There will no impact on rates given the cash returns are still positive and the current LTP funding assumes no net revenue from the harvest of the forest.

5. Summary

5.1 Water Works Road currently provides the only access to the Turitea Water Treatment Plant, the lower and upper dams and Turitea West Forest. The road is prone to slips and drop outs and there is an ongoing risk that access will be cut off to the water treatment plant at any time. Water Works Road is scheduled to be closed during the summer of 2018-19 to enable the implementation of Programme 91 to construct a duplicate water main between the water treatment plant and the city reservoirs.

5.2 The closure of Water Works Road during the summer of 2018-19 will necessitate the further postponement of the planned forest harvest of the Stand 7 of Turitea West Forest. This postponement introduces risk in respect of both the yield from the forest and the returns given log price volatility. Harvesting of Stand 7 in the summer of 2019-20 would also impact on normal treatment plant operation.

5.3 An opportunity has arisen to construct alternative access over neighbouring land which would enable a decoupling of the forest harvest from access over Water Works Road. This would enable earlier harvest of Stand 7 to occur, weather permitting and ensure there is no disruption to planned capital works and operations and maintenance activities at the water treatment plant. The alternative access would also provide an emergency access route for treatment plant operation and maintenance in the event that Water Works Road is closed for any reason. For this reason the alternative access route contributes to additional resilience for the water supply activity.

5.4 The net financial impact will be a reduction in the net cash return from the harvest operations and a small loss of the book value of the forest assets to Council. There will be however no impact on rates for the 2018-28 LTP.

6. NEXT STEPS

6.1 If Council approves the recommendation then a formal agreement will be entered into with both neighbouring property owners.

6.2 Construction of the access track would be carried out in the 2018/19 financial year. Once completed the access track would be available immediately for light vehicles. Harvest of the forest would be scheduled for the following year (2019-20) to allow the newly constructed track to settle before running logging trucks over it.

7. 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?	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?	No
Are the recommendations inconsistent with any of Council’s policies or plans?	No

Attachments

Alternate Access Map ⇩

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 23 April 2018

TITLE: The Options for the City Water Supply Associated with Gordon Kear Forest

DATE: 21 March 2018

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

Dora Luo, Water Asset Engineer, City Networks

RECOMMENDATION(S) TO Council

1. That the report on the options for the city water supply associated with Gordon Kear Forest be received.

1. ISSUE

1.1 Following completion of a review of Council’s ownership of Gordon Kear Forest in December 2017, Officers reported on the review findings in a report to the Finance and Performance Committee meeting of 19 February 2018. The report discussed a number of reasons why the Gordon Kear land holding should remain in Council ownership. One of the reasons was the potential strategic value of the land for future water supply provision if needed.

1.2 The Committee formally requested a report from Officers on the specific options provided by the Gordon Kear Forest in respect of water supply to the city. This report sets out the current state of knowledge with respect to water supply planning and the likely value of the Gordon Kear Forest holding in that strategy.

2. BACKGROUND

2.1 The Gordon Kear Property was originally purchased by Council in 1975. Subsequently around two thirds of the total 745 hectares was established as a radiata pine plantation for commercial return. The remainder of the property has been maintained in native forest and shrublands. In 2006 an area of land and plantation forest within the property was exchanged for what is now Arapuke Forest Park. The total area of the Gordon Kear property was reduced to 678 hectares. Following harvest operations between 2009 and 2016 the total area planted in radiata pine has now reduced to approximately 400 hectares.

2.2 The Gordon Kear Property is located approximately 16 kilometres south of Palmerston North, in the headwaters of the Kahuterawa Stream. It is one of a number of Council owned properties that span significant areas of the lower ranges adjacent to Palmerston North and make up a considerable area of the catchments of the Turitea and Kahuterawa Streams. The extent of PNCC property ownership is shown in Figure 1 below.

2.3 The report to the 19th February 2018 - Finance and Performance Committee of Council outlined the consultant’s conclusion that the Gordon Kear property supports a number of current and potentially strategically important social and environmental values, including 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.

2.4 The report recommended that the Council retain ownership of the Gordon Kear property and actively manage the radiata forest plantings to maximise returns as well as advancing the social and environmental values through enhancing biodiversity, recreation, soil and water protection and carbon capture.

3. strategic value to water supply

3.1 The existing Turitea catchment provides around 60% of the annual water supply for Palmerston North via storage and draw-off from two dams. The catchment has been protected and secured for water supply purposes from the late 1800s through direct ownership by the City Council and specific designation of the area for water supply purposes.

3.2 Long term water supply planning by Council is critical to ensuring adequate supplies of high quality water are available to meet current and projected future demand. Council officers undertake integrated water demand and supply assessments typically every 5 years. Specific assessments are documented in the ‘Water Supply Development Plans’ which have been completed in 1996, 2001, and 2016. With each revision of the plan, new demand forecasts and supply requirement assessments for a 30 year time horizon are completed. The key findings of the 2016 plan update were presented to Council at a workshop in March 2017. The recommendations arising from the plan underpin programmes focussed on developing additional water supply source capacity and improving water supply resilience included in the Long Term Plan 2018-2028 currently out for consultation.

Figure 1 Map of PNCC Council Land Holdings in Foothills of Tararua Ranges

3.3 A key aspect of the development plan assessment of water source capacity is the assessment of the ‘safe yield’ from the existing Turitea catchment and dam storage system. ‘Safe yield’ is an estimate of the daily average volume of water which can be supplied from the dams for a specific duration of dry weather (months) based on the probability of that dry event occurring (average return interval in years) before the dam reaches its minimum draw-off level. Council Officers have determined that in line with taking a risk averse approach as appropriate for water supply provision, the Turitea supply should be able to accommodate a minimum 4 month long dry period with a 1 in 50 year likelihood of occurrence. The 4 month long dry period with a 1 in 50 year likelihood of occurrence has been used as the ‘safe yield’ estimate in the modelling of future source requirements to determine the timing of additional water supply bores to provide additional supply capacity.

3.4 National guidance from NIWA on the likely impact of climate change in the Manawatu region indicates an increased likelihood of longer dry summers coupled with more frequent high intensity rain events, although total annual rainfall is not expected to alter significantly. The increased uncertainty around summer rainfall, is predicted to increase the likelihood that the Turitea dam storage must be actively managed to supply water over a 4 to 5 month long period with no appreciable rainfall recharge. The 2016 Water Supply Development Plan completed a reassessment of the safe yield from the Turitea catchment and the estimates for the equivalent durations and return periods have fallen by varying amounts ranging from 3,700 to 6,400 m³/day. The reduction in safe yield estimates following the 2016 assessment are summarised in Table 1 below.

Table 1 Summary of Turitea Catchment and Dam Safe Yields

3.5 The significant reductions in safe yield estimates are of the order of 15 to 20% and significantly impact on the extent to which the Turitea supply can be relied on during summer periods. Officers have elected to compensate for this effect by advancing additional bore capacity in combination with initiating work on the design of peak storage at each of the bore stations.

3.6 The strategy in respect of providing more water source capacity is focussed on the provision of more bores. Key advantages of this approach include:

· the lower costs associated with network transmission costs with new bores being provided close to the centre of demand e.g. Whakarongo and City West

· the limited level of exploitation of the current groundwater resource, with best estimates suggesting that PNCC’s current consented takes represent less than 10% of the available deep groundwater resource

· the limited level of treatment required although provision of on-site storage to meet chlorine contact and optimise bore pumping rates is increasing costs

· the improved resilience associated with having multiple water sources located across the city compared to reliance on a single dam source with a long pipeline

3.7 To provide greater certainty that bore source water supplies will be available to meet future demand, Council has lodged an application with the Regional Council for a global bore consent covering the next approximately 20 years. This will combine all existing bore takes and it is hoped provide scope for additional new bores to meet increased demand and provide greater resilience and redundancy. For the 30 year duration of the water supply development planning horizon to 2046, there is no identified need to look beyond the existing Turitea and planned bores sources.

3.8 However, changes in demand and the level of groundwater utilisation beyond this 20-30 year period could introduce constraints over this supply in the future. This timeframe equates broadly to the harvest timing of the current radiata pine plantation crop, so would form a logical re-evaluation point for water supply possibilities associated with the Gordon Kear property. If climate change effects worsen and the pattern of rainfall particularly during the summer months changes, there may also be a need to re-visit the option of securing additional surface water sources in the short term. It is in these contexts that the Gordon Kear property may become a supplementary supply option.

4. strategic value of gordon kear as a water source

4.1 Council has previously considered the option of augmenting the current Turitea water supply by expanding the existing surface water source catchment in combination with additional storage. The 1996 Water Supply Development Plan, refers to very brief consideration of either damming tributaries of the Turitea Stream or the Kahuterawa Stream.

4.2 The Gordon Kear Property includes land at the head of the Kahuterawa catchment and encompasses a natural basin that appears to provide reasonable storage volumes if dammed. Sites suitable for damming and collecting the surface water are very limited. This site has a significant advantage given its significant elevation at 340m compare to the 173 m of Turitea Upper Dam and a reasonable direct distance to the Turitea Catchment.

4.3 Although there is no sign of constrained ground water source to meet the city’s future growth demand yet, additional surface water capacity will be a benefit if the ground water resource is depleting. While constructing storage dams to impound surface water is significantly more costly compared to developing ground water wells, the life of dams is significantly longer.

4.4 A brief assessment of upper Kahuterawa catchment, indicates that there is a total area of approximately 1550 ha, upstream of the potential location for an impoundment dam. Of this total catchment area some 680ha is in PNCC ownership (Gordon Kear) with the balance of 870 ha in 4 separate land holdings with the largest being part of Ratahiwi Farm Ltd at 450ha. The catchment is approximately 65% of the area of the Turitea catchment which comprises 2,400 ha. A plan showing the land area distribution is included in Appendix 1.

4.5 Other key differences when compared to the Turitea Catchment include:

· Significant land in radiata plantation forest which introduces greater management complexity and cost as well as potentially higher contaminant levels.

· The distance from the existing Turitea WTP and the complex contour and private land holdings between the two catchments which will add to any transmission costs

4.6 While there has not been any detailed consideration of this water supply opportunity, there is sufficient understanding of the likely yield and complexities to conclude that Gordon Kear could provide a supplementary source of water which might add from 60 to 75% in respect of safe yield i.e. 7,000 to 9,000 m³/day for a 50 year return of a 4 months dry period. This is equivalent to approximately two additional groundwater bores within the city.

4.7 To achieve this additional yield will require a significant capital investment of tens of millions of dollars for a dam and conveyance infrastructure. While a dam in the Kahuterawa upper catchment has the potential to supply raw water by gravity given the elevation of the basin at 340m is some 200m above the elevation of the Turitea lower dam at 140m there are some significant areas of uncertainty including:

· the potentially lower water quality associated with runoff from a catchment with significant radiata plantation forest cover. See comments above in relation to potential alignment of water supply options with harvest timing.

· the challenges around securing consent to transfer water from one stream catchment to another

· the need to obtain landowner approval for the gravity or pumped conveyance pipeline to transfer water to the Turitea lower dam and water treatment plant

4.8 In order to ensure that the feasibility and rough order costs as well as water supply yields for a water supply dam in the Gordon Kear property is known, Officers propose to commission a desk top assessment of the options if budget permits in the 2018-19 financial year. This will be input to the next update of the Water Supply Development Plan.

5. Summary

5.1 In summary, current water supply source planning does not envisage any exploitation of additional surface water sources to meet projected future water supply demand in the next 30 years.

5.2 The period beyond the next 20-30 years equates broadly to the harvest timing of the current Gordon Kear Forest radiata pine plantation crop, so would form a logical re-evaluation point for water supply possibilities associated with the property.

5.3 Preliminary assessment suggests that the Gordon Kear property within the upper part of the Kahuterawa Valley has the potential to provide supplementary supply capable of increasing the safe yield of the Turitea WTP by anything from 60 to 70%. This potential is subject to significant constraints and uncertainties.

5.4 However in order to better quantify the potential contribution of a water catchment and storage dam, Officers propose to commission a desk-top assessment in 2018-19, to clarify feasibility, the most likely form of any storage and transfer system and the ball park cost of the options, as well as key constraints. This work will feed into the next review of the Water Supply Development Plan.

6. 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?	No

Attachments

Upper Kahuterawa and Gordon Kear Forest Catchments ⇩

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 23 April 2018

TITLE: Report on Proposal for 6 Month Trial of Free E-Waste Drop-off Service

DATE: 26 March 2018

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

Natasha Hickmott, Rubbish and Recycling Engineer, City Networks

RECOMMENDATION(S) TO Council

1. That the report, estimating an additional cost of $300,000 for a six month trial of E-waste charges of $0 for ‘TV and Electronics’, ’Consumer Electronics’ and ‘Other’ excluding photocopies, be adopted.

1. ISSUE

1.1 The Fees and Charges report was presented to the 19^th March 2018 Finance & Performance Committee Meeting. The report included a recommendation to rationalise and simplify the E-Waste charges with provision for limited Council subsidy funding provided to encourage greater E-Waste diversion from landfill. The proposed revision to fees and charges was accepted and adopted by the Committee. However an additional resolution was adopted as follows:

1.2 That fees for household e-waste in categories of 'TV and Electronics', 'Consumer Electronics', and 'Other' excluding photocopiers, be set to $0 on a trial basis, for a 6 month period in FY19, subject to a financial analysis report being brought back to Finance and Performance April 2018.

1.3 This memorandum provides the requested report back on E-Waste recycling and the financial analysis of setting the fee of e-waste to $0 excluding photocopies for a period of months in FY19.

2. BACKGROUND

2.1 In the absence of any mandated or government funded stewardship scheme for end of life electrical and electronic waste in New Zealand, E-waste recycling services are fragmented and patchy in their availability. The majority comprise either voluntary or not for profit initiatives or ‘fee for service’ provided by commercial companies. This is in contrast to many overseas jurisdictions where ‘product stewardship schemes’ provide funding for e-waste recycling and recovery based on the levy of a recycling charge as a portion of the sale price of new electronic and electrical items.

2.2 E-waste recycling is typically considered to comprise end of life disposal of appliances and electrical items once any residual life has been exhausted following re-sale through the traditional second hand market or on-line auction sites such as Trademe. While larger electrical appliances such as washing machines, dryers, fridge-freezers and dishwashers can usually be disposed of through existing metal recyclers, given there are significant valuable metals to be recovered, many smaller electrical and electronic items have limited easily recoverable component materials.

2.3 For most electronic and small electrical items, the cost of responsible recycling and re-processing to recover valuable materials and reduce any environmental impact of disposal of the residuals far out-weighs any returns achieved. As a result significant additional funding is required to support commercial enterprises involved in e-waste recycling and recovery. Some ‘national takeback’ schemes exist for small consumer electronics where the revenue recovered from recycling covers the scheme costs e.g. cell phones.

2.4 Internationally E-waste recycling and recovery has become a large scale undertaking. While in most countries with central funding support, or formal ‘product stewardship schemes’, local processors have become established to process and recover materials. However in in these jurisdictions not all product is handled through official channels. Given the large sums of money involved and opportunity for profit, large scale legal and illegal international trading in e-waste is occurring often resulting in large quantities of low grade e-waste being effectively ‘dumped’ for processing or disposal in low income countries in a number of parts of the world.

2.5 Even with well operated and managed processing facilities, with on-site recovery of metals and other components, a significant portion of many electrical and electronic products cannot be re-cycled and must be landfilled. This particularly applies to many of the plastic casings, mountings and cables. Ensuring the net environmental outcome of e-waste recycling is greater than disposal to landfill requires careful verification of product traceability and selection of providers committed to safe and sustainable reprocessing. Otherwise recycling of e-waste may simply contribute to dumping and transference of the environmental effects in another location.

2.6 Currently there are only a small number of E-waste processors offering a full reprocessing service typically in the larger urban areas. Typically once products are broken down, component parts are sent to third party processors. For the metals and some plastics New Zealand processors are typically used while for speciality components such as circuit boards items are usually to overseas based processors. Other recovered materials of low value such as plastic cases and wire casing are sent to landfill.

2.7 In some locations community enterprises have been established which carry out some of the product breakdown, recover high value items for re-sale and send the remainder of the material for further processing or to landfill.

2.8 While there are no local reprocessing facilities in Palmerston North beyond traditional scrap metal processing, Officers are interested to explore opportunities to extend the useful life of products by re-purposing. For example a proportion of computers dropped off for recycling can be upgraded and re-purposed. Discussions are on-going with a local company to provide a service in this area at minimal cost to Council.

3. Current E-Waste Recycling Rates

3.1 The current E-waste recycling service offered by Council is provided under contract with Auckland based provider E-Cycle Limited and has been in place since 2014. The contract followed a review by staff of a range of New Zealand based recycling and processing service providers. E-Cycle Limited is a well-established company, with high standards and a robust approach to traceability of its products, providing E-waste recycling services to over 20 Councils, community groups and landfill operators. E-Cycle has significant contracts with 3 large international electronics re-processors to take a significant portion of recovered components e.g. circuit boards.

3.2 Officers have independently visited and inspected the processing and handling facilities. E-Cycle can provide customised reports if required detailing product serial numbers, data destruction and recycling certification. E-Cycle complies with the Basel and Stockholm conventions and adheres to the Australian/NZ E-Waste Standard.

3.3 Council has historically provided the E-waste recycling services on a full cost recovery basis, whereby the costs for transport and processing of each item are charged at the time of drop off. Council staff costs for managing the E-waste service are not charged but recovered as part of the Fergusson facility operating costs paid for from the public rubbish and recycling targeted rate. Desk top computers have traditionally been free to dispose of on the basis that the value of the materials recovered from the computers has fully covered the cost of processing and transport.

3.4 The volumes of E-Waste received at Ferguson Street are relatively modest at around 3 tonnes/ month or 36 tonnes/annum, comprising up to 3000 individual items. The quantity of E-waste has remained steady over the last few years of the service. The fees are certainly a significant factor in constraining any increase in tonnages of E-Waste that is recycled. E-waste recycling is expensive compared to disposal within the household waste collection service (PNCC or commercial). A summary of the numbers of items, fees and revenue collected is given in Table 1.

3.5 Council also receives e-waste items and particularly televisions and computer monitor cases in the illegal dumping stream. It is estimated that in the last 12 months approximately 12% of the more than 1000 incidents of illegal dumping in the city have included a component of E-waste (i.e. 120).

Table 1. Summary of Current and Predicted E-Waste Revenue

Item	Quantity (Est 2017-2018)	Current Fee (2017-18)	Revenue (2017-18)	Proposed Fee (2018-19)	Revenue (2018-19)
Television - CRT	319	$40.00	$12,754	$20.00	$6,377
Television – Flat Panel	165	$25.00	$4,114	$20.00	$3,291
Computer Monitor - CRT	158	$17.00	$2,681	$10.00	$1,577
Computer Monitor – Flat Panel	178	$12.00	$2,139	$10.00	$1,783
Desktop Computer/Server	187	$-	$-	$5.00	$934
Laptops/Tablets	225	$6.00	$1,347	$5.00	$1,123
PC/Stereo Speakers	153	$4.00	$610	$2.00	$305
Keyboards/Docking Stations	206	$4.00	$823	$2.00	$411
Hub/Modem/Switches/Routers	149	$4.00	$597	$2.00	$298
UPS	10	$5.00	$51	$5.00	$51
Printer (Inkjet or laser)	377	$15.00	$5,657	$15.00	$5,657
Photocopier – Small/Medium/Large	9	$70.00	$600	$50.00	$429
Fax Machines	36	$15.00	$540	$15.00	$540
Cellphones/GPS/Digital Camera/Mice		$-	$-	$-	$-
DVD/CD Player/VCR	180	$7.00	$1,260	$5.00	$900
Stereo/Car Stereo System/Gaming Console	108	$7.00	$756	$2.00	$216
Misc Consumer Electronics (per kg)	799	$3 / kg	$2,397	$2.00	$1,598
Washing Machine/Dryer	26	$29.00	$746	$25.00	$643
Dishwasher	2	$29.00	$50	$25.00	$43
Microwave	214	$12.00	$2,571	$5.00	$1,071
Heaters/Fans	60	$6.00	$360	$2.00	$120
Vacuum Cleaner	72	$12.00	$864	$5.00	$360
Small Appliances – Toaster/Kettle/Blender/Drills/Alarm Clocks/Phones/Camera’s	197	$6.00	$1,183	$2.00	$394
Totals	3030		$42,100		$28,123

4. Newly Adopted Fees and Charges – 2018-19

4.1 In an effort to encourage and promote increased waste diversion of E-Waste, Officers have been exploring a range of strategies including:

· Identifying local and existing businesses who support re-purposing and processing of E-waste to reduce the volume of product to be sent

· Simplifying and reducing the charges for key categories of E-waste by providing some limited subsidy from the public rubbish and recycling targeted rate to encourage diversion and reduce the level of illegal dumping

· Initial investigations into the feasibility and potential cost of establishing a community enterprise for the receipt, re-purposing and initial processing of E-waste

4.2 The revised charges adopted as part of the revised Fees and Charges 2018-19 are part of this approach. In developing the revised categories and the level of fees Officers completed a sensitivity analysis in respect of the level of Council funding support required to support the new fee regime.

4.3 Officers had estimated that at current E-waste levels the revised fees will require Council funding support of $15,000 per annum. The level of Council funding support increases to $25,000 per year if E-waste volumes increase by 50% over current levels, and to $32,000 if E-waste volumes increased by 100% to over 70 tonnes per annum. An annual level of 70 tonnes of e-waste represents approximately 4% of the estimated total E-waste generated in Palmerston North.

4.4 There is a risk of higher costs to Council if the levels of E-waste recycling increase beyond this level. Officers consider this risk to be low, however in the event that the level of cost incurred impacts negatively on overall budgets, Officers would report back to Council with proposals to revise the fees to address any shortfall in funding or seek additional funding.

5. zero fees for e-waste trial

5.1 In order to assess the potential cost to Council of a six month trial of free E-waste drop-off, Officers have used currently available data for E-waste volumes generated in New Zealand, together with current costs for transport and processing under the existing PNCC contract with E-cycle as this represents the most conservative approach.

5.2 The latest New Zealand wide research work investigating product stewardship scheme options in New Zealand was completed in 2015. The research report estimated that each New Zealander generated 19kg/person/annum of E-Waste in 2015 with that quantity expected to grow to 27kg/person/annum by 2030. On the basis of this data a per capita E-waste volume of 20kg/person/annum has been used to estimate the total volume of E-waste likely to be generated in 2018.

5.3 Using the estimated 20kg/person/year and Palmerston North’s estimated population of 85,000, the total volume of E-Waste generated is estimated to be around 1,700 tonnes per year. With current E-waste volumes of 36 tonnes per year Council is diverting approximately 2% of the total annual E-Waste volume generated in Palmerston North.

5.4 It is difficult to accurately determine both the likely quantities of E-waste and costs for providing a six month free E-Waste trial as the overall impact will depend on factors including:

· The likelihood of there being significant quantities of legacy E-waste in storage

· The exact composition and therefore cost for transport and processing of E-Waste delivered to Council

· The extent to which the scheme would attract E-waste from outside the city e.g. residents of other districts who work in Palmerston North

· The additional staffing and infrastructure costs required to support the scheme

5.5 Despite the uncertainties Officers have estimated the financial impact of a six-month E-waste trial with zero fees, for a range of scenarios based on the current level of service cost and including an additional charge for staff and facility costs which are not currently budgeted. The estimates summarised in Table 2 are considered to be at the low end of potential costs for a trial.

Table 2. Summary of potential costs for E-Waste trial

	Current Uptake (six months)	200% Increase	500% Increase	1,000% Increase
E-Waste received (6 months – Tonnes)	18T	54T	90T	180T
% of Total Estimated Quantity of E-Waste diverted for PNCC	2%	6%	12%	22%
Additional disposal and transport costs	$21,000	$63,000	$125,000	$210,000
Additional staffing and facility costs (+20%)	$4,000	$12,000	$25,000	$40,000
Estimated Total Financial Impact	$25,000	$75,000	$150,000	$250,000

5.6 While the exact level of uptake which might occur cannot be predicted given there is no equivalent New Zealand experience to draw upon, Officer judgement is that a 5 fold increase in E-waste volumes is more than likely considering the likely volume of e-waste stored by residents and the likelihood of receiving significant volumes of E-waste from residents living outside the city boundary. Officers consider therefore that a six month trial will require a budget provision of at least $300,000.

5.7 The implementation of a trial will have other potential effects unrelated to funding including:

· Increase potential conflicts between activities at Ferguson Street due to the larger volumes of E waste which are predicted

· Establishes a ‘regional product stewardship’ subsidy for E-Waste funded by Palmerston North City Council Ratepayers

· Diverts funding and staff resources from pursuing lower cost more sustainable product recycling and diversion initiatives

· Reduces pressure on manufacturers and central government to find a sustainable national solution to E-waste which supports local processing

6. Summary

6.1 A 6 months zero charge E waste trial will require a minimum funding provision of $300,000. The trial would also have other impacts including diverting staff resources from pursuing lower cost more sustainable product recycling and diversion initiatives.

· Officers suggest that it may be advisable to defer a decision on any trial until after a report back on the results of the first 6 months of implementation of the reduced fees adopted for 2018-19.

7. 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?	No

Attachments

Nil

Robert van Bentum

Water & Waste Services Manager

Natasha Hickmott

Rubbish and Recycling Engineer

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 23 April 2018

TITLE: Treasury Report for 9 months ended 31 March 2018

DATE: 6 April 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 9 months ending 31 March 2018 be noted.

1. ISSUE

To provide an update on the Council’s treasury activity for the 9 months ended 31 March 2018.

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 (i.e. if the yields fall below the purchase price).

This strategy has been encapsulated in subsequent 10 Year and Annual Plans and the realisation process was completed in December 2017.

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), updated in December 2017, also contains a number of other criteria regarding debt management.

3. Performance

3.1 Investment Fund

The Fund had a balance of $2.71m at 1 July 2017 and was fully realised in December 2017. Movements in Fund value are shown in the following graph:

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.

3.2 Term Debt

Schedule 1 attached shows the details of Council’s debt as at 31 March 2018. 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

Actual – 9 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

97,000

17,000*

12,000

Closing Balance

Comprising:

Bank advance (on call)

LGFA short term advance

LGFA & Council stock

120,600

109,000

10,000

99,000

97,000

10,000

87,000

102,000

10,000

92,000

# 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.

* $12m new debt was raised in August to pre-fund debt maturing in December 2017. The sum was placed on short term deposit in the interim. $5m of new debt was raised in March to pre-fund debt maturing in May 2018. This sum was also placed on short term deposit in the interim. Overall the interest income will more than cover the interest cost of the sums funded in advance.

Net debt at 31 March 2018 was $94.725m (ie gross $102m less short term deposits of $6.0m and call investment of $1.275m) compared with $93.665m at 1 July 2017 (i.e. 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 9 months (including interest, line fees & the effects of swaps) amounted to $4.392m 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 March 2018 and show an increase in book value of $62k for the quarter, but a reduction of $461k for the year to date.

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

· 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.

· 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 March 2018 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 9 months from the Fund of $30k equates the budget. Finance costs for the 9 month period (including interest, line fees & the effect of swaps) was $4.392m 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+. The outcome of the latest review will be published this month.

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 June 2018 quarter.

Attachments

Schedules 1 to 3 ⇩

Steve Paterson

Strategy Manager Finance

PALMERSTON NORTH CITY COUNCIL

Memorandum

TO: Finance and Performance Committee

MEETING DATE: 23 April 2018

TITLE: Quarterly Performance and Financial Report - Quarter Ending 31 March 2018

DATE: 13 April 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 March 2018 Quarterly Performance and Financial Report and note:

a. The March 2018 financial performance and operating performance.

b. The March 2018 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 budget operating expenditure be increased by a further $141,000 being the estimated unbudgeted cost of conducting the Maori Ward Poll.

1. ISSUE

To provide a quarterly update on the performance and financial achievements of the Council for the period ending 31 March 2018. This is the third quarterly report for the year.

2. BACKGROUND

Cost of services delivered year to date: - Operating-controllable variance - Variance with interest and rates included	$1.8m fav $2.8m 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 - Total	54.8% 35.5% 42.4%	Compares with amounts completed same time in 2016/17: 57.2% 31.9% 42.4% with 63% completed full year. Expenditure value 31% or $6.9m higher than last year.
Operating cash flows variance to budget	$4.0m fav	Favourable to budget with favourable operating variance and an overall lower working capital requirement to that budgeted.
Increase in net debt	$16.2m 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>	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 March 2018 Quarterly Performance and Finance Report ⇩
2.	Section three, March 2018 Quarterly Performance and Finance Report ⇩

Keith Allan

Financial Accountant

Andrew Boyle

Head of Community Planning

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