1 Prayer
2 Apologies
3 Declarations
of Conflicts of Interest
4 Standing
Orders
|
RECOMMENDATION
THAT the
following standing orders are suspended for the duration of the meeting:
20.2
Time limits on speakers
20.5
Members may speak only once
20.6
Limits on number of speakers
And that
Option C under section 21 General procedures for speaking and moving motions
be used for the meeting.
· Standing orders are recommended
to be suspended to enable members to engage in discussion in a free and frank
manner.
|
6 Report
Section
6.1 Annual
Plan 3 Waters Compliance Additional Funding
File
Number: COU1-1400
Author: Josh
Lloyd, Group Manager - Community Infrastructure and Development
Authoriser: Monique
Davidson, Chief Executive
Attachments: Nil
PURPOSE
The matter for consideration by the Council is the approval
of additional funding required in the Annual Plan 2019/20 to support regulated
compliance work for the three waters.
|
RECOMMENDATION for consideration
That having considered all
matters raised in the report:
a) Council approve the additional budget
required in the Annual Plan 2019/20 to support regulated compliance for the
three waters and this is funded from rates to a total value of $113,191.
|
|
|
|
compliance
|
|
Significance
|
This matter is assessed as being of some importance.
|
|
Options
|
This report identifies and assesses the following
reasonably practicable options for addressing the matter:
1. Council approve the
additional budget required in the Annual Plan 2019/20 to support regulated compliance
for the three waters and this is funded from rates to a total value of
$113,191.
2. Council approve the
additional budget required in the Annual Plan 2019/20 to support regulated
compliance for the three waters and this is loan funded to a total value of
$113,191.
3. Council approve the
additional budget required in the Annual Plan 2019/20 to support regulated
compliance for the three waters and this is funded from within existing three
waters budgets by reprioritising expenditure to a total value of $113,191.
4. That Council do not
approve any increase in funding to support regulated compliance requirements
for the three waters and instead instruct and support officers to push back
on regulators.
|
|
Affected persons
|
The persons who are affected by or interested in this
matter are the residents of Central Hawke’s Bay who are impacted in any
way by the three waters, Council officers tasked with meeting compliance
standards, Council contractors tasked with meeting compliance standards.
|
|
Recommendation
|
This report recommends option 1 for
addressing the matter.
|
|
Long-Term Plan /
Annual Plan Implications
|
This report requests, among other options, a change to the
Annual Plan 2019/20 budgets to increase funding to support regulatory compliance
for the three waters.
|
|
Significant
Policy and Plan Inconsistencies
|
Option 2 is outside of the Revenue and Financing Policy
|
EXECUTIVE SUMMARY
This report presents options to fund an identified shortfall
between existing Annual Plan budgets and what is required to meet new
regulatory compliance requirements for Drinking Water, Storm Water and Waste
Water. Specifically, options considered include funding from rates, loan
funding for Annual Plan 2019/20, re-prioritising investment or not investing at
all and accepting to not meet compliance requirements. Based on the options
analysis Officers consider that funding from rates is the best option to reduce
risk to Council and the community.
BACKGROUND
Mandatory Compliance Regime.
Council own and operate three waters infrastructure to
provide safe and reliable service to its communities and in accordance within a
plethora of regulatory and legislative controls. The compliance regime is
rightfully in place to provide oversight of the sector and ensure that minimum
standards are being met in order to ensure that services are safe, reliable and
do not have any adverse impacts on health, safety or the environment.
There are many controls in place for Council that are
implemented by many different governing bodies or regulators. The two key
groups of controls under which Council MUST comply for the three waters are the
NZ Drinking Water Standards and our many Resource Consent conditions.
The NZ Drinking Water Standards are implemented across NZ by
regional DHBs with appointed local Drinking Water Assessors (DWAs). These
standards are set ultimately by the Ministry of Health. Our Resource Consent
conditions are set in line with the Resource Management Act, administered by
the Hawke’s Bay Regional Council and enforceable through the Environment
Court.
Drinking Water Compliance
A national move to a new format of Water
Safety Plans has been embraced by the Hawke’s Bay DHB and local Drinking
Water Assessors (DWAs). The new format has been accompanied by an increased
enthusiasm and energy of the DWAs who are seeking now to review many previously
accepted practices, processes and procedures. DWAs locally are now requiring
reviews of all supporting documentation to all water-safety-related activities
at a level much greater than previous. Weekly reviews are occurring internally
now to meet the compliance workload and this is considered unsustainable in the
medium to long term.
The HBRC have also tightened up on
requirements now requesting much greater detail and timeliness in water-use
information. HBRC are also more strictly enforcing consent conditions for water
takes requiring additional monitoring and reporting on Councils part.
Waste Water Compliance
The extension of consents for some plants to optimise
capital investment has resulted in an increase in short-medium term monitoring
and reporting requirements. The sophistication of analysis and information
processing for monitoring and reporting against all wastewater consents has
also increased with annual return reports increasing from 20 to 60 pages in
most cases.
Storm Water Compliance
The implementation of, and adherence to, CHBDCs Stormwater
Resource Consent is requiring a radical increase in resource. New monitoring
and sampling programmes are being created, new reporting frameworks published
and landowners are being engaged with under a totally new model and approach to
managing Stormwater. Stantec have been supporting the work to date and have
compiled a 12-month roadmap of actions required to meet consent conditions
complete with estimated resource requirements for each task.
Risk.
Council has adopted a formal approach to managing risk
coordinated across the organisation. Governance play a vital role in the risk
management approach through the adoption of policies and frameworks and through
the review and endorsement of a corporate risk register. The tables below are
taken from the adopted Risk Management Framework and CHBDC Risk Register,
respectively. They illustrate the importance that governance has placed on
effective risk management and highlight key risks at a generic level
(insignificant to catastrophic classification ranking) and a specific level
(such as the top listed risk on the risk register about fresh water quality and
compliance.
Officers have built a close working relationship with the
HBRC and DHB DWAs over the past 18 months through the changing regulatory and
compliance regime. Officers have also increased their understanding and
limitations of our infrastructure. This process has been expedited through the
on-boarding of Veolia. Officers have confidence that our infrastructure is
performing to physical expectations in most cases but that additional and
ongoing resource is required to continue to demonstrate this to regulators as
well as to make some small changes to plant and equipment. It is Officers view
that without an increase in resource, Council will struggle to continue to
demonstrate compliance. Non-compliance can be dealt with in many ways with the
severest being prosecution under the Health Act or Resource Management
Act.
|
Consequence (C)
|
1
|
2
|
3
|
4
|
5
|
|
Risk Area
|
Insignificant
|
Minor
|
Significant
|
Major
|
Catastrophic
|
|
Leadership and Governance including
Reputation
|
Customer complaint.
AND/OR
Not at fault issue, settled quickly with
no impact.
Minor legislative technical breach but no
damages. No monetary penalty
AND/OR Internal query.
No impact on the Vision and Strategic
Community Outcomes
Consultation on Annual or LTP, strategies
or revised Vision & Community Outcomes delayed by less than 3 working
days
|
Non-headline community media exposure.
Clear fault. Settled quickly by CHBDC response.
Negligible impact.
Minor technical non-compliances and
breaches of regulations or law with potential for minor damages or monetary
penalty.
AND/OR
Special audit by outside agency or enquiry
by Ombudsman.
Inconvenience or short delay in
achieving the Vision and Strategic Community Outcomes
Consultation on Annual or LTP, strategies
or revised Vision & Community Outcomes delayed by 3-5 working days
|
Negative local (headline) and some
regional media coverage. Council notification. Slow resolution.
Compliance breach of regulation with
investigation or report to authority with prosecution and/or possible
fine.
AND/OR
Non-compliance with Corporate/Council
Policy
Significant difficulty introduced to
achievement of the Vision and Strategic Community Outcomes.
Lost opportunity to contribute positively
to one or more of the Vision and Strategic Community Outcomes
|
Negative regional (headline) and some
national media coverage. Repeated exposure. Council involvement. At fault or
unresolved complexities impacting public or key groups.
Major compliance breach with potential
exposure to large damages or awards. Prosecution with 50% to maximum
penalty imposed. District or Environmental court.
OR
Multiple compliance breaches that
together result in potential prosecution with 50% to maximum
penalty imposed.
Failure to achieve a specific Strategic
Community Outcome.
Lost opportunity to significantly advance
a specific Strategic Community Outcomes.
|
Maximum multiple high-level exposure. Sustained national media coverage. Direct Council
intervention. Loss of credibility and public / key stakeholder support.
Serious compliance
breach with potential prosecution with maximum penalty imposed. High Court or
criminal action.
OR
Multiple compliance
breaches that together result in potential prosecution with maximum
penalty imposed
Failure to achieve multiple Strategic
Community Outcomes.
Lost opportunity to significantly advance
multiple Strategic Community Outcomes.
|
Enforcement.
Officers consider that they are likely to be unable to meet
the requirements of new and existing regulation under the NZ Drinking Water
Standards and our Resource Consents without additional investment for
monitoring and compliance activities. This report seeks to inform Council about
the risk of enforcement and options to mitigate that risk. While prosecution is
only one aspect of enforcement, it is a possibility that Council need to be
aware of.
Should prosecution be pursued by our regulating bodies, the
Health (Drinking Water) Amendment Act 2007 sets that a fine not exceeding
$200,000 is imposable on any organisation who commits an offence under the act
as well as a maximum fine of $10,000 per day for every day during which the
offence occurs. The Resource Management Act 1991 sets that a fine not exceeding
$600,000 is imposable by any organisation who commits an offence under the act
as well as a maximum fine of $10,000 per day for every day during which the
offence occurs. These figures are the maximum values and it is not anticipated
that such high figures would be imposed on a Council of our size however it is
possible.
National Context.
The compliance regime under which CHBDC operates is the same
for other Councils across NZ. There are however significant regional
inconsistencies in the interpretation of standards and guidelines across the
country that continue to be the subject of heavy national debate. Councils
involvement in the Joint Water Working Group as well as the HB 3 Waters Reform
working group ensures a continued and increasing awareness of both regional and
national activity.
The Central Government-led 3 Waters Reform seeks to
fundamentally transform the regulatory model for the 3 Waters ensuring
consistency and robustness in the regulation. Officers involved in aspects of
the review are totally confident that a new central regulating body will be
created in the short to medium term. Officers are also entirely confident that
any new regulations will be in addition to existing regulation and the
compliance realm will not become simpler or more ‘relaxed’.
Officers have had it made clear that a continued significant investment in
compliance and monitoring is required.
A second leg of the 3 Waters Reform is seeking to review the
operational delivery model and find efficiencies and optimisations. This work
is being led nationally by a Hawke’s Bay working group with a report from
that group to be presented to CEs in May. This work may in time lead to some
consolidation of resources and changes in funding models but will not make
changes within the immediate or short term as required to fund existing
challenges.
Funding Implications.
Officers request an alteration to the Annual Plan 2019/20
budgets to allow for necessary increases in internal and contracting resource
to meet new and changing legislative and wider regulatory and compliance
requirements for drinking water, storm water and waste water. An increase in
the following budgeted amounts within the presented Annual Plan are requested:
The increases in operating expenditure required are
necessary given changes in the regulatory and compliance regimes for all three
waters. The changes necessitating an increase in Council investment are
described below categorised under each of the three waters.
The total increase in funding required is $113,191.
|
|
Current Budgeted
Amount
|
New Budget
Requirement
|
Additional Budget
required
|
|
Water
Operational Monitoring
|
$87,485
|
$148,818
|
$61,333
|
|
Wastewater Operational Monitoring
|
$153,000
|
$196,630
|
$43,630
|
|
Stormwater Operational Monitoring
|
$32,640
|
$40,868
|
$8,228
|
SIGNIFICANCE AND ENGAGEMENT
In accordance with the Council's Significance and Engagement
Policy, this matter has been assessed as of some importance because of the
potential impact on rates or existing programmes of work.
OPTIONS
The following standard criteria for evaluating options have
commonality between the options and are discussed here in general rather than
individually under each option.
a) Alignment to Project Thrive and Community Outcomes
Project THRIVE was a key driver of the Big Water Story which
placed an increased focus on 3 waters infrastructure. The investment requested
in this report does not directly support 3 waters infrastructure creation or
maintenance but supports the effective management of that infrastructure
through increased monitoring and compliance in adherence with regulation/s.
Options 1 and 2 both allow Council to continue to meet the inherent drivers of
Project THRIVE and the Big Water Story through continuing investment in
infrastructure and supporting this investment with further investment in
monitoring and compliance to ensure that the infrastructure is performing as it
should to meet health, wellbeing, environmental, community and regulatory
outcomes. Options 3 and 4 are considered specifically under their respective
sections below.
b) Participation by Māori
Council is required to engage with Maori in a meaningful way
while providing 3 waters services. The additional compliance requirements
addressed in the report have no direct bearing on Councils ongoing engagement
with Maori.
Option 1 Council
approve the additional budget required in the Annual Plan 2019/20 to support
regulated compliance for the three waters and this is funded from rates to a
total value of $113,191.
a) Financial
and Resourcing Implications
The additional investment per year to meet new compliance
requirements of $113,191 spread across the 3 waters will have an impact on
targeted rates for connected customers as follows:
|
|
Current Budgeted
Amount
|
New Budget
Requirement
|
Additional
Budget required
|
Increase amount
per connect (incl GST)
|
|
Water
Operational Monitoring
|
$87,485
|
$148,818
|
$61,333
|
$16.94
|
|
Wastewater Operational Monitoring
|
$153,000
|
$196,630
|
$43,630
|
$12.57
|
|
Stormwater Operational Monitoring
|
$32,640
|
$40,868
|
$8,228
|
$0.0099 per dollar
of capital value
|
b) Risk
Analysis
This option is considered to remove the immediate and
highest risk to Council which is the threat of non-compliance and subsequent
prosecution. This option however creates additional risk by transferring the
burden onto ratepayers who may experience affordability issues in some cases.
There is a risk to Council of negative public feedback or criticism about
continued rates increases to service the 3 waters however this risk is
considered manageable through communicating clearly with ratepayers about the absolute
need to comply with regulation and that this is not Council’s own doing.
c) Community
Views and Preferences
This option is considered to be in alignment with community
views and preferences in that it will go some way to ensuring the continued
delivery of safe and reliable drinking water, the careful management of the
environment and environmental impacts and compliance with regulation. It is
anticipated that there will be strong views in the community about the
affordability of required rates increases.
d) Statutory
Responsibilities
This option supports Council to meet its statutory
responsibilities under the NZ Drinking Water Standards and numerous Resource
Consents.
e) Consistency
with Policies and Plans
This option requires a change to the Annual Plan but is in
alignment with infrastructure plans, asset management plans and water safety
plans and Council’s Revenue and Financing Policy.
f) Advantages and Disadvantages
The primary advantages of this option are that it directly
allows Council to meet regulatory compliance requirements and avoid the
immediate threat of prosecution. This option is also considered to be
relatively easy to enact in that it does not require a change to funding
mechanisms.
The primary disadvantage of this option is the affordability
implications for our ratepayers.
Option 2 Council
approve the additional budget required in the Annual Plan 2019/20 to support
regulated compliance for the three waters and this is loan funded to a total
value of $113,191.
a) Financial and Resourcing Implications
An option exists to loan fund the required $113,191 in year
one while Council consider longer term how to meet changing compliance
requirements. This is not a long-term solution as loan funding for year on year
investment is outside of Council Revenue and Financing Policy and what is
considered prudent financial management. The impact on connected ratepayers in
year 1 to pay back the loan over a five-year period is shown in the table
below. Note that this amount would be added to any future rates increases
required in the five-year period.
|
|
Current Budgeted
Amount
|
New Budget
Requirement
|
Additional
Budget required
|
Increase amount
per connect (incl GST)
|
|
Water
Operational Monitoring
|
$87,485
|
$148,818
|
$61,333
|
$3.86
|
|
Wastewater Operational Monitoring
|
$153,000
|
$196,630
|
$43,630
|
$2.86
|
|
Stormwater Operational Monitoring
|
$32,640
|
$40,868
|
$8,228
|
$0.0023 per dollar
of capital value
|
b) Risk Analysis
This option removes the immediate risk to Council of
non-compliance and potential prosecution. This option defers the risk to
Council of public scrutiny over affordability issues but only for one year as
funding via loan for year on year investment is outside of Council Revenue and
Financing Policy and what is considered prudent financial management.
c) Community Views and Preferences
This option is in alignment with community views and
preferences in that it allows good management of infrastructure and an ability
to meet compliance requirements. This option also will garner community support
in creating a short-term period of grace from larger rates increases. This
option is however considered unsustainable and merely defers a longer-term
decision on how to fund compliance requirements. Through Project THRIVE and the
LTP 2018-28 consultation the community demonstrated a strong desire to not
defer decisions on infrastructure that need to be made.
d) Consistency with Policies and Plans
This option is not consistent with Councils Revenue and
Financing Policy so would need to be implemented outside of that Policy.
e) Advantages and Disadvantages
The primary advantage of this option is that it lessens the
affordability impact on ratepayers in year one, but only for a short time.
The primary disadvantages are that it is only a short term
option potentially deferring the same decision to be made next year.
Option 3 Council
approve the additional budget required in the Annual Plan 2019/20 to support
regulated compliance for the three waters and this is funded from within
existing three waters budgets by reprioritising expenditure to a total value of
$113,191.
a)
a) Financial and Resourcing Implications
This option will not have any resulting increases in rates
or require any changes to funding mechanisms. A transfer of existing funds from
within existing 3 waters operational budgets could be made but would come at
extreme risk to asset performance and level of service. The funds would
logically need to come from budgets set aside for asset condition assessment
and asset management plans. This would leave little to no money available in
these budgets to carry out already planned work to manage our assets.
Drinking Water
Asset Management Planning budgets in Drinking Water would be
$0.00 for 2019/20 ($30,812) and the $30,521 of the additional funding remainder
would be taken from routine maintance under the CFIM contract.
Waste Water
Asset Management Planning would be reduced by the additional
expenditure of $43,630.
Storm Water
Asset Management Planning would be reduced by the additional
expenditure of $8,228.
b) Risk Analysis
This option completely removes the risk of additional
financial burden on ratepayers but transfers this to what Officers consider to
be an unacceptably high risk on the assets and in terms of level of service.
Funds would need to be transferred from an existing operational budget with
AMPs being the most suitable candidate. This would leave insufficient funds to
carry out already planned AMP work and would result in poorly produced plans
and deteriorating assets.
c) Alignment to Project Thrive and Community
Outcomes
This option would meet community needs and expectations in
the immediate term by allowing continued monitoring and compliance work to
adherence to regulation. It could however be seen to be contradictory to
already built understanding in the community about the need to invest in the
assets through proper maintenance, condition assessment and planning as this
option would directly take much-needed funds from those activities.
d) Community Views and Preferences
This option may be supported by the community in the short
term as it would not result in any increases to rates. It would however result
in a decreased level of service from the assets which undermines the intent of
the Big Water Story and the strong views of the community to properly invest in
infrastructure.
e) Consistency with Policies and Plans
This option is consistent with the Revenue and Financing
Policy however would have a significant impact on the ability of Officers to
develop robust and appropriate Asset Management Plans.
f) Advantages and Disadvantages
The primary advantage of this option is that it does not
result in an increase in rates.
The primary disadvantage of this option is that it would
result in a decrease in levels of service from the assets and be contradictory
to already built understanding in the community about the need to invest in the
assets through proper maintenance, condition assessment and planning as this
option would directly take much-needed funds from those activities
Option 4 That
Council do not approve any increase in funding to support regulated compliance
requirements for the three waters and instead instruct and support officers to push
back on regulators.
a) Financial and Resourcing Implications
This option would require no additional investment from
Council but would require Officer and Elected Member time to engage with
regulators to argue and support the case for not complying with regulations.
Prosecution for not complying with regulation could come in
the form of financial penalties as identified in the report.
b) Risk
Analysis
This option creates a significant risk to Council of
breaching the NZ Drinking Water Standards and its requirements under the
conditions of numerous Resource Consents. The provision of safe drinking water
is number 1 on Councils adopted Risk Register and this option directly does not
support continued management of that risk.
While Officers do not consider there to be an immediate risk
of public safety being compromised, by not meeting new compliance requirements,
there is potential that without completing the necessary monitoring activities
required under compliance regime/s that Council could produce unsafe water.
c) Alignment
to Project Thrive and Community Outcomes
This option does not align with Project THRIVE or community
outcomes as it will likely see Council prosecuted and therefore require
significant sums of money to be transferred from value-adding activities to
paying imposed penalties.
d) Statutory
Responsibilities
This option is directly against mandated regulation as per
the NZ Drinking Water Standards and our many Resource Consents.
e) Community
Views and Preferences
Officers consider that this option does not align with
community views and preferences that would set at a minimum that Council comply
with regulation standards. The Community have questioned several times during
recent engagements how Council complies with Drinking Water Standards and have
questioned how Council complies with its own Resource Consents.
f) Consistency
with Policies and Plans
Option 4 does not require a change to the Annual Plan or any
funding mechanism but is inconsistent with aspects of Water Safety Plans and
Asset Management Plans.
g) Advantages
and Disadvantages
The advantage of this option is that it comes at no
immediate cost to the ratepayer.
The disadvantages of this option are that it will almost
certainly lead to non-compliance, possible prosecution and the need to spend
time and money to pay penalties.
Recommended Option
This report recommends Option
1, Council approve the additional budget required in the Annual Plan 2019/20 to
support regulated compliance for the three waters and this is funded from rates
to a total value of $113,191, for addressing the matter.
NEXT STEPS
Following a decision by Council, Officers will re-design
compliance and monitoring work programmes as required to ensure continued
compliance. Officers will also communicate with the regulating bodies in the
district/region to inform them of any changes to our programmes or to provide
any feedback that Elected Members wish.
|
RECOMMENDATION for consideration
That having considered all
matters raised in the report:
a) Council approve the additional budget
required in the Annual Plan 2019/20 to support regulated compliance for the
three waters and this is funded from rates to a total value of $113,191.
|
6.2 Central
Hawke's Bay District Community Trust - Request for additional funding
File
Number: ASS2-3000
Author: Doug
Tate, Group Manager Customer and Community Partnerships
Authoriser: Monique
Davidson, Chief Executive
Attachments: 1. Central
Hawke's Bay District Community Trust - Funding request letter and budget
breakdown ⇩ 
PURPOSE
The purpose of this report is to present further information
to Council to determine whether to provide additional annual funding for
operational costs to the CHB Community Trust.
|
RECOMMENDATION
for consideration
That having considered all
matters raised in the report:
a) That
Council provide additional funding to the Central Hawke's Bay District
Community Trust of $14,500 ongoing, above and beyond the current
Service Agreement value, noting an additional rating impact of $8,910 in the
2019/20 year; or
b) That
Council provide additional funding to the Central Hawke's Bay District
Community Trust of only $5,590 ongoing, above and beyond the current
Service Agreement value; or
c) That
Council declines the Central Hawke's Bay District Community Trusts request
for additional funding.
d) That
Council requires a variation to the Service Agreement with the Central
Hawke's Bay District Community Trust, with payment of the additional
funding being conditional upon the Trust providing quarterly reporting
information to Council to meet Long Term Plan performance measures and for
the Trust Chairman to attend a quarterly liaison meeting with Senior Council
staff. (DELETE OR AMEND IF NO FUNDING PROVIDED)
|
|
|
|
compliance
|
|
Significance
|
This matter is assessed as being of some importance
|
|
Options
|
This report identifies and assesses the following
reasonably practicable options for addressing the matter:
1. Fund the full
request of the Trust requiring new rating requirements of $8,909.
2. Part fund the
request of the Trust to the value contained within budgets.
3. Decline the request
for additional funding.
|
|
Affected persons
|
The persons who are affected by or interested in this
matter are the CHB Community Trust and users of the pool.
|
|
Recommendation
|
This report does not recommend an option to address the
matter.
|
|
Long-Term Plan /
Annual Plan Implications
|
Yes – if option 1 is adopted additional funding will
be required for the 2019/20 financial year.
|
|
Significant
Policy and Plan Inconsistencies
|
No
|
BACKGROUND
Council have a service agreement with the Central Hawke's
Bay District Community Trust (“The Trust”) dated 8 November 1996
for the provision of a swimming pool in Central Hawke’s Bay, with the
Trust covenanting “to provide the residents of Central Hawke’s Bay
and visitors with access to a modern recreational swimming and fitness
facility”. In consideration of the provision of the pool, Council
makes an annual payment.
The service agreement has had minor variations since 1996, either
extending the agreement or formalising increases above and beyond
inflation. The service agreement comes to an end on 30 June 2022.
All costs relating to the operation of the facility are the
responsibility of the Trust, noting however that they are limited in their
ability to generate operational revenue - outside of sponsorship and Council
funding.
While the Trust could seek to raise fees and charges for the
complex with Council approval, the current operational contractual arrangement
prevents any net revenue being returned to the Trust. The Trusts
operational service provider collects and retains all fees and charges as part
of the operational service agreement, requiring modification of the service
agreement for a portion or any fees and charges to be returned to the Trust.
The Trust are required as part of their Lease to insure the
Pool and other improvements and are required to pay all premiums in respect
thereof.
In early May
officers received a request from the Central Hawke’s Bay Community Trust
to provide an increase of $14,500 ongoing, above and beyond the current funding
allocation provided for in their service agreement with Council. For
clarity, this request was given earlier than anticipated in the Service
Agreement, with the Trust not required to submit any request for increased
funding until 30 June of each financial year.
The increase
in funding is requested to cover operational costs relating to insurance that
has increased beyond the Trusts capability to sustainably fund these for the
pool complex. The Trust sought independent insurance advice to procure
the insurance and sought expert advice on the relativity of an increase based
on their current premiums. The Trust has accepted the current insurance
with the new provider for the 2019/20 year. Officers have not had the
opportunity to seek comparable insurance costs at the time of writing.
A budget for
the Trust is set out with their correspondence submitted as in attached.
As set out in the budget, the Trust has no other means of funding these
additional costs, requiring it to necessarily look to Council in terms of the
Service Agreement regarding the pool.
An option is
for the Trust to reduce the allocation being set aside annually for operational
replacements and the renewal of the facility. In relation to the
stewardship of the facility, this is an approach the Trust are uncomfortable
taking on behalf of the Central Hawke’s Bay Community.
Council
currently provides $209,146 (excluding GST) in the 2018/19 year as part of the
service agreement. The agreement provides for a compounding inflation
value each year.
Based on the
anticipated inflation figure for the 2018/19, the expected value of the service
agreement for the 2019/20 year is $211,237.
The budget
in the 2019/20 year is $216,828, providing a surplus of $5,590.
The Trust
have requested an increase in funding of their service agreement to
$225,737. This increase is $14,499 above the value in the 2019/20 year
that the service agreement anticipates, and $8,910 above the budgeted value in
the 2019/20 Annual Plan and is an increase in rates of 0.05%.
It is
acknowledged between the parties that a stronger operational and strategic
relationship between Officers and Trust needs to be established. In the
preparation of the report, this is something the Trust’s Chair has
welcomed in the future. It is recommended a variation to the service
agreement is made to enact this, should Council provide additional funding.
Councillors
will also recall that as part of the Long Term Plan, new performance measures
relating to the operation of the swimming facility were included. In the
absence of this being included in the current service agreement, it is
recommended that the requirement is also provided should new funding be
provided to make their provision a requirement.
SIGNIFICANCE AND ENGAGEMENT
In accordance with the Council's Significance and Engagement
Policy, this matter has been assessed as of some importance.
OPTIONS
Three
options for Council to consider include:
Option 1 Fund
the full request of the Trust requiring a new rating requirement of $8,909
a) Financial
and Resourcing Implications
New
funding of $8,910 above the budgeted value in the 2019/20 Annual Plan is
required and this is an increase in rates of 0.05%.
b) Risk
Analysis
The most substantial risk to
Council is the additional increase to the general rate that results.
c) Alignment
to Project Thrive and Community Outcomes
Providing the additional
funding supports a great community asset and service to the Central
Hawke’s Bay Community, supporting connected citizens and strong
communities.
d) Statutory
Responsibilities
n/a
e) Consistency
with Policies and Plans
n/a
f) Participation
by Māori
n/a
g) Community
Views and Preferences
The Trust would look favourably
on the increase.
It is unclear whether support
or not of the facility by Council would be viewed favourably or unfavourably by
the general public.
h) Advantages
and Disadvantages
There are no obvious advantages
to this option, other than the Trust being able to fully fund its operational
costs. The only disadvantage is the additional ongoing rate impact.
Option 2 Part
fund the request of the Trust to the value contained within budgets
a) Financial
and Resourcing Implications
Council only fund $5,590 of the
requested $14,500, being the projected budget surplus for the activity
identified in the 2019/20 Annual Plan project.
There would be no rate impact
with this option.
b) Risk
Analysis
The most substantial risk is
that the Trust is unable to operate within its operational financial means or
has to reduce the maintenance reserve it is building for renewal and
replacement, which is not sound asset stewardship.
i) Alignment
to Project Thrive and Community Outcomes
Providing the additional
funding supports a great community asset and service to the Central
Hawke’s Bay Community, supporting connected citizens and strong
communities.
j) Statutory
Responsibilities
n/a
k) Consistency
with Policies and Plans
n/a
l) Participation
by Māori
n/a
m) Community Views
and Preferences
The Trust may look unfavourably
only receiving part of the increase.
It is unclear whether support
or not of the facility by Council would be viewed favourably or unfavourably by
the general public.
n) Advantages
and Disadvantages
The obvious disadvantage is
that the Trust is unable to fully fund its operational costs and cost of
replacement long term. The advantage is that no additional increase to
rates is required.
Option 3 Decline
the request for additional funding.
a) Financial and Resourcing Implications
No
new funding requirements result.
b) Risk
Analysis
The notable risk is the
feedback from and the inability of the Trust to fund the shortfall. Long
Term this then creates a position when maintenance reserves for the complex
dwindle.
c) Alignment
to Project Thrive and Community Outcomes
The facility is well supported
by the Central Hawke’s Bay Community, supporting connected citizens and
strong communities.
d) Statutory
Responsibilities
n/a
e) Consistency
with Policies and Plans
n/a
f) Participation
by Māori
n/a
g) Community
Views and Preferences
The Trust would look
unfavourably on no increase. It is likely the overall terms of insurance
would have to be varied, possibly increasing the risk exposure to the Trust and
Council in the event that the Trust could not fund any excess, however this has
not been able to be verified at the time of writing.
It is unclear whether support
or not of the facility by Council would be viewed favourably or unfavourably by
the general public.
h) Advantages
and Disadvantages
The obvious advantage to this
option is that no additional rates increase is required. The clear
disadvantage is that the Trust is unable to fully fund its operational costs
and longer term will not have renewal funds available.
Recommended Option
This report does not
recommend an option, with the topic being a matter for Council to determine.
NEXT STEPS
In the event that Council approve the additional funding, a
Variation to the Service Agreement will be formalised, providing a way forward
for the Trust.
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RECOMMENDATION for consideration
That having considered all
matters raised in the report:
a) That
Council provide additional funding to the Central Hawke's Bay District
Community Trust of $14,500 ongoing, above and beyond the current
Service Agreement value, noting an additional rating impact of $8,910 in the
2019/20 year; or
b) That
Council provide additional funding to the Central Hawke's Bay District
Community Trust of only $5,590 ongoing, above and beyond the current
Service Agreement value; or
c) That
Council declines the Central Hawke's Bay District Community Trusts request
for additional funding.
d) That
Council requires a variation to the Service Agreement with the Central
Hawke's Bay District Community Trust, with payment of the additional
funding being conditional upon the Trust providing quarterly reporting
information to Council to meet Long Term Plan performance measures and for
the Trust Chairman to attend a quarterly liaison meeting with Senior Council
staff. (DELETE OR AMEND IF NO FUNDING PROVIDED)
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