PALMERSTON NORTH CITY COUNCIL
Finance and
Performance Committee MEETING
20 August 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 resume following the 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. Declarations
of Interest (if any)
Members are reminded of their duty to
give a general notice of any interest of 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 18 June 2018 Part I Public be
confirmed as a true and correct record.”
6. He Ara
Kotahi Bridge Lighting Page 15
Report, dated 6 August 2018 from
the Leisure Assets Planner, Jason Pilkington.
7. Quarterly
Performance and Financial Report - Quarter Ending 30 June 2018 Page 27
Memorandum, dated 31 July 2018
from the Financial Accountant, Keith Allan and the Head of Community Planning,
Andrew Boyle.
8. Treasury
Report for 12 months ended 30 June 2018 Page 123
Memorandum, dated 30 July 2018
from the Strategy Manager Finance, Steve Paterson.
9. Committee
Work Schedule Page 135
10. Exclusion
of Public
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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:
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General
subject of each matter to be considered
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Reason for
passing this resolution in relation to each matter
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Ground(s)
under Section 48(1) for passing this resolution
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11.
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Minutes of the Finance and Performance Committee
meeting - Part II Confidential - 18 June 2018
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For the reasons setout in the Finance and
Performance Committee minutes of 18 June 2018, held in public present.
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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), Acting Chief
Infrastructure Officer (Ray McIndoe), Acting General Manager – Strategy
and Planning (David Murphy), General Manager - Community (Debbie Duncan),
Acting General Manager – Customer (Sheryl Bryant) Human Resources
Manager (Wayne Wilson), General Manager - Marketing and Communications (Sacha
Haskell), 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.
Acting Governance
and Support Team Leader (Stuart McKinnon) and Committee Administrators (Penny
Odell, Rachel Corser and Courtney Kibby), 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].
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PALMERSTON NORTH CITY COUNCIL
Report
TO: Finance
and Performance Committee
MEETING DATE: 20
August 2018
TITLE: He
Ara Kotahi Bridge Lighting
DATE: 6
August 2018
AUTHOR/S: Jason
Pilkington, Leisure Assets Planner, Infrastructure
APPROVED BY: Ray
McIndoe, Acting Chief Infrastructure Officer
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RECOMMENDATION(S)
TO Council
1. That Council
approves $1,210,000 of unbudgeted funds to ensure the He Ara Kotahi Bridge is
lit as per the Manawatū River Framework Lighting
Plan, as described in Appendix I of the report titled “He Ara Kotahi
Bridge Lighting”.
2. That
Council directs the Chief Executive to make funding applications up to
$610,000 for the purchase and installation of lights on the He Ara Kotahi
Bridge and Plaza area.
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Summary of options analysis for
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Problem
or Opportunity
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The
Manawatū River Framework and Programme 1435 have budget
to develop a lighting loop from the Fitzherbert Bridge along both banks of
the Manawatū River to the He Ara Kotahi Bridge.
That budget did not include funds to ensure the new bridge has the
capacity to be lit, or for lighting purchase and install costs.
Officers caught this oversight prior to the new bridge steel being
fabriacted. The Chief Executive Officer approved the required variations to
the existing bridge contacts, during July in the absense of Council meetings.
Officers were directed by the Chief Executive to report to Council
as early as possible on options for funding the unbudgeted works, through
either increased borrowings or making existing savings.
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OPTION 1:
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Council
approves $1,210,000 for lighting the He Ara Kotahi Bridge.
Officers
will seek to fund $610,000 (approximately 50% of the total cost) of the light
purchase and install phase of the project through external funding
applications.
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Community Views
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The community has
generally been very positive towards the establishment of a new pedestrian
cycle-way.
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Benefits
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No requirement in the
future to try and retrofit the new bridge for lighting, which would likely be
more expensive and potentially unsightly.
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Risks
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Funding applications
fall through and Council is required to fund the full cost of light purchase
and install. The Councils project investment coordinator advises the
Central Energy Trust is the best funder for the river lighting project and
the project may not fit the funding criteria of other funding
organisations. Also other applications will need to be carefully manged
to not detract from other council projects
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Financial
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$1,210,000 in
additional unbudgeted funding is required ($610,000 from external funds).
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OPTION 2:
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Council approves
$1,210,000 for lighting the He Ara Kotahi Bridge, and funds the entire amount
from borrowings.
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Community Views
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The community has
generally been very positive towards the establishment of a new pedestrian
cycle-way.
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Benefits
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This options means
Council is not dependent on external funding to complete the project and
lighting install and purchase can take place immediately.
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Risks
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Council already has a
$350,000 funding application with Central Energy Trust, and early indications
from the Board are positive.
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Financial
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$1,210,000 in
additional unbudgeted funding is required.
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OPTION 3:
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Council approves
$1,210,000 for lighting the He Ara Kotahi Bridge, and directs the Chief
Executive to reallocate funds from existing infrastructure projects.
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Community Views
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The community has
generally been very positive towards the establishment of a new pedestrian
cycle-way.
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Benefits
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This option does not
require Council to fund the project through increasing borrowing.
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Risks
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Other infrastructure
projects would be sacrificed to fund the bridge lighting, and these projects
would need to be reconsidered at the next 10 Year Plan. Therefore the saving
may only be a deferral of works.
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Financial
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No additional finance
required on this option.
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The recommendations contribute
to Goal 2: A creative and exciting city
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The recommended option
contributes to the outcomes of the Creative and Liveable Strategy
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The recommended option
contributes to the achievement of action/actions in the Active Community Plan
The action is: Construct a
centrally located lit 3-4 km walking circuit to enable safe, night time
walking and exercise during evenings and winter (e.g. between the River
bridges once the He Ara Kotahi bridge built) (by end of 2022/2023).
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Contribution
to strategic contribution
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This proposal will ensure
that one key link in this Plan is not missed – lighting the He Ara
Kotahi Bridge in order to develop the full 3-4 km lighting link.
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Rationale for the recommendations
1. Overview
of the problem or opportunity
1.1 During
the 2018-2028 10 Year Plan process two programmes related to lighting in the
Manawatū River area were put up to Council for consideration –
Programmes 1435 (River Lighting Loop) and 752 (Manawatū River Framework).
The programme 1435 for a lighting loop came from an action in the Active
Communities Plan.
1.2 Programme
752 Manawatū River Framework committed $495,000 to lighting the
Fitzherbert Bridge. Programme 1435 Manawatū River Lighting Loop committed
$420,000 towards lighting both river banks (Victoria Esplanade side and the
Massey University side) from the Fitzherbert Bridge to the new He Ara Kotahi
bridge.
1.3 It
was mistakenly assumed by Officers at that time that the He Ara Kotahi Bridge
was planned to have lighting and that the lighting would be covered by the He
Ara Kotahi Bridge budgets.
1.4 Once
this oversight was discovered, Officers moved quickly to establish both a
lighting plan for the bridge and ensure that the build and fabrication of the
new bridge would at least have the capacity to be lit in accordance with the
lighting plan.
1.5 Council
was away in July 2018, and no reports could be put forward seeking approval for
the funding and the work. Officers worked with the acting Chief Infrastructure
Officer and the CEO to find an adequate solution. It was decided to approve the
variations to the contract so as to avoid future additional costs, then report
to Council accordingly – so as not to miss the only available window of
opportunity.
1.6 Since
that time Officers have sought an appropriately skilled sub-contractor, made
the appropriate variations to the bridge contracts and submitted an application
to Central Energy Trust for light purchase and install costs.
2. Background
and previous council decisions
2.1 During
the development of the Manawatū River Framework in 2016 a budget was
established under that plan for lighting a section of the Manawatū River
– predominantly along the City side edge in the vicinity of the Victoria
Esplanade river bank. The aerial below describes the original river section (in
orange) to be lit.
2.2 During
the development of the Active Communities Plan in 2017 further consideration
was given to lighting, and it was proposed to develop a full lighting loop
– from the Fitzherbert Bridge to the new He Ara Kotahi Bridge. The
aerial below shows the full lighting loop (in green) as proposed and adopted
through adoption of the Active Communities Plan.
2.3 The
Fitzherbert Bridge, Massey University bank and Victoria Esplanade bank were
then budgeted and those budgets included in the draft 2018-2028 10 Year Plan.
This plan was adopted, along with these budgets, in June 2018.
2.4 The
design work for the Manawatū River Framework was undertaken in the 2017/18
financial year with the desire to pull all design-work together up-front in a
single year. The lighting design began towards the end of the 2017/18 financial
year, as one of the last pieces of design work.
2.5 Once
Officers began planning and design for lighting the entire loop (under the
Manawatū River Framework design) in 2017/18 it was discovered that there
was no plan for He Ara Kotahi Bridge lighting, or provision made for lighting
on the bridge itself.
2.6 The
cost of the full lighting loop – which includes lighting on the
Fitzherbert Bridge, the Massey bank, the Victoria Esplanade bank and the He Ara
Kotahi Bridge is $2,125,000.
2.7 This
is broken down in the following table (note: yellow is non-budgeted lighting
work):
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Feature
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Phase
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Cost
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He
Ara Kotahi Bridge Lighting (Total cost)
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Phase
1
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$1,210,000
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Fitzherbert
Bridge Lighting
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Phase
2
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$495,000
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Victoria
Esplanade bank lighting
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Phase
3/4
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$210,000
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Massey
University bank lighting
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Phase
3/4
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$210,000
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Total
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2,125,000
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2.8 In
the table above only the Phases 2-4 were funded through Programmes 752
(Manawatū River Framework) and 1435 (Manawatū River Lighting Loop) in
the 2018-2028 10 Year Plan. The He Ara Kotahi Bridge lighting at Phase 1 was
not included in either of these programmes.
2.9 The
knowledge of the above oversight occurred at the same time that the fabrication
work for the new He Ara Kotahi Bridge was beginning to kick off – in
April 2018.
2.10 Officers
worked with the lighting designers, electrical engineers, the bridge
contractors and the fabricators to establish whether a solution could be formed
in time. Once it was established that a solution could be achieved and a cost
for the additional work was established, Officers approached the CEO in order
to assess the situation with regards funding.
2.11 During
this work Officers identified what work would need to be funded and completed
immediately, and what work could wait. There were a number of features that
required immediate attention:
· Establishing power
along the underside of the bridge to the Massey side.
· Modification of
the bridge steel work so that the bridge would have the capacity to hold lights
(as per the lighting design).
· Laying of the
ducting in the Plaza area for lighting to be installed at a later date.
2.12 There
were a number of features that could potentially wait:
· Purchase of actual
lights.
· Install and laying
of electrical cable.
2.13 The
yellow section of the table above (He Ara Kotahi lighting) is split into two
distinct aspects. They are:
· $600,000 (To
fabricate lighting infrastructure into the bridge, power to Massey side and lay
ducting for lighting capacity – required immediately)
· $610,000 (To
purchase lights and pay for install – not required immediately)
2.14 It
was accepted that an executive decision needed to be made immediately for the
features listed in 2.11 of this report, because an instruction to the Bridge
Contractor needed to be issued no later than 10 July 2018, and there was no
opportunity during July to seek formal Council approval before that date.
2.15 The
consequences of not issuing an instruction to the bridge contractor would have
been:
· Higher cost to try
and retrofit lighting at a later stage (significant replacement of metal
railings, posts and handrails).
· Potentially an
inferior lighting solution to the one proposed at Palmerston North’s
premier river section and park area, in order to try and cut costs. This
outcome would look completely out of place given the high quality plans for the
Fitzherbert Bridge and river bank areas leading into the new bridge.
· Potentially
unsightly cables and ducting on the bridge if a retrofit was able to be
achieved.
· Potentially unsafe
pedestrian/walkway that has no lighting at night.
2.16 With
the above in mind the Chief Executive directed Officers to issue the
instruction to make the relevant variations to the bridge contract, and
directed officers to report to the nearest appropriate Committee with options
and recommendations.
3. Description
of options
3.1 Option
1: Council approves $1,210,000 for lighting the He Ara Kotahi Bridge.
Officers will seek to fund $610,000 (approximately 50% of the total cost) of
the light purchase and install phase of the project through external funding
applications.
3.2 Option
2: Council approves $1,210,000 for lighting the He Ara Kotahi Bridge, and
funds the entire amount from borrowings.
3.3 Option
3: Council approves $1,210,000 for lighting the He Ara Kotahi Bridge, and
directs the Chief Executive to reallocate funds from existing infrastructure
projects.
4. Analysis
of options
4.1 Option
1: Council approves $1,210,000 for lighting the He Ara Kotahi Bridge.
Officers will seek to fund $610,000 (approximately 50% of the total cost) of
the light purchase and install phase of the project through external funding
applications.
4.2 There
are a number of issues that could have emerged, had the instruction from the
Chief Executive to create the variations to the contract for He Ara Kotahi
Bridge not gone ahead. They are:
· An expensive
retrofit. The lighting design incorporates lighting fixtures that are not
visible to the eye, and are hidden within the bridge infrastructure (such as in
handrails, etc.). This creates a subtle, high quality lighting effect. It is
likely that cutting out steel, posts and handrails and adding in new ones after
the fact would at least double the cost on install.
· If the retrofit costs
for install to the design plan were too inhibitive, Council could end up with
unsightly cables and ducting running along the bridge to try and achieve the
same effect. This would significantly reduce the aesthetic amenity of design
that Council has worked hard to achieve on this project.
· If retrofit to the
design was simply no longer possible, which is likely for some of the lighting
proponents; the cost was too prohibitive or the results too unsightly, Council
may have ended up with a high quality bridge with poor lighting outcomes at
night and something inconsistent with the rest of the planned river lighting
loop.
· By entering into a
commitment to light this portion of the river network in the Active Communities
Plan and the 2018-2028 10 Year Plan, Council has committed to providing a safe,
quality night-time experience in this area. Not lighting this bridge, or poor
lighting, would be inconsistent with the Active Communities Plan, the 10 year
Plan and the aesthetic lighting plan for the area.
4.3 Officers
have lodged a funding application with Central Energy Trust for funding parts
of the lighting purchase and install costs, as per the Trust’s criteria.
So far early discussions with the Trust have been positive.
4.4 There
are also other funding options with regards covering costs for lighting
purchase and install costs. Officers are currently seeking external funds, and
will report back to Council in September on the status of funding applications
for this project.
4.5 Option
2: Council approves $1,210,000 for lighting the He Ara Kotahi Bridge, and
funds the entire amount from borrowings.
4.6 The
analysis of Option 1 holds for this option.
4.7 This
option requires Council to fund the full amount of the project - $1,210,000.
Currently Council has an application with Central Energy Trust for $450,000,
and early discussions with the Board are positive. A successful application
would still see a funding shortfall of $160,000.
4.8 Under
this option Officers could potentially make up as much of the additional
funding required for the project from external funds and then report on any
shortfalls with recommendations in September 2018.
4.9 Option
3: Council approves $1,210,000 for lighting the He Ara Kotahi Bridge, and
directs the Chief Executive to reallocate funds from existing infrastructure
projects.
4.10 The
analysis for Option 1 holds for this option.
4.11 This
option would require Officers to go through budgets and establish which
programmes could potentially undergo some reallocation of budget in order to
fund the bridge lighting.
4.12 This
option will mean that an existing programme(s) will need to be halted or
partially completed until such time as additional budget is available for the
work.
4.13 Given
that much of the work Council engages in is necessary this option may in
reality only see a deferral of cost to the next 10 Year Plan funding
round.
5. Conclusion
5.1 Council
has produced a high quality decorative and practical lighting design as part of
the Manawatū River Framework and the Active Communities Plan, for a
lighting loop in the Victoria Esplanade river environment.
5.2 During
this design work it was discovered that Officers had overlooked whether
lighting for the He Ara Kotahi Bridge was in fact funded through the He Ara
Kotahi project. It was not.
5.3 Once
the oversight was discovered officers worked to deliver to suitable solution to
ensure the bridge would have the capacity to be lit.
5.4 This
occurred while Council was away, and the Chief Executive directed Officers to
report to Council on the matter as a soon as practicable.
6. Next
actions
6.1 Fabrication
of the bridge for lighting and laying of ducting occurs.
6.2 Resource
consent for lighting.
6.3 Develop
funding applications for install and purchase of lights.
6.4 Report
back to Council on the outcome of the project in September 2018.
7. Outline
of community engagement process
7.1 This
lighting project went through a community engagement process consistent with
that completed during the Active Communities Plan and the 2018-2018 10 Year
Plan.
Compliance and administration
N/A
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Does the Committee have
delegated authority to decide?
If Yes quote relevant clause(s)
from Delegations Manual <Enter
clause>
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No
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Are the decisions significant?
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No
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If they are significant do they
affect land or a body of water?
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No
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Can this decision only be made
through a 10 Year Plan?
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No
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Does this decision require
consultation through the Special Consultative procedure?
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No
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Is there funding in the current
Annual Plan for these actions?
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No
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Are the recommendations
inconsistent with any of Council’s policies or plans?
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No
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Attachments
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1.
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Manawatū River Lighting design ⇩ 
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PALMERSTON NORTH CITY COUNCIL
Memorandum
TO: Finance
and Performance Committee
MEETING DATE: 20
August 2018
TITLE: Treasury
Report for 12 months ended 30 June 2018
DATE: 30
July 2018
AUTHOR/S: Steve
Paterson, Strategy Manager Finance, Finance
APPROVED BY: Grant
Elliott, Chief Financial Officer
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RECOMMENDATION
1. That
the performance of the treasury activity for the 12 months ending 30 June
2018 be noted.
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1. ISSUE
To
provide an update on the Council’s treasury activity for the 12 months
ended 30 June 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.
(Note: on 25 June 2018 the Council
adopted its updated financial strategy and 10 Year Plan 2018-28. They
contain an amended maxima for the future of 200% for the net debt to total
revenue ratio.)
Following the latest annual review
published on 9 April 2018 Council’s S&P Global Rating’s credit
rating remains unchanged at AA / A-1+.
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 30 June 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
|
Actual – 12 months (2017/18)
$000
|
|
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
|
97,000
19,875
17,000
|
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Closing Balance at 30 June 2018
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
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99,875
2,875
10,000
87,000
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#
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 30 June 2018 was
$98.875m (ie gross $99.875m less short term deposits of $1.0m) 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 12 months
(including interest, line fees & the effects of swaps) amounted to $5.846m
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” i.e. the difference between the value at
which the interest rate was fixed and the current market value of the
transaction. Each of these transactions was valued at the date they were
fixed and again at the reporting date. Financial reporting standards
require the movement in values to be recorded through the Council’s
Statement of Comprehensive Income (Profit & Loss Account). They have
been revalued as at 30 June 2018 and show an increase in book value of $212k
for the quarter, but a reduction of $165k for the year.
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. During 2017/18 we used a rolling 12
month projection of $105m for this assessment. This is considerably less
than assumed in the Annual Budget and reflects that actual capital expenditure
(and as a consequence total debt) is less than the budget assumption. The
projection for reporting for 2018/19 has not yet been finalised as it relies on
more detailed assessment of the timing of planned capital expenditure.
The interest rate risk position graph shows that based on forecast debt of
$105m, then 78% of the interest exposure is fixed. However the budget for
2018/19 assumes $39m of additional debt will need to be raised during the
year. If this forecast is used for this policy then 59% of interest is
currently fixed. The policy requires that at least 55% is fixed.
As at 30 June 2018 all of the policy
targets had been met.
Council’s credit lines with the banks include
a $18m four year credit facility with Westpac Bank (maturing 31 July 2020) and
a revolving $25m three year facility with ANZ Bank (maturing 31 March 2021).
4. CONCLUSION
& NEXT STEPS
Realised interest and dividend
returns for the 12 months from the Fund of $30k equates the budget. Finance costs for the 12 month period (including
interest, line fees & the effect of swaps) was $5.846m 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.
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 September 2018 quarter.
5. Compliance
and administration
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Does the Committee have
delegated authority to decide?
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Yes
|
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Are the decisions significant?
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No
|
|
If they are significant do they
affect land or a body of water?
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No
|
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Can this decision only be made
through a 10 Year Plan?
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No
|
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Does this decision require
consultation through the Special Consultative procedure?
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No
|
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Is there funding in the current
Annual Plan for these actions?
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Yes
|
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Are the recommendations
inconsistent with any of Council’s policies or plans?
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No
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The recommendations contribute
to Goal 5: A driven and enabling Council
|
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The recommendations contribute
to the outcomes of the Driven and Enabling
Council Strategy
|
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The recommendations contribute
to the achievement of
action/actions
Not Applicable
|
|
Contribution
to strategic direction
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Routine
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Attachments
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1.
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Schedule 1 - Debt levels & prudential borrowing
ratios
Schedule 2 - Interest rate swaps
Schedule 3 - Risk exposure position ⇩ 
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