Agenda of Finance and Infrastructure Committee Meeting

MINUTES OF Central HAwkes Bay District Council
Finance and Infrastructure Committee Meeting
HELD AT THE Council Chamber, 28-32 Ruataniwha Street, Waipawa
ON Thursday, 22 April 2021 AT 9.00am

PRESENT: Mayor Alex Walker

Cr Tim Aitken

Deputy Mayor Kelly Annand

Cr Gerard Minehan

Cr Brent Muggeridge (Chairperson)

Cr Jerry Greer

Cr Kate Taylor

Cr Exham Wichman

Cr Pip Burne

Dr Roger Maaka

IN ATTENDANCE: Monique Davidson (Chief Executive)

Brent Chamberlain (Chief Financial Officer)

Doug Tate (Group Manager, Customer and Community Partnerships)

Joshua Lloyd (Group Manager, Community Infrastructure and Development)

Nicola Bousfield (Group Manager, People and Business Enablement)

Darren de Klerk (Director Projects & Programmes)

Shawn McKinley (Land Transport Manager)

Caitlyn Dine (Governance and Support Officer)

1 Apologies

Nil

2 Declarations of Conflicts of Interest

Nil

3 Standing Orders

Committee Resolution

Moved: Cr Gerard Minehan

Seconded: Cr Exham Wichman

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.

Carried

4 Confirmation of Minutes

Committee Resolution

Moved: Cr Gerard Minehan

Seconded: Cr Kate Taylor

That the minutes of the Finance and Infrastructure Committee Meeting held on 25 February 2021 as circulated, be confirmed as true and correct.

Carried

5 Report Section

6.1 Resolution Monitoring Report

PURPOSE

The purpose of this report is to present to the Committee the Finance and Infrastructure Resolution Monitoring Report. This report seeks to ensure the Committee has visibility over work that is progressing, following resolutions from Council.

Committee Resolution

Moved: Cr Jerry Greer

Seconded: Cr Tim Aitken

That, having considered all matters raised in the report, the report be noted.

Carried

Mrs Davidson presented this report.

6.2 Finance and Infrastructure Committee Monitoring Report

PURPOSE

The purpose of this report is to present to the Finance and Infrastructure Committee an update on key priorities.

Committee Resolution

Moved: Cr Gerard Minehan

Seconded: Cr Kate Taylor

That, having considered all matters raised in the report, the report be noted.

Carried

Mrs Davidson presented this report.

6.3 Roading Control Authority Performance Report

PURPOSE

The purpose of this report is to provide the Committee with the results of the 2019 – 2020 Road Controlling Authority (RCA) report created by the Road Efficiency Group (REG) prepared on behalf of LGNZ and NZTA

Committee Resolution

Moved: Mayor Alex Walker

Seconded: Cr Tim Aitken

That, having considered all matters raised in the report, the report be noted.

Carried

Mr McKinley and Mr Lloyd presented this report.

6.4 Review of the Adverse Events and Catastrophic Events Funds

PURPOSE

The matter for consideration by the Council is to review the Adverse Events and Catastrophic Events Funds.

Committee Resolution

Moved: Cr Kate Taylor

Seconded: Mayor Alex Walker

That having considered all matters raised in the report:

a) That Finance and Infrastructure Committee receives the report entitled “Review of the Adverse Events and Catastrophic Events Funds”.

b) That the Committee agree to amend the policy by adjusting the size of the funds for inflation, making the adverse events fund $600,000, and the catastrophic events fund $2,400,000.

c) The Committee agrees to transfer $500,000 from the catastrophic events fund to the adverse events fund.

d) That the Committee apply the NZTA refund of $279,973 to the adverse events fund.

Carried

Mr Chamberlain presented this report.

Shawn McKinley left the meeting 9.42am

6.5 Key Project Status Report - Porangahau to Wimbledon Roads PGF Programme

PURPOSE

To add a level of oversight on this significant programme for CHBDC, this report aims to inform and keep council and the community updated on the progress of this important externally funded programme of works.

Committee Resolution

Moved: Cr Exham Wichman

Seconded: Cr Kate Taylor

That, having considered all matters raised in the report, the report be noted.

Carried

Mr de Klerk presented this report.

6.6 Key Project Status Report - 3 Waters Tranche One Stimulus

PURPOSE

Committee Resolution

Moved: Mayor Alex Walker

Seconded: Deputy Mayor Kelly Annand

That, having considered all matters raised in the report, the report be noted.

Carried

Mr de Klerk presented this report.

6.7 Elected Members Expenses for January 2020 to February 2021

PURPOSE

The purpose of this report is to update the Committee on the Elected Members’ Expenses for the thirteen months covering January 2020 to February 2021.

Committee Resolution

Moved: Cr Tim Aitken

Seconded: Deputy Mayor Kelly Annand

1. That, having considered all matters raised in the report, the Elected Members Expenses for January 2020 to February 2021 report be noted.

Carried

Mr Chamberlain presented this report.

At 10:08 am, Deputy Mayor Kelly Annand left the meeting.

At 10:08 am, Mayor Alex Walker left the meeting.

At 10:08 am, Mrs Davidson left the meeting.

6.8 Whenua Māori Rating Amendment Bill

PURPOSE

The purpose of this report is to keep Councillors abreast of the Whenua Māori Rating Amendment Bill that is passing through Central Government at present and its implications on Central Hawkes Bay District Council and in Long Term Plan Budgets.

Committee Resolution

Moved: Cr Exham Wichman

Seconded: Cr Kate Taylor

That, having considered all matters raised in the report, the report be noted.

Carried

Mr Chamberlain presented this report.

6.9 Nga Ara Tipuna ki Tamatea - Project Update

PURPOSE

The purpose of this report is to provide an update to the Committee on Provincial Growth Fund partnership project with Te Taiwhenua o Tamatea – Nga Ara Tipuna ki Tamatea.

Committee Resolution

Moved: Cr Gerard Minehan

Seconded: Cr Kate Taylor

That the update report on the Project Nga Ara Tipuna Ki Tamatea be received by the Committee

Carried

Mr Tate presented this report.

6.10 Financial Reporting for the eight months to February 2021

PURPOSE

The purpose of this report is to provide the Committee with a summary of Council's financial performance and highlight the key financials for the first eight months of 2020/21 financial year.

Committee Resolution

Moved: Cr Pip Burne

Seconded: Cr Gerard Minehan

That, having considered all matters raised in the report, the report on Council's financial performance for the first eight months of the 2020/21 financial year be noted.

Carried

Mr Chamberlain presented this report.

At 10:38 am the meeting adjourned for a break and the Prime Minister visit.

At 12:56 am the meeting resumed into public excluded business.

Councillor Jerry Greer apology not present for Public Excluded Business.

RESOLUTION TO EXCLUDE THE PUBLIC

Committee Resolution

Moved: Cr Jerry Greer

Seconded: Cr Tim Aitken

That the public be excluded from the following parts of the proceedings of this meeting.

The general subject matter 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 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 for the passing of this resolution

7.1 - Resolution Monitoring Report

s7(2)(a) - the withholding of the information is necessary to protect the privacy of natural persons, including that of deceased natural persons

s7(2)(b)(i) - the withholding of the information is necessary to protect information where the making available of the information would disclose a trade secret

s7(2)(h) - the withholding of the information is necessary to enable Council to carry out, without prejudice or disadvantage, commercial activities

s48(1)(a)(i) - the public conduct of the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding would exist under section 6 or section 7

7.2 - Water Rates Remission due to water leak

s7(2)(b)(ii) - the withholding of the information is necessary to protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information

Carried

6 Date of Next Meeting

Recommendation

THAT the next meeting of the Central Hawke's Bay District Council be held on 12 August 2021.

7 Time of Closure

The Meeting closed at 1:49 pm.

The minutes of this meeting were confirmed at the Finance and Infrastructure Committee Meeting held on 12 August 2021.

...................................................

CHAIRPERSON

Finance and Infrastructure Committee Meeting Agenda

12 August 2021

6.6 Waipukurau Second Water Supply/ Waipawa Link - Go/ No Go Report

File Number: COU1-1410

Author: Darren de Klerk, 3 Waters Programme Manager

Authoriser: Monique Davidson, Chief Executive

Attachments: 1. Waipukurau Second Supply - Project Update for Finance and Infrastructure Committee Rev 2 ⇩

2. 202100729 C1051 2nd Water Supply Budget v10 July ⇩

3. 20210728 2nd Supply Procurement Strategy V3 ⇩

PURPOSE

The matter for consideration by the Council is to the continued development of the design and procurement for the Waipukurau Second Water Supply.

RECOMMENDATION for consideration

That having considered all matters raised in the report:

a) That council endorse and approve proceeding with Option 2 (Plan C) to continue with components of construction and design.

b) That council approves redistributing $1.1m of DIA funding to bringing forward the replacement of the Abbottsford rising main – subject to DIA approval.

c) That council supports the reallocation of funding set aside for Abbottsford rising main renewal in Year 2 or 3 of the LTP be redirected back to this project to backfill the removal of DIA funds now.

d) That council acknowledge the current project budget forecasting, but no decision to amend project budget is being considered until the project progresses further.

EXECUTIVE SUMMARY

This paper presents the following key project updates for information.

· Technical Summary from WSP outlining progress on river crossings, due diligence performed, geotechnical study and the production bore identifies ongoing viability in the project at this stage. Geotechnical investigations on the river crossing remains to be resolved through developed discussion with Tangata Whenua.

· Landowner engagement to date identifies general support for the project, discussions at the Borefield lot remain complex however officers believe further engagement will develop this to a natural position. Risks associated with timeframes for consenting on LINZ land fr geotechnical and pipeline work is highlighted as a significant schedule risk and is subject to iwi support.

· Budget summary identifies an expected project value between $13.6M and $14.5M.

· Cashflow highlights potential DIA shortfall if planned capital work is deferred due to project risks resulting in circa $1.1M potential underspend. Alternative options are considered for deployment of this however all require ongoing commitment to develop design for the second supply in parallel. Deferral of design would introduce further capital risk however the schedule impact is likely to be more significant. Overarching Capital Work Procurement Strategy – master strategy for the project procurement has been updated for Council endorsement

· WSP award sum extension from $945K to $1.15M pending outcome of consultant panel establishment late September allowing continuation of design,

· Risk Update from February decision paper.

· Iwi engagement requires time and further engagement prior to supporting the project to progress, Option 2 and Plan C allow for this to occur and ensures no decision are made that could be seen to pre-empt robust and meaningful engagement.

· Significance and Engagement Update;

o Communications performed to date including Hui held 25^th June,

o Direct engagements performed are generally restricted to directly affected landowners, with community comms remaining web based due to sensitivity of private landowners and easement negotiations.

BACKGROUND

This paper provides an update and request for decisions to be made at a significant hold point on the Waipukurau Second Water Supply Project. The aim of this project being to:

• Enhance the resilience of Waipawa and Waipukurau water supply system - More robust infrastructure with lower risk of damage, increased redundancy, and longer response window.

• Ensure the supply can reliably meet demand / level of service targets - Consistent compliance with DWSNZ (Drinking Water Standards NZ), consistent water supply provided at the right quantity and pressure.

• Improve the ability to service sustainable growth, both within the existing township boundary but also in adjacent areas. Sufficient water available for sustainable growth, infrastructure that delivers water to areas of desired growth.

DISCUSSION

TECHNICAL SUMMARY

Refer to the attached WSP memorandum, Waipukurau Second Supply – WSP Project Update for Finance and Infrastructure Committee Rev 2, which is summarised below.

· River crossings: the team obtained specialist contractor input which confirmed that directional drilling the river crossings is within contractor capability, subject to suitable ground conditions. WSP’s desktop geotechnical assessment notes that ground conditions may be suitable, but four boreholes are required at each river crossing to confirm (investigations on hold pending Tangata Whenua engagement). There are risks around the constructability / actual ground conditions, Tangata Whenua position (initial engagement identified concerns), resource consents for investigations and eventual construction and LINZ easements.

· Overarching Procurement Strategy: this has been updated to reflect progress and is attached. There are risks around proceeding with capital work and land compensation necessary to meet DIA funding milestones while risks remain in some areas and further due diligence is required to be further developed extending the information gathered to date alongside design, the key risk again presents on river crossings.

· Due diligence investigations: Geotechnical investigations have been carried out along the route, although again not for the river crossings. No unexpected conditions were encountered in the investigations performed. WSP has confirmed that the reservoir site is generally suitable subject to resolving some issues during design, and that either a steel or concrete reservoir option is viable. There are risks around pipelines across marginally stable land and known faults – which was previously identified. The pipelines will be relatively resilient but may suffer some damage / rupture during significant seismic events requiring repair. The ecological assessment identified some areas of high value but effects are manageable.

· Central reservoir: WSP is master planning reservoir storage across the scheme to confirm recommended storage volumes at Pukeora, Abbotsford Road and the Central Reservoir. The latter is expected to be in the order of 3 ML. Following geotechnical investigations, WSP has provided the attached paper comparing steel and concrete reservoir options. In summary a concrete reservoir offers a longer design life (100 years vs 50 years for steel) and lower operational and maintenance input, but is approximately $0.7 – 1.1 M more expensive to build, and $0.5 – 0.9 M more expensive from a whole of life perspective (WOL costs include operations, maintenance and renewals over a 100 year period at 5% discount rate, including replacement of the steel reservoir in year 50). Given budget pressure, the recommendation if for a steel reservoir, provided council accepts the higher operations and maintenance input and costs ($0.2 M NPV).

· Production bore at Tikokino Road: The production bore has been constructed and test pumped. The bore can comfortably supply 50 L/s (consistent with the other bores) with very little impact on surrounding groundwater levels. Water quality is still being confirmed but there is no reason to expect issues.

LAND

There are 7 directly affected landowners identified including LINZ, with valuations for compensation having been performed across all of these lots. Engagement has been occurring for circa 6 months and generally support for the project is relatively consistent and assessed as either a moderate or low risk.

Budgets have been updated to reflect the recently secured valuations signalling slight improvement however negotiations and letters of compensation need to be presented so caution remains until this process has passed this milestone and feedback from landowners on the compensation level is received.

Key notes from The Property Group are:

· Continued willingness by majority of affected landowners to engage in fair and reasonable negotiations.

· Challenges with negotiations at the bore-field site are reflected in the land compensation.

· Independent valuations received by Council are in general in line with initial desktop assessments used to establish project budget.

· One additional landowner requirement from a further previously unaffected property for pipeline easement. Anticipated advisor costs and compensation have increased accordingly, but within wider Land and Easement budget.

In closing the project team reasonably confident of ability to negotiate agreement within proximity to estimated compensation.

BUDGET

Officers as signalled in the 3^rd June presentation, the project was set a budget of $11.5m in October 2020 when the DIA funding was announced for Tranche One. The design was in very early stages with no due diligence along the route having taken place and minimal iwi or landowner engagement, as the project has progressed over the last 9-10 months, the budget understanding has progressed further.

Attachment #2 sets out the budget range officers are currently expecting the project to be completed for. At present time officers are expecting the project to be circa $13.6m, but with value engineering and other aspects to be developed, expect the budget range may be less as outlined further in the key points below.

The position of the project budget at the 29^th July is as follows:

Item	MCA Oct 2020 - V4	Monitored Forecast July 2021	Funding Position
Capital Forecast	$11.5m	$13.8m (Monitoring Cash-flow)	DIA funding $3.3m deadline 31st March 2022. Committed to date $1.6m ($350k LTP/ $1.35m DIA).
Project Forecast advised for Funding (High end). Project target identified for project team		$14.5m $13.6m	Refer attached - 202100729 C1051 2nd Water Supply Budget v10 July.
Additional funding sources potentially required in the future		Circa $2-3m	Proposed to be drawn from 2018 LTP underspend (carry forwards) or other projects within the programme.

Where is the funding coming from?

As part of the intent to establish a more coordinated strategic program, supported by establishment of a consultancy panel, and in order to ease DIA time pressure these have being considered for clustering with the Second Supply project – this will in turn form a programme of work.

The redistribution plans to bring forward the renewal of the Abbottsford Rising main from Tikokino Road intersection to the Abbottsford road reservoirs (budget circa $1.1m), in future years expected Year 2 or 3, budget that was intended for this mains replacement will be redirected back into the Waipukurau 2^nd supply project.

If additional funds are required to increase the project budget in future years, officers plan to fund this from within existing projects in the programme outlined below, specifically these may be;

- Carry forwards – of the $5.6m set aside in the 2018 Long Term Plan for the project, only $1.1m at present is planned to carry forward, if required additional funding is anticipated to be carried.

- Hunter Park Reservoir – dependant on master planning, early indications are that this reservoir could be decommissioned, and up to $1m of this project may be surplus.

- SH2 Main Replacement – early engineers estimate indicate the project may have a $500 surplus, this could be reallocated.

- Pipeline Renewals – Pipe renewals projects could be reallocated to the project (to date the Tikokino Road) renewals have been funded out of the 2^nd supply rather than renewals budgets as they fall within the demarcated project.

Below is a table outlining the projects in addition to the Second Supply, the following programmes of work are identified within the first 5 years of the 2021 LTP requiring coordination with the second supply project.

Water Supplies	2018-2021	Mar21-Mar22	2021/22	2022/23	2023/24	2024/25	2025/26	TOTAL	Spend to Date
Waipawa/ Waipukurau Water Programme	LTP 2018	DIA 3W T1	YR1	YR2	YR3	YR4	YR5
Waipukurau Second Supply/ Waipawa Link	5.67m	0	2.33m	2.40m	2.65m	0	0	13.05m	359k
Waipukurau Second Supply/ Waipawa Link	0	3.3m	0	0	0	0	0	3.3m	1m
Hunter Park Reservoir Replacement	0	0	0	0	0	819k	844k	1.66m	0
Pukeora Reservoir Replacement	0	0	0	0	4.77m	0	0	4.77m	0
Waipawa Abbottsford Reservoir Replacement	0	0	0	0	0	0	2.81m	2.81m	0
SH2 Borefield - Turb Solution	0	0	500k	0	0	0	0	500k	0
SH2 Borefield Upgrade	1.35m	0	0	0	0	0	0	1.35m	1.4m
Waipawa/ Waipukurau Water Pipeline Projects
SH2 Replacement AC Main Replacement	0	0	0	772k	795k	0	0	1.56m	0
Waipawa firefighting improvements	320k	0	494k	637k	672k	710k	751k	3.26m	200k
Waipukurau firefighting improvements	1.2m	0	604k	546k	682k	957k	644k	3.43m	800k
Water Main renewals (District)	0	0	790k	1.46m	2.0m	2.03m	2.06m	0	0
Nelson / Reservoir Water Main Renewal	0	990k	0	0	0	0	0	0	450k
TOTAL	8.54m	4.29m	4.72m	5.82m	11.5m	4.55m	7.18m	45.6m	4.23m

Value Engineering

Definition – “A systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be manipulated by either improving the function or reducing the cost”

Value engineering (VE) is being driven as a natural part of design refinement. In a complex project such as this, it is often iterative across multiple work steams requiring parallel design and investigation functions in order to achieve a true value proposition without incurring an adverse and unexpected effect. Of note the following VE is ongoing in this project:

Land and Easements – The February 2021 estimate placed this work stream at $910k, we believe this will now be under $850k. This is resultant from the design and coordination tasks performed to date.

Reservoir – Master-planning across all three towns is underway to assess best long term sizing and refine proposed locations for each reservoir, treating the three towns as one combined reticulation system. In addition, understanding geotechnical has assisted in refining product recommendations to a steel tank (subject to council endorsement), with a potential capital improvement of circa $0.7 – $1.1 M. Note further study is required to validate this.

River crossings – we have not been able to progress geotechnical study on the river crossing however this remains a further technical area of focus as access, investigation and design develops.

Water Treatment plant – we have not currently focused on the water treatment plant as a priority however this will become a focus as design develops.

Pipeline – Tendering stage 2 and 3 of Tikokino Rd will provide a clearer market perspective on the pipeline costs which will be compared against tracking budgets for the project.

In parallel with the above Durable Infrastructure agenda is being maintained with Operational oversight and reviews balancing the WSP Consultancy assumptions into design, with practical Operational team’s knowledge and requirements to help balance fit for purpose design with the desire to reduce costs.

Two earlier pipeline projects recently tendered have provided tendered amounts less than engineers estimates.

Cashflow and DIA Funding

In order to achieve DIA timeframes, $3.3M of ‘qualifying’ expenditure is required by 31^st March 2022. The current schedule programmes the following commitments by Council requested as part of the strategic procurement plan in this decision paper:

· Rising Main (Waipawa River to Central Reservoir, excluding river crossing) - Completion of design, Tender and Contract award by November 2021

· Reservoir access road and platform - Completion of design, Tender and Contract award by November 2021

· Reservoir – Further development and refinement of due diligence and design in preparation for Tender .

· Completion of directly affected landowner compensation packages associated with the above.

· Continuation of design for the whole project and coordination with master planning the Water Supply network across the three towns as part of the 3W Program.

The project team continue to monitor this through a monthly cash-flow and have used this to identify some alternative methods of expending the DIA funding should council be concerned at moving into physical capital works prior to validation of the river crossings. These are presented under the Procurement Strategy below however, all require the ongoing commitment to the current design program development allowing risks and value engineering to continue to be refined.

PROJECT PROCUREMENT STRATEGY

The project team have developed an overarching procurement strategy designed to support the project through to completion. This is referenced into the design program and cashflow, and identifies packages and timeframes aligned to the principal deliverable schedule. In short this is designed to establish the critical path to success in achieving best value from capital tenders in the market (see attached - 20210728 2nd Supply Procurement Strategy V3pdf). The attached strategy analyses differing methods of procuring the work considering market conditions, nature of work, risks and contract forms, with a recommendation below.

Officers recommend the use of Option D1 or D2 (splitting road access from the reservoir platform), from the procurement strategy, key packages and dates are presented below. Further detail on the progressive procurement approach is covered under the four wellbeings section in this paper.

Note that expending the DIA Tranche 1 funding by March 2022 currently assumes construction of the rising main and the Central Reservoir earthworks starts by January 2022, meaning tenders need to be called by September / October 2021. Officers recommend the river crossings are largely de-risked before works between the rivers start, to avoid the potential for creating stranded assets in the event that the river crossings are not feasible. Ideally, this would include obtaining support from Tangata Whenua and LINZ, completing the geotechnical investigations, and confirming constructability. Options to expend DiA funding are set out later in this paper.

Following the status quo below is the current approach as per Option 1.

Procurement required to support DIA Tranche 1 funding milestone ($3.3m expended by March 2021):

· Contract 1 Production bore development – Awarded in February 2021, almost complete.

· Contract 3 / 4 Tikokino Road rising main – Stage 1 under construction, Stage 2&3 out to tender

· Contract 5 Rising Main (Waipawa River to Central Reservoir) – Procurement Plan target 23 September Council Meeting. Construction to start targeted early 2022.

· Contract 6 Reservoir earthworks & Access road). Procurement Plan target 23 September Council Meeting. Construction to start targeted early 2022.

· Contract 8 - River crossings (Early Contractor Involvement ‘ECI’- specialist subcontractor) – Held subject to Tangata Whenua. (Note ECI support is an isolated task and early engagement may be requested late 2021 once support for geotechnical investigations is obtained)

Procurement not currently scheduled to support DIA Tranche 1 funding milestone:

· Contract 2 WTP Upgrade and remaining works at the treatment plant site. – 2022/2023

· Contract 7 Falling main pipeline – 2022/2023

· Contract 9 Reservoir construction – 2022/2023 (civils and road access may precede).

Officers request Council approval on the procurement strategy recommendation Option D1 or D2 (splitting road access from the reservoir platform), so design and tender packages can be fully developed with an intent to present separate procurement plans prior to these being lodged into market.

ALTERNATIVE OPTIONS FOR MEETING DIA FUNDING TIMEFRAMES

Plan A	Proceed per project schedule and procurement strategy D1 or D2 described above and submit procurement plans for tender approval September 2021: · Full design · Tenders for rising main and reservoir road · Completion of land compensation Decision to commit to awarding contracts and finalising land compensation contingent upon de- risking river crossings and land.	Risks associated with river crossing and land may not be resolved sufficiently to enable contracts to be awarded with confidence or land compensation to be paid, which would impact DiA milestone (approximately $1.1M underspend). This option does not address this risk as fails to prepare an contingency.
Plan B	Proceed per project schedule including due diligence, strategic land acquisition (Borefield) and procurement plan D1 or D2 described above. Submit procurement plans for tender approval September 2021. Defer decision to proceed into capital work until river Geotech and Tangata Whenua discussions are concluded.	Expends another c. $100k, DIA funding timeframes will not be met until capital works are approved. Impact DIA milestone (approximately $1M underspend).
Plan C	Proceed per project design schedule and procurement strategy including due diligence, strategic land acquisition (Borefield) and procurement strategy plan D1 or D2 described above. Submit procurement plans for tender approval September 2021. Defer decision to proceed into capital work until river Geotech and Tangata Whenua discussions are concluded plus bring forward Due Diligence and early design on the rising main to Abbotsford Rd, including the Reservoir Replacement at Abbotsford Rd, and tender. Note: May assist with procurement of the two reservoirs together (Central & Abbotsford).	Expends another c. $700K-$1M DIA funding timeframes will be met. Procurement plan approval on Abbotsford rising main required in September, design would not be complete for the reservoir however the rising main could be completed and tendered subject to further land acquisition/easements.
Plan D	Continue with Plan C plus Buy Pipe (6-8km), and fund storage	Meets DIA funding, risk and additional cost on storage, and redundancy risk. Not recommended.
Plan E	Continue with Plan B and Plan C plus Redistribute funding to other 3W related projects.	Significant risk to DIA funding as broadens project funding exposure to other project timeline and deliverables.

Plan A – Officers consider the issue with crossing the river to be manageable as there are significant and numerous examples of this method across the country, however expect this to take time to develop with Tangata Whenua so they support this and allow Geotech to be performed which still carries project risk. In addition, the project team have identified a local Iwi owned contractor with a strong industry training agenda capable of performing both ECI and the final drilling tasks. Early discussions are under way and a separate paper will be brought to ELT identifying whether this will provide value.

The risk of proceeding with option A opens the issue of stranded assets. Officers believe Plan C from the above offers a viable and less risky alternative for council allowing design to proceed, while discussions with Tangata Whenua develop.

WSP NEXT STAGE AWARD

The consultant WSP supporting this project has an approved programme of work/services up to the value of $944K until July/ August 2021 which is largely expended. Given project timeframes, difficulties in resourcing within the Consultant market and the level of detailed project knowledge obtained by WSP, it is not advisory for Council to alter consultants at this late stage of the project.

Council supported the establishment of a Consultant Panel with existing service providers under the Consultant Panel procurement plan resolution 29^th July.

In order to progress the design and tender packages identified within the procurement plan, an interim award to extend the current scope to September will be required for:

Phase 2

· Project Coordination/Management Support/MSQA - Rising Main, River Crossings, Civils, Central Reservoir, Trunk Main, and Treatment Plant.

· Ecological Impact Assessment,

· Detailed Design - Mains,

· Detailed Design – Central Reservoir and Civils,

· ECI and Detailed Design – River Crossings

· Hold point at pre-tender stage.

1. HOLD Tender Packages (Four Packages) – Rising Main, River Crossings, Civils, Central Reservoir, Trunk Main, and Treatment Plant.

2. HOLD Detailed Design – Treatment Plant.

Item	Fee Budget	%’age of Project Value
Approved WSP Award to Date	$ 943,111.00
Expected WSP Award to Complete	$ 723,080.00
WSP Total Award	$1,666,191.00	12%
Fee Contingency Allowance	$ 270,000.00

Officers recommend the ongoing award of WSP to allow progressing either Plan A or Plan C from the Alternative DIA timeframes outlined above. WSP award sum extension requested from $945K to $1.15M to take them through to September, at which point further services can be subsumed into consultant panel establishment late September.

RISK ASSESSMENT and mitigation

Updated below risks carried from previous Council papers.

Project Risk	Update and Mitigation	Position
Waipawa borefields ability to produce the additional water required to supply Waipukurau	The production bore comfortably yields 50 L/s. Water quality is being confirmed.	Updated
Consenting and groundwater take limitations	A preliminary water take application has been accepted by HBRC, effectively ring fencing the required allocation of 155 L/s. Consent risks remain as subject to the Borefield affected landowner agreement. Agreement will form part of the compensation negotiation scheduled for 10^th August.	Updated
Land acquisition and landowners willing to work with council for easements and land sites.	Landowner compensation packages have been developed and are generally in line with initial expectations used to establish project budget. Next stage will require circulation of packages to landowners for comment. Refer TPG summary report. The Borefield landowner compensation has been progressed in advanced with the compensation negotiation scheduled for 10^th August.	Updated
Project delays due to currently unknown factors like ground conditions, land access.	Due diligence has been performed with the exception of the river crossing locations. No unexpected issues have been identified at this stage. Investigations on progressing the river crossings remain in discussion with Tangata Whenua, however given the expressed cultural concern on crossing rivers this is currently carried as an unresolved consent and engagement risk.	Updated
The tension between decision making to meet reform and grant funding objectives and making wise investment decisions.	The technical viability of the project is well progressed with clear operational oversight and input with no identified technical or landowner obstacles. The exception being geotechnical conditions in the river. DIA funding is placing demands on Council decision making, issues remain on: 1. Tangata Whenua River crossing support and consenting timeframes. 2. Final landowner agreements carrying reputational risk. 3. Council support for continued Capital expenditure.	Updated
Ground conditions including crossing two rivers.	Investigations have been paused due to Tangata Whenua concerns at crossing the river. A request to allow riverside investigations is in discussion. Progressing this remains at this stage an engagement risk for the project.	Carried
Ground conditions implicating reservoir and geotechnical costs.	Due diligence has been performed, information included as part of this paper. Council decision on officers recommendation is required.	Closed
Additional Risks Identified
Cost inflation and market conditions.	Identification of level of budgeting confidence at 80%. Value Engineering planned alongside design development to seek further opportunities’.	Carried
Procurement and Staging.	CHBDC have developed a procurement strategy for review and approval as part of this paper considering Industry Capacity and Technical requirements. This is also aligned to a master cashflow.	Closed
Schedule - Development of river crossing methodology not timely creating consenting delays on River crossings and IWI or HBRC resistance.	Tangata Whenua engagement has commenced, concerns at crossing the river with pipe have been presented by mana whenua. Further engagements are planned with the formation of a PGG guiding the project, will require information and time to develop.	Updated
Resources (Internal/External)	Procurement strategy identified a logical and achievable delivery program Altering this to one of the alternative Plans identified may incur further slippage in the schedule or affect quality of deliverables.	New

FOUR WELLBEINGS

This procurement activity aims to:

• Enhance and contribute to the resilience of Waipawa and Waipukurau water supply system - More robust infrastructure with lower risk of damage, increased redundancy and longer response window.

The 2021 Long Term Plan focusses on Challenge #2 to renew our infrastructure to be smart and build durable infrastructure and to realise the goals and objectives recently set in our sustainable water management plan to improve our leakage management.

The procurement activities will aim to further stimulate the local economy via a progressive procurement response from tenderers. Guiding this is the CHBDC progressive procurement toolkit, which Officers have reviewed jointly with the project team to identify 2 focus areas from each section to be considered into tenders. These will be further refined subject to the work package into 1nr requirement from each section placed in each tender package, so the progressive approach is fully tailored to best benefit from the work being performed. Further details of this will be presented to council under the specific procurement plan. A 20% loading will apply to this element of the evaluation.

Progressive Procurement Sections

· Section 1 - Social Wellbeing (H&S wellbeing or Engagement and local education initiatives).

· Section 2 - Cultural Wellbeing (Mana Whenua opportunities or Diversity inclusion).

· Section 3 - Economic Wellbeing (Job creation/Training or local supplier partnering).

· Section 4 - Environmental Wellbeing (Local supplier partnering or Kaitiakitanga/ energy efficiency).

Delegations or authority

The finance and infrastructure committee is requested to approve the recommended option to proceed, which is proposed to be co-funded within existing LTP budgets and through additional grant funding with no impact to the ratepayer in addition to current rates. Officers recognise the significance of the project to the communities, and therefore request continued council oversight and approval to proceed.

sIGNIFICANCE AND ENGAGEMENT

In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as of some significance.

Community Communication

The communications and engagement plan has been updated as the project has developed.

Council signalled the upcoming project during Long Term Plan pre-engagement and provided more in-depth consultation on the project during March 2021 LTP consultation.

The CHBDC website provides detailed information on the project and ongoing updates for all interested parties.

Wider and more in-depth community communication will begin once landowners and iwi are sufficiently engaged with the project, and it has reached a greater level of certainty.

Direct Engagements

· Coordination with the intended due diligence, procurement and Land acquisition strategy has been ongoing and sensitive to topics raised by Tangata Whenua, as well as sympathetic to directly affected Landowners. Indirectly affected landowners adjacent to the intended pipeline route have also received initial disturbance notifications for the due diligence work, with a copy of the project memo so they were aware of any contractors working alongside their properties. Wider engagement will proceed once iwi and landowner engagement has progressed and as the project develops in accordance with the developed strategy.

· Affected landowners - Direct engagement with affected Landowners has been ongoing for the last 6 months with general support for the project. Some issues have arisen on landowner compensation expectations at the borefield, and progressing the river crossing easement from Tikokino rd to the Waipawa river. These are progressing however may take further time to develop with the affected parties. Expectations are this process will take a further 3-4 months to conclude and is progressing largely as originally programmed.

· Landowners Compensation – Compensation discussion have been held so landowners understand the process. Valuations have been performed and circulated for review by the directly affected landowners. Expectations are this process will take a further 3-4 months to conclude and is progressing largely as originally programmed.

· Tangata Whenua - Following the information and meeting request circulated in January to local marae’s seeking engagement. Officers held a Hui on the 25^th June with Tangata Whenua from the Mataweka marae, Tapairu marae and Rakautatahi marae, discussing the project generally. Cultural concerns raised relate to the physical crossing of rivers with pipes, and the mixing of river waters (Waipawa & Tukituki), and the longer term control on maintenance (100yr+). Tangata Whenua are not currently in support of crossing the river with a water pipe. Further information is being collated to assist informing marae including examples on this common practice from other projects performed nationally.

OPTIONS Analysis

Option 1 - Approve Project proceeds under Plan A – Overarching Procurement Strategy including associated design and extend WSP award. Continue with full project brief intent.

Option 2 - Approve project proceeds under alternate Plan C – Proceed per project design schedule including due diligence, strategic land acquisition (Borefield) and procurement plan D1 or D2 described above.

Defer decision to proceed into significant further capital work until river Geotech and Tangata Whenua discussions are concluded plus bring forward Due Diligence and early design on the rising main to Abbotsford Rd and tender, including the Reservoir replacement at Abbotsford Rd.

Alternate Plan E – Delay Project, Redistribute funding.

	Option 1 Approve Project proceeds – Procurement Strategy, and WSP award.	Option 2 Alternate Plan C – Proceed with design and partial redistribute of DIA funding ($1.1m).	Option 3 Alternate Plan E – Delay Project and Redistribute further DIA funding.
Financial and Operational Implications	Commitment to Capital works September 2021 Likely expends DIA funding	Part redistribution of DIA funding within the water supply projects. Meets operational and expected to meet DIA funding	Potential Loss of $3.3M DIA funding due to unknown risks on un-developed projects.
Long Term Plan and Annual Plan Implications	Within current budgets 2021 LTP Budget $1.29M 2020-2022 3 Waters Tranche One $3.3M	Within current budgets 2021 LTP Budget $1.29M 2020-2022 3 Waters Tranche One $3.3M	Outside current budgets as risk on expenditure of DIA. 2021 LTP Budget $1.29M 2020-2022 3 Waters Tranche One $3.3M
Promotion or Achievement of Community Outcomes	Improvement in Infrastructure Resilience.	Improvement in Infrastructure Resilience on rising main.	May not improve Infrastructure Resilience
Statutory Requirements	DWSNZ Compliance maintained. Reduction in leakage and potential for pipeline or reservoir contamination.	DWSNZ Compliance maintained. Reduction in leakage and potential for pipeline or reservoir contamination.	DWSNZ Compliance not maintained. No reduction in leakage ongoing potential for pipeline or reservoir contamination.
Consistency with Policies and Plans	Challenge #2 renew infrastructure to be smart, durable infrastructure and improve leakage management.	Challenge #2 renew infrastructure to be smart, durable infrastructure and improve leakage management.	Not consistent with Council Challenges or Thrive objectives.

Recommended Option

This report recommends Option 2 - Alternate Plan C – Proceed with design and partial redistribute funding for addressing the matter.

NEXT STEPS

· Reschedule the project deliverables programme

· Continue to develop investigations and design and bring forward identified projects for coupling to the Second Supply.

· Develop masterplan reservoir size and location into a reticulation concept across all three towns to support Second Supply central reservoir design.

· Continue to develop discussions with Tangata Whenua prior to committing to any decisions

· Investigate ECI support for key future project components

RECOMMENDATION

a) That council endorse and approve proceeding with Option 2 (Plan C) to continue with components of construction and design.

b) That council approves redistributing $1.1m of DIA funding to bringing forward the replacement of the Abbottsford rising main – subject to DIA approval.

d) That council acknowledge the current project budget forecasting, but no decision to amend project budget is being considered until the project progresses further.

Finance and Infrastructure Committee Meeting Agenda

12 August 2021

6.7 Trade Waste Strategy

File Number: COU1-1410

Author: Darren de Klerk, 3 Waters Programme Manager

Authoriser: Monique Davidson, Chief Executive

Attachments: 1. Trade Waste Strategy - July 2021 ⇩

PURPOSE

The matter for consideration by the Council is to adopt a Trade Waste Strategy that outlines the method of implementing the improvements and operationalising the trade waste bylaw.

RECOMMENDATION for consideration

That having considered all matters raised in the report:

a) The Trade Waste Strategy 2021 is adopted and endorsed for implementation to support the recently adopted Trade Waste Bylaw.

EXECUTIVE SUMMARY

Trade waste is defined as any liquid that is or may be discharged from a trade Premises or tanker to the Central Hawkes Bay District Council’s (Council) wastewater system of a non-domestic nature.

Council’s Policy with regard to the management of trade waste is through the Trade Waste Bylaw 2021.

A District wide strategy is needed to address current issues with the trade waste system such as:

· Understanding of how gaps identified in the current trade waste regime will be covered

· The need to introduce capital cost recovery for the long-term wastewater treatment solution

· Making sure the Council is recovering capital, operational and administrative costs via charges that are fair, appropriate and representative

A trade waste strategy is also required to help plan for and subsequently manage operation of future upgrades planned in the Wastewater Strategy.

This strategy will have impact on key stakeholders, such as trade waste dischargers, and Council, but also indirectly ratepayers.

Funding will be on a user-pays basis. This includes contributions from ratepayers and trade waste operators. Multiple options exist for allocation of recovery of expenditure.

The objectives of the Trade Waste Strategy are to:

· Build robust and effective systems and processes to enact the proposed Bylaw

· Give effect to CHBDC’s policy/ies regarding the encouragement/ management of industry in providing employment and other financial benefits within the District

· Provide justification for the need to change the current trade waste regime

· Enable a collaborative approach between key stakeholders/contributors and the Council, working towards Strong Communities

· Provide a meaningful environmental benefit, impacting on the social and cultural wellbeing of the Central Hawke’s Bay Region

· Ensure whole of life effectiveness of the Bylaw for current and future purposes

· Balance trade-offs between community, industry, economic and Council outcomes

· Provide a clear framework around which to build and develop future iterations of the Bylaw, TW consents, stakeholder engagement programmes, cost recovery decisions and internal resourcing for TW management

Major milestones will include:

· Adoption of updated Trade Waste Bylaw – completed May 2021

· Creation of practice notes to support the bylaw – underway, expected completion September 2021

· Adoption of trade waste strategy – this recommendation

· Completion of internal (Council) systems overhaul – underway, expected completion late 2021

· Issuing of new Trade Waste consents - underway, expected completion late 2021

· Use of new system (Infrastructure Data) to manage trade waste consents/ data - underway, expected completion late 2021

BACKGROUND

A review of the trade waste regime in Council was undertaken in 2020, which identified gaps in the control and management of trade waste in the district. Findings from the review identified issues such as:

· Sampling and flow measurement issues

· Non-compliant discharges

· Roles and responsibilities not clear

· Data handling issues

· There could be trade waste discharges happening that the Council are not aware of

A review of the 2018 Trade Waste Bylaw was subsequently undertaken, which was adopted in May 2021. This included rewording the Bylaw to make it more easily understood, inclusion of the ability to issue Warning Notices to support control of trade waste, additional fees and charges categories, and clarity around classifications. The Bylaw has formed the Policy for the Trade Waste Strategy.

DISCUSSION

A Strategy is needed to set the direction to develop a mature Trade Waste regime in Council. This will tie in with the Wastewater Strategy [1], supporting the process of implementing the long-term wastewater treatment solutions, and into the future with the operation of the wastewater treatment plants.

The Wastewater Strategy identifies load management as Project #5 – where Trade Waste is a significant contributor to the load placed on our wastewater plants.

As some aspects of Trade Waste significantly affects our industry, and is an important mechanism for recovering operational and capital cost to support the delivery of our wastewater operational management and future capital upgrades, a strategy is required in order to clarify the approach, and provide a fully endorsed basis for the work involved in developing various aspects of the Trade Waste regime.

The inter-linking parts of the trade waste regime are complex. With the adoption of the reviewed bylaw, this also offers the Council the opportunity to reset the Trade Waste regime by:

· Starting afresh with a reviewed fit for purpose bylaw

· Requiring all traders (known and new) to apply for new consents

· Setting up robust systems and processes from scratch to control and manage trade waste in the District

· Building effective and enduring relationships with trade waste premises to work collaboratively with the Council going forwards, which supports the Thrive value of Strong Communities

· Setting the Council up to work towards the solution for the new centralised waste water treatment plant

These will all provide a sustainable, structured and accountable trade waste regime for the Council to take into the future.

RISK ASSESSMENT and mitigation

Adverse effect on business

· The Strategy outlines mechanisms for management and enforcement of Trade Waste from business premises. Negative effects on business financial position or operation may result. Mitigated by building a collaborative relationship with business owners and managers and not being unduly harsh.

FOUR WELLBEINGS

1. Cultural: Has an indirect effect on wastewater quality entering the receiving environment by managing influent to treatment plant and improving the quality of the awa, while council being kaitiaki for our environment to give effect to Te Mana o Te Wai.

2. Social: Potentially large contribution to and impact on employment in the district. Affects Council reputation and relationship with key community stakeholders including businesses and business owners.

3. Economic: Potential impact to business and Council financial position. Relationships between the Strategy and Trade Waste fees and charges by informing cost to treat waste.

4. Environmental: As part of the big Wastewater story, driven by ensuring more favourable environmental outcomes for receiving environments.

Delegations or authority

This report is within the CHBDC Chief Executive delegated authority but, due to impact on commercial owners, key stakeholders and potential reputational sensitivity, this paper is being presented to the Finance and Infrastructure committee.

sIGNIFICANCE AND ENGAGEMENT

In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as significant due to the financial and operational impact on affected businesses.

OPTIONS Analysis

There are three options regarding the Trade Waste Strategy 2021:

- Option one: Adopt the proposed Strategy as presented.

- Option two: Revise the Strategy and re-present to the Finance and Infrastructure Committee at a later date.

- Option three: Reject the Strategy and continue with the existing approach.

	Option 1 To adopt the Trade Waste Strategy 2021	Option 2 Revise the proposed Trade Waste Strategy 2021 & re-present	Option 2 To reject the Trade Waste Strategy 2021
Financial and Operational Implications	Direction for funding spend	Direction for funding spend Delay on implementation	No direction for funding spend Knock-on effects to WWTP design/build/operation
Long Term Plan and Annual Plan Implications	Consistent with LTP intentions	Consistent with LTP intentions	Not consistent with LTP intentions.
Promotion or Achievement of Community Outcomes	Helps achieve effective management of Trade Waste. Impacts business function.	Delayed achievement of effective trade waste management	Will not achieve further Community Outcomes
Statutory Requirements	Greater likelihood of meeting Regional Council Wastewater discharge consents	Potential to not meet statutory requirements due to delay	Less likelihood of meeting Regional Council Wastewater discharge consents
Consistency with Policies and Plans	Addresses significance and engagement policy.	Delay in addressing significance and engagement policy	No change from existing policies

Recommended Option

This report recommends Option One: Trade Waste Strategy 2021 is adopted and endorsed for implementation to support the recently adopted Trade Waste Bylaw for addressing the matter.

NEXT STEPS

Implement the steps outlined in the strategy including:

- Continued stakeholder engagement

- Continued control and management system development and implementation.

- Report on improvements and progress of plans via key project status report for #thebigwastewaterstory.

RECOMMENDATION

a) The Trade Waste Strategy 2021 is adopted and endorsed for implementation to support the recently adopted Trade Waste Bylaw.

Finance and Infrastructure Committee Meeting Agenda

12 August 2021

6.8 Infiltration and Inflow (I&I) Strategy

File Number: COU1-1410

Author: Darren de Klerk, 3 Waters Programme Manager

Authoriser: Monique Davidson, Chief Executive

Attachments: 1. 20210730 Inflow and Infiltration Management Strategy ⇩

PURPOSE

The matter for consideration by the Council is adoption of the I&I Management Strategy, which includes options for remediation (including funding) of defects contributing to inflow and infiltration to the sewer network from the private side of the boundary.

RECOMMENDATION for consideration

That having considered all matters raised in the report:

a) That the Finance and Infrastructure Committee approves the recommendation to adopt the I&I Management Strategy.

b) That the Finance and Infrastructure Committee support and endorse Option 1 recommendation for private side defects to be repaired by the resident in the first instance.

EXECUTIVE SUMMARY

Inflow and Infiltration to wastewater systems occurs from sources on private property and through defects in the public network. An Inflow and Infiltration Management Strategy has been prepared (attached 20210630 Inflow and Infiltration Management Strategy), which presents the extent of the I&I problem across CHBDC’s towns and develops a strategy to investigate and reduce I&I. The strategy provides an overarching strategic direction for addressing I&I throughout the district, covering the approach, investigations, design basis, management plan and implementation. Work done across the district will be in accordance with the strategy to ensure effective and appropriate use of public funds. The strategy focuses on both the public side and private side of the sewer network.

It has been estimated that up to half of the I&I in a network can come from the private side resulting in significant peaking across the wastewater network. To reduce this issue, Council can require (and recover costs from) remediation of identified defects through the adopted bylaw. Three major options exist on cost recovery: Private funding, Public funding or partial public funding. Private funding also includes recovery of costs via rates or property debts. Various implications exist for each option which are further explained within.

The approach recommended for approval is to work with the property owner to repair the defect. The defect will be highlighted to the property owner via a defect notice and will follow the process laid out in the defect notice practice note.

BACKGROUND

All of CHBDC’s wastewater networks experience high levels of inflow and infiltration (I&I) from stormwater and groundwater. This contributes to increased flows in the network and through the wastewater treatment plants, leading to reduced capacity, increased costs to upgrade, increased operating costs, and breaches of resource consent conditions.

I&I enters the private side of the network through roof downpipes connected directly into the gully trap or lateral pipe; broken or cracked laterals; broken septic tanks connected to the network; and low or broken gully traps in an area where surface water ponds. Typically, half of all removable I&I enters the network through the private side.

Central Hawke’s Bay District Council (CHBDC) are currently in the process of upgrading and reconsenting their Wastewater Treatment Plant (WWTP) discharges for the communities of Waipukurau, Waipawa, Otane, Takapau, Porangahau and Te Paerahi as part of ‘The Big Wastewater Story.’

Wastewater networks in these towns experience high levels of I&I posing a risk to the current wastewater upgrade project in terms of potential for higher capital costs (than necessary) and inefficient operation. Given the scale of investment anticipated it is important the design of the scheme is optimised. This includes optimising the network flows through managing I&I to efficiently size the wastewater treatment facilities and to minimise potential for uncontrolled discharges to the receiving environment.

In addition, the district is projected to experience large population growth, particularly in Waipukurau and Otane. Population growth in these towns will be largely driven by new subdivisions built to council infrastructure standards. These subdivisions should be subject to minimal I&I.

Conditions of CHBDC’s resource consents to discharge wastewater from these plants include to implement I&I Management Plans. This report outlines the background and strategy for investigation and management of I&I. Management plans have previously been produced for each of the towns in 2010. These are to be updated and submitted to the Hawkes Bay Regional Council, concurrently with developing the strategy.

Previous CHBDC I&I Reduction Work

An I&I reduction programme was previously undertaken in the district in 2009 across all towns. Following a typical process of issuing defects notices, re-inspecting properties, and issuing further defects notices, the Council achieved a 98% success rate of removing private side defects.

Illegal Stormwater Connection Legislature

Council’s bylaws may be used to enforce residents to repair defects on private property. The CHBDC Wastewater Bylaw 2021 requires that the customer must take reasonable steps to ensure that:

· There is no direct connection of any stormwater pipe or drain to the wastewater system

· Gully trap surrounds are sealed and set above stormwater ponding or overland flow path levels

· Inspection covers are in place and are sealed

· Private drains are kept and maintained in a state free from cracks and other defects

In the event that defects are identified, the Council may serve a defects notice advising of the defect and steps to be taken to remedy the defect, with the onus on the customer to remedy the defect. If the customer does not repair the defect, the bylaw allows the Council to repair the defect and to recover the cost.

The process for enforcing the bylaw typically follows the following steps:

· Inspect properties – identify defects

· Issue notices to repair to residents with defects by set timeframe

· Re-inspect properties to determine repaired and unrepaired defects

· Send second notice to properties with outstanding defects

· Reinspect properties with second notice

· Issue third notice to properties with outstanding defects, which actions that may include:

o Add defect to LIM

o Council funds repair

o Council funds and recovers cost through rates levy

o Council funds and adds debt to property which is recovered upon sale of property

The typical process is outlined in Figure 1 below, taken from CHBDC’s Wastewater Bylaw Defect Process Notice Practice Note WW01.

2. Figure 1: Typical defects notification process

Communications Strategy

A communications strategy is being developed to engage with the residents. Educating the residents on the importance of I&I reduction, especially in relation to the other Big Wastewater Story projects, will be key to achieving strong compliance by residents and reducing reputational risks to Council.

The process for defects inspections and repairs will need to be conveyed to residents through communications with the public. The outcome of the F&I Committee decision on this paper will also need to be conveyed, in particular who pays, and what processes will be undertaken with non-compliant landowners.

DISCUSSION

The key drivers for reducing I&I in the district are:

● Reduce capital costs for the new WWTPs, including conveyance, main hydraulic elements and storage

● Reduce operating costs from pumping and treating excessive wastewater volumes due to I&I

● Meet resource consent conditions to discharge treated wastewater effluent

● Free up capacity in the networks to support population growth

● Better environmental outcomes due to reduction in uncontrolled overflows and flooding at manholes or on properties, and exfiltration.

While the responsibility to remedy defects on the private side lies with the landowner, the Council will need to undertake on-property inspections to identify defects.

Typically following inspections, the Council will issue defects notices to landowners. A round of follow up inspections will be required to determine whether defects have been repaired. If defects are not repaired the Council will need to decide whether to enforce the repairs under the bylaw and how to recover costs.

Enforcing repairs and recovering costs carries a reputational risk for the Council, particularly as self-funding the repairs is likely to be an issue for some low-income landowners.

If the Council wish to achieve rapid improvements in I&I from the private property side, they may consider partially or fully funding repairs. Otherwise, repairs will take longer and are likely to have an overall lower successful completion rate. It should be noted that the most successful private lateral rehabilitation programmes have involved agency funding.

If funding these repairs, the Council needs to consider potential political implications, such as ratepayer views on council funding private landowner defects and setting a precedent for repairing these private defects. This may be considered unequitable to any ratepayers who finance their own repairs.

Other schemes which may improve participation rates are where the Council engages a contractor to undertake repairs and recovers the cost from the resident. This could be through a rates levy, loan scheme or similar, to spread the cost to the resident. Benefits of the Council engaging the contractor are:

· Same contractor is undertaking each item of works, resulting in economies of scale and better familiarity with work and specifications

· Less effort required on behalf of the resident, therefore more likely to take up the offer

· May spread cost to ratepayer, making it more affordable for low income residents

RISK ASSESSMENT and mitigation

Reputational Damage

· Due to increased cost to select members of the public, perceived inequality may influence poor public opinion of Council. This risk may be heightened if Council funds part or all of the repairs. This risk will be mitigated by public education campaigns emphasising the importance of the repair works.

Adverse effect on community

· Due to cost of repairs, members of the public may be adversely affected. This risk may be lessened if Council finds part or all of the repairs. This risk may be mitigated by allocating remediation costs to rates repayments or property debt and working with public to produce a fair and palatable solution.

Health and Safety

· Health and safety risks may be present on private property during inspections. This risk will be mitigated with properly trained staff with robust health and safety processes behind them.

· A legal opinion as to the legality of Council paying for private side repairs will be required if part or full funding of private repairs are selected.

FOUR WELLBEINGS

Cultural:

This project aims to result in lowering of frequency of wastewater overflows into the Waipawa river, an area where cultural sensitivity was identified through community consultation.

Social:

This project aims to result in lowering of frequency of wastewater overflows into the Waipawa river, an area where social sensitivity was identified through community consultation. Furthermore, wastewater system remediation will result in greater levels of service to urban residents of Central Hawke’s Bay through lessening of frequency and severity of wastewater overflows.

Economic:

This project will have positive economic benefits to the Council by reducing the volume of clean water entering the wastewater network. This reduces operating and capital costs, may allow deferral of capital upgrades and aids in meeting resource consent conditions.

Any procurement activity’s will aim to further stimulate the local economy via a progressive procurement response from tenderers. Guiding this is the CHBDC progressive procurement toolkit, which Officers have reviewed jointly with the project team to identify focus areas from each section to be considered into tenders. A 20% loading will apply to this element of the evaluation.

• Section 1 - Social Wellbeing (H&S wellbeing or Engagement and local education initiatives).

• Section 2 - Cultural Wellbeing (Mana Whenua opportunities or Diversity inclusion).

• Section 3 - Economic Wellbeing (Job creation/Training or local supplier partnering).

• Section 4 - Environmental Wellbeing (Local supplier partnering or Kaitiakitanga/ energy efficiency).

Environmental:

This project aims to result in lowering of frequency of wastewater overflows into the Waipawa river, enhancing the health of the river and all its downstream receiving environments. This project also aims to lessen the frequency and severity of wastewater overflows throughout the network, which can result in a detrimental effect to their receiving environments.

Delegations or authority

The private side remediation component of the project is within the CEs delegations, but due to impact on property owners and potential reputational sensitivity, this paper is being presented to the Finance and Infrastructure committee.

sIGNIFICANCE AND ENGAGEMENT

In accordance with the Council's Significance and Engagement Policy, this matter has been assessed of some significance.

Private homeowners are considered the major grouping affected by this proposal. Public education campaigns and direct engagement with landowners is planned to bring greater clarity and acceptance to affected parties.

This matter will also affect two major council asset groups, treatment plants (current and future) and reticulation systems, both of which will as a result of this project, require less operational expense and less capital expense due to lowering of flows. Incorporating this knowledge into public education campaigns will help mitigate some risks associated with this decision.

OPTIONS Analysis

The funding strategy for private side repairs consist of three options:

1. Fully privately funded (Owner pays full cost)

2. Fully publicly funded (CHBDC pays full cost)

3. Private/public funding split (CHBDC pays partial cost)

The benefits and drawbacks of each option are presented in Table 1:

3. Table 1: Advantages and disadvantages for funding options

	Option	Advantages	Disadvantages	Commentary
1	Owner pays full cost	● Lowest funding commitment from CHBDC	● Lower participation rates ● Longer timeframe for completion ● Low income earners disadvantaged	● Enforcement mechanism for non-compliance following third notice may result in negative publicity ● Loan scheme for low income earners may be more equitable
2	CHBDC pays full cost	● Higher Participation rates ● Shorter timeframe for rehabilitation	● Increased cost ● Precedent of CHBDC paying to repair private infrastructure ● May be perceived as inequitable to residents who have made their own repairs	● Avoids situation where CHBDC enforces residents to make repairs ● Funding may be more effective if spent on the public side of the network
3	CHBDC pays partial cost	● Higher participation rates than 1 ● More affordable than 2 ● Reduces burden to low-income owners	● Lower participation rates than 2 ● Less affordable than 1 ● Precedent of CHBDC paying to repair private infrastructure ● May be perceived as inequitable to residents who have made their own repairs	● Determination of funding split ● Funding may be more effective if spent on the public side of the network

Option 1:

Option 1 has the lowest cost to Council, and the bylaw requires that residents are responsible for their own repairs to illegal stormwater connections. Option 1 would follow the process outlined in Figure 1, and used previously in 2009.

The risk in Option 1 lies with enforcing landowners who do not repair defects following the third notice. Council has the ability in the bylaw to undertake repairs and recover funds. Enforcing this on low-income residents may result in negative publicity and reputational risk to the Council. The intention of how the Council will enforce the bylaw following the third defect notice needs to be communicated to the public at the outset of the project to ensure consistency.

There are various mechanisms for recovering the funds following the third defect notice:

· Council directly invoices landowner

· Council levies cost on to rates invoices. Could allow for staged recovery to reduce the financial burden to landowners.

· Loan scheme for low-income residents to undertake repairs

Details of the recovery of costs following the third notice have not been fully worked through, and it is intended this is the next step in the project should Option 1 be approved.

Option 2:

Option 2 would result in the highest and fastest update of repairs however, it has the highest cost to Council, and may set a precedent of Council paying for repairs to private infrastructure. It also may appear inequitable to residents who have funded their own private drainage repairs prior to the programme of works.

Any public funding of private repairs needs to be weighed up against using that funding for repairs on the public network. Investigations in Otane found significant defects on the public side, particularly at manholes. Therefore, it is considered spending the funding on the public side will be as effective as the private side.

Option 3:

Option 3 reduces the financial burden to low income households, and therefore will result in a higher number of repairs.

Having the Council pay a partial cost introduces another level of complexity. An equitable cost share should be determined between Council and ratepayers. This could be based on a flat amount up to Council’s annual budget for the project based on a first come first serve basis, or cost share with Council to pay for certain types of repairs.

As per Option 2, Council funding needs to be weighed against the effectiveness of spending on the public side.

The 2021 Long Term Plan, identifies $300,000 per year for I&I management as well as $500,000 of water reform funding. This funding finances both public and private side defects, therefore to council-fund private defects reduces the amount available for much-needed I&I repairs to the public system.

Some operational expenditure will be necessary to identify and evaluate remediation effectiveness, the amount of which has not been evaluated exhaustively.

The impact of this decision could affect the sizing of the proposed wastewater treatment plant in Waipawa and associated infrastructure, potentially saving capital and operational costs. The extent of this has not yet been evaluated, though this consideration will lessen somewhat if existing pond infrastructure is used as storm buffer ponds.

The intention is to fund the investigation, management and council owned defects from the LTP funding.

Land Owners

A comprehensive I&I investigation has already been undertaken in Otane, with the town used as a case study to extrapolate the potential costs of private side repairs. Using rates from local plumbers, it was estimated fixing all private property surface defects identified from inspections (i.e. low or broken gully traps and removing downpipes plumbed into the gully trap) would cost between $21,500 and $31,200 in total. This equates to an average of $400 to $650 per property with defects. More significant defects would need to be addressed on a case by case basis i.e. onsite drainage to stormwater.

	Option 1 Fully Privately Funded	Option 2 Partial Public Funding	Option 3 Full Public Funding
Financial and Operational Implications	Lowest cost to Council Likely lowest reduction in I&I and will involve significant monitoring and follow up by Council officers.	Middle range cost to Council Administrative requirements to manage repairs and works with residents	Highest cost to council Administrative requirements to manage repairs and works with residents
Long Term Plan and Annual Plan Implications	Long term plan benefits due to I&I reduction: reduced operating cost and deferred capital works upgrades	Long term plan benefits due to I&I reduction: reduced operating cost and deferred capital works upgrades	Long term plan benefits due to biggest I&I reduction: reduced operating cost and deferred capital works upgrades
Promotion or Achievement of Community Outcomes	More difficult for low-income residents, however most consistent across ratepayers	Introduces complexities as to fairness – who gets funding and how much? - Do people who refuse to pay end up benefitting?	May introduce inequities and set precedent for Council responsibilities for private assets Places less burden on low-income earners
Statutory Requirements	Bylaw puts onus on resident, therefore most consistent with statutory requirements	Bylaw puts onus on resident, therefore inconsistent with statutory requirements.	Bylaw puts onus on resident, therefore inconsistent with statutory requirements
Consistency with Policies and Plans	Consistent with previous I&I reduction programme in 2009 which required landowners to undertake repairs	Inconsistent with previous I&I reduction programme in 2009 which required landowners to undertake repairs	Inconsistent with previous I&I reduction programme in 2009 which required landowners to undertake repairs

Recommended Option

This report recommends Option 1 for addressing the matter. This recommendation is made on the following basis:

· The Wastewater Bylaw clearly states the landowner is responsible for removal of private stormwater drainage into the sewer

· No management of funds, making it simpler for Council to administer

· Does not set precedent of Council funding privately owned assets

· Based on the previous I&I reduction programme in 2009 is likely to still achieve a high degree of success

· Given the likely large number of defects on the public side of the network, this funding will likely be as effective at reducing I&I if spent on the public side of the network

· Funding is likely to be better spent on upgrading or maintaining stormwater infrastructure to maintain long term compliance

· Some consideration may need to be given to residents and towns where CHBDC has constrained or minimal stormwater networks to drain the roof water that is presently being discharged to gully traps – this will be dealt with on a case by case basis.

· A robust communications and engagement plan will be created to support the implementation of the strategy.

NEXT STEPS

· Commence implementation of I&I strategy

· Public education and community engagement undertaken.

· Inspections undertaken and defect notices issued.

RECOMMENDATION

a) That the Finance and Infrastructure Committee approves the recommendation to adopt the I&I Management Strategy.

b) That the Finance and Infrastructure Committee support and endorse Option 1 recommendation for private side defects to be repaired by the resident in the first instance.

Finance and Infrastructure Committee Meeting Agenda

12 August 2021

6.9 Request to bring forward Pourerere Public Toilet Capital Funding

File Number: COU1-1410

Author: Jennifer Leaf, Places & Open Spaces Manager

Authoriser: Monique Davidson, Chief Executive

Attachments: Nil

PURPOSE

The matter for consideration by the Committee is to bring forward capital funds in year 2 of the LTP for the replacement of the Pourerere Beach public toilets to support the funding received through the Ministry of Business Innovation and Employments Tourism Infrastructure Fund.

RECOMMENDATION for consideration

That having considered all matters raised in the report:

a) The capital funding in year 2 of the 2021 - 2031 Long Term Plan for the Pourerere Beach public toilets be brought forward to the current year (year 1) to support funding from Ministry of Business Innovation and Employments Tourism Infrastructure Fund.

EXECUTIVE SUMMARY

Council has identified the need for improved and waterless toilets at Pourerere Beach through its asset management planning and funding through the 2021-32 Long Term Plan.

In year 2 of the LTP $53,202 was approved for renewal and $180,000 for upgrading the Pourerere Beach public toilets. Additional funding was sought through Ministry of Business, Innovation, and Employment’s Tourism Infrastructure Fund (TIF) to help meet the actual cost of project. On 15 July, Council received notification that it has been awarded $209,440 towards this project ($108,800 capital expenses and $28,640 operational expense) against a total project cost of $442,642.

By bringing forward the funds in year 2 of the LTP to year 1, Council will be able to complete the project to its full extent with the assistance of the TIF funding.

BACKGROUND

The current Pourerere Beach public toilets and change rooms make up the stark white building of cinder block construction built in 1975 that is a third of the way down Pourerere Beach Road on Recreation Reserve land. They are functional when water is available, but are otherwise aging, not accessible, or built to current standards. The existing septic system while functional, is aged and does not meet current standards, more generally acting as a holding tank.

During the development of the LTP budget renewal and upgrade funds were requested. Ongoing issues over the summer however, clearly indicated that a larger and a dry vault system was required. Council submitted a request to fund the project in round 5 of the Tourism Infrastructure fund this past autumn. On 15 July notification was received that Council was successful in being awarded funding for the project.

Water is the key issue and the toilet block is fed from a spring on private land approximately 1.5-2 kilometres west across hills and Gibraltar Road. There is an agreement with the landowner that Council is able to use half of the water. This is often exceeded and the landowner either turns off the water or water is in greater demand at the toilet block than is able to refill the tank in a timely manner. The water is unpotable, yet despite signage and other measures, the water at times is still used as a potable supply by campers on site.

When there is no water at the toilet block toilets continue to be used and are quickly blocked up, usually during the height of the summer camping season. This creates an unhygienic situation and reflects poorly on the district. It also takes more time and cost to clean.

Bringing in water and servicing are an additional cost. During the peak camping/visitor season it is typical for Council to fill the water tank at least three/four times. Council has also provided 8-10 additional port-a-loos during this time that require regular cleaning and a tank service to remove waste. It is expected that 2-4 port-a-loos would still be required during the peak season, but there is still considerable savings.

The new toilets would provide 6 pans and be accessible. Their design also makes them easier to clean. Their appearance would be a better fit with the natural environment and have a similar façade to those installed at Te Paerahi. The holding tank is 3000 litres. Solar power would provide for lighting and ventilation.

DISCUSSION

The report is brought to Council to enable this project by bringing funds from year 2 of the LTP forward to this current year 1 and thereby being able to access the $209,440 from the Tourism Infrastructure Fund.

The TIF funding is contingent on Council’s funds and would not otherwise be available. Without TIF funding the project could not be completed in year 2 with the funds currently approved through the LTP process. The intent through the LTP was to seek external funding, this funding has simply been realised earlier than projected.

The total project cost is $442,642. The breakdown of the project costs and funding is shown in table that follows:

The financial impact of bringing the loan funding forward from year 2 to year 1 is approximately $28,300 (the principal loan payment, loan interest and the depreciation non-FIS costs forward a year earlier).

RISK ASSESSMENT and mitigation

The risk is a reputational one if we do not bring forward the fund to access the funds awarded to us through the Tourism Infrastructure fund, with Council confirming its need for the funds and the services.

FOUR WELLBEINGS

The four wellbeings are all supported through this project that provides a much needed amenity at the Pourerere Beach. Visiting or camping at the beach is a social and cultural experience that many New Zealanders take as a right. Economically, it supports our tourism infrastructure for both domestic and international visitors. Environmentally, we know what occurs when such amenities are not available, not to mention the water savings using this dry vault system.

Delegations or authority

A Council decision is required for changes to the LTP approved funding.

sIGNIFICANCE AND ENGAGEMENT

In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as of some significance.

OPTIONS Analysis

There are primarily two options: for Council to consider:

Option 1: Bring LTP year 2 capital funding forward to year 1 for the Pourerere Beach Toilets

As mentioned previously there are already capital funds approved in the LTP for upgrading the Pourerere Beach toilets: $180,000 in improvements and $53,202 in renewals (both in year 2). These are loan funded monies and to bring them forward is an increase in the debt costs by xxxxx.

Being that Pourerere is our closest beach for day visitors as well as camping spot, the new toilets would improve the water issue that we currently deal with on site and improve the overall aesthetic with new fit for purpose accessible toilets.

The opportunity to achieve this project with $209,440 of Tourism Infrastructure Funding

Option 2: Do not bring forward capital funding for the Pourerere Beach Toilets

This option means that we would have only have $233,202 in year 2 which would be insufficient for a 6 pan dry-vault unit, demolition and removal of existing toilet block, and improvements to footpaths and car-parking. The project would not go ahead unless existing funds were sought.

	Option 1 Bring LTP year 2 capital funding forward to year 1 for the Pourerere Beach Toilets	Option 2 Do not bring forward capital funding for the Pourerere Beach Toilets
Financial and Operational Implications	Ability to receive TIF funds from central government to support Council funds and deliver upgraded toilets. Will be operational savings. Loan funding related costs will be an additional $28,300.	Insufficient funds in year 2 to upgrade the Pourerere Beach public toilets.
Long Term Plan and Annual Plan Implications	There will be implications for the current financial year. These are discussed in the report, with the loan funding impact resulting sooner.	Unlikely for monies to be spent if there is insufficient funds to complete project properly. Is likely Council will not be able to fully fund toilet block.
Promotion or Achievement of Community Outcomes	This option supports a number of community outcomes outlined in project thrive such as a proud district and providing durable infrastructure, but most notably the toilet block is environmentally responsible.	It is not clear how this option would achieve community outcomes.
Statutory Requirements	Upgraded toilets will meet new building code and be accessible	Insufficient funds to be fit for purpose
Consistency with Policies and Plans	Reflects needs in asset management of public toilet activity	Reflects needs in asset management of public toilet activity and is consistent with the funding in the LTP

Recommended Option

This report recommends option 1, Bring LTP year 2 capital funding forward to year 1 for the Pourerere Beach Toilets for addressing the matter.

NEXT STEPS

If approved, ensure that capital funds in line items in GL codes: 5362C002 ‘Pourerere Beach Toilet’ Upgrade and 5362C501 ‘Replace Pourerere Toilets’ be moved in budget to year 1 from year 2.

RECOMMENDATION

That having considered all matters raised in the report:

Finance and Infrastructure Committee Meeting Agenda

12 August 2021

6.10 Draft Financial Report and Carry Forwards for the 2020/2021 Financial Year

File Number: COU1-1410

Author: Brent Chamberlain, Chief Financial Officer

Authoriser: Monique Davidson, Chief Executive

Attachments: 1. Draft Activity Funding Impact Statements for 30 June 2021 ⇩

PURPOSE

The matter for consideration by the Council is to give Councillors an early indication of the draft financial results for 2020/2021, and for Council to approve the proposed allocations to carry forwards, special funds, and between activities for the 2020/2021 Financial Year.

RECOMMENDATION for consideration

That having considered all matters raised in the report:

a) That Council receives the report entitled Draft Financial Report and Carry Forwards for the 2020/2021 Financial Year.

b) Council approve the proposed allocations to carry forwards and special funds for the 2020/2021 Financial Year.

c) Council approve that the 2020/2021 activity surpluses in the general rate funded activities be used to fund the deficits in the general rate funded activities as proposed.

d) Council approves funding the $428k shortfall in drinking water renewal budget via loan funding.

EXECUTIVE SUMMARY

This report brings to Council the draft unaudited Financial Statements for the Council for the year ended 30 June 2021.

Contained in the report is a list of movements in Special Funds/Carry Forwards that are proposed to be funded from this year’s activities, and a proposal that where a general rate funded activity has a surplus, that this surplus be applied to those general rate rated activities that have deficits.

BACKGROUND

Throughout the year Council has received quarterly management reports on Council Finances. This report brings to Council an early draft unaudited financial results for the year ended 30 June 2021, and the funding impact statement for both the whole of Council and each group of activities undertaken by Council.

DISCUSSION

Set out below is a summary of the draft unaudited financial results for the 2020/21 financial year:

Statement of Comprehensive Revenue and Expense for the year ended 30 June 2021

It is important to note that this is based on traditional accounting presentation requirements and is more akin to how a “For Profit” entity would report. It is quite different to the Funding Impact Statement that the Local Government Act requires which looks at all sources of income/funds received and then how it has been applied/spent.

This years financial results have significantly been impacted by unbudgeted revenue and costs that relate to Central Government initiatives such as the Provincial Growth Fund, 3 Waters Reform, and economic stimulus packages post Covid.

Councils revenue is nearly $20m ahead of budget, but almost all of this is in subsidises and grants received from external parties, and hasn’t come from the rate payer.

This includes subsidises and grants include such projects as:

· 3 Waters Reform (water infrastructure upgrades) $4.1m

· Route 52 Roading Upgrade (PGF) $6.2m

· Nga Ara Tipuna – Cultural Tourism (MBIE and others) $2.4m

· Economic Recovery/Job Creation (MBIE) $3.6m

· Responsible Camping (MBIE) $0.1m

In additional to the earnt subsidies and grants listed above, Council has received a further $3.4m of unearnt subsidies and grants as at 30 June 2021 and these have been treated a liability (revenue in advance) rather than revenue. For example to date Council has received $5.5m of 3 waters reform money, but it had only spent $4.1m of it by balance date and the remaining $1.4m has been treated as revenue in advance.

The business as usual revenue lines have tracked closely to budget.

Fees and Charges are slightly ahead of budget particularly in the consenting area and reflects the hot property market, and the higher than normal sub-division and building activity experienced in our community.

When you turn your attention to expenses, you will note that these too are ahead of budget, particularly in the operational costs area.

Again much of this relates back to the additional external funding being spent. $1m of the 3 waters reform money has been used to fund 3 waters operational costs (the balance in asset creation), the $2.4m Nga Ara Tipuna Project has also been treated as operational (Council is essentially project managing the project on behalf of an independent trust), and $3.6m Economic Recovery and $0.1m Responsible Camping are also both operational.

As stated earlier, these financial results are early draft unaudited financial statements. The auditors don’t arrive on site until the 23^rd August 2021 and as a result the results are subject to refinements and audit adjustments.

For example you’ll note that there is currently no revaluation movements recorded as officers are waiting on external contractors to pair review the revaluation of Councils roading assets. Stantec have provided the first draft of their report which shows a increase of Councils roading assets of $8.9m (although most of this is asset additions during the year).

Also, Council (in conjunction with DOC), sold 5 former reserves in early 2021. To date Council has incurred significant sales costs and these have been funded through special funds account “S001 Capital Projects Fund” which is why this account is currently overdrawn by $217k. The solicitors are in the process of finalising the sales proceeds and costs incurred by both parties, but it is expected that Council will receive approximately $305k once the dust settles. This sale is yet to be booked as we are waiting on the final details.

External Debt/ Investments/ Asset Creation

During 2020/21 Council’s external debt has remainder unchanged at $20m. This was partly because we drew some debt early (before it needed) late last year and held this money as an investment till it was required, and during the year Council has received 3 Waters reform money which has allowed some capital works to be externally funded.

Council’s weighted average cost of funds is 2.28% (2020: 2.28%), and the maturities are as the table below:

Since balance date, Council has drawn a further $2m for a period of 1 year at an interest rate of 1.25% pa.

During 2020/21 Council has spent $25.9m on acquiring new assets or renewing existing assets.

While Council has external debt of $20m, it also has internal debt (i.e. borrowings from other Council reserves). Total debt at 30 June was $25.5m which means in addition to the $20m external debt, Council has used $5.5m of Councils internal funds to fund its infrastructure assets. The pie chart below shows how this debt is allocated to the various Council activities.

Special Funds

Special Funds and Trust Accounts are funded held for a specific purpose and are allocated interest annually from Councils investments/internal borrowings. Special Funds total just over $7m.

Each year Council allocates its investment revenue to these special funds, and for 2020/21 Council is proposing to allocate $206k of interest to Councils special funds which will represent an average 2.9% pa return.

Obviously, during 2020/21 Council has seen investment returns fall, so this year Officers propose a tiered interest payment to its special funds.

Tier One – these special funds are held for infrastructure replacements and require returns sufficient to offset inflation, and to provide an alternative to 100% rate funding of infrastructure. Officers propose to pay interest of 3.25% pa to this group.

Tier Two – These are Councils Scholarship Funds where Council gives away the interest to the scholarship recipients. Officers propose to pay interest of 3.00% pa to this group to maintain the capital base of these scholarship funds.

Tier Three – Mayoral Fund – this fund requires sufficient interest to top the fund back up to $5k each year, rather than being based on a pure return basis.

Tier Four – Everything else. Here officers propose to provide a return of 1.5% pa which is in line with term deposit rates being offered by the high street banks.

Below is a table listing the various special funds, the current balance being held, and the proposed interest return:

The movements in the special funds during the year include the funding of, or the additional provision for:

Water Security Funding - $69k spent

Nga Ara Tipuna Contribution - $210k spent

Te Paerahi Public Toilet - $23k spent

By Election Costs - $5k spent

Vehicle Replacements – $57k provision

Landfill Aftercare - $51k part repay leachate loan

Mayoral Fund - $3k spent

Adverse/Catastrophic Events – $389k provision ex Reorganisation of balances, and addition of NZTA refund and surplus budget

Stormwater Renewal - $221k Tutanekai Helicoil Project Spend

Wastewater Upgrade - $200k Wetlands Project Spend

Drinking Water - $9k Spend budget shortfall

Bridge Replacement - $53k provision

Planting - $20k provision ex bequest

Waste Minimisation - $45k spend on Glass Bunker and education

Retirement Housing - $23k budget shortfall

Carry Forwards

Carry Forwards is the practice where Councils take projects that where budgeted to occur in a financial year, and therefore rated for but remain unspent at year end. These projects are expected to be completed in the following financial year so Council “Carries Forward” the rates funding to the following year to allow that project to be undertaken.

For the 2020/2021 below is a list of the Carry Forwards (note these are cumulative and include any carry forwards from previous years that remain unspent):

You’ll note that in the community facilities space there is significant renewals being carried forward. That is because they tend to rate for capital works over several years, and then undertake a significant piece of work once the funds are available.

Group Surplus and Deficits

Once you that taken into account the operating result of each Council Activity, and the movements in Special Funds and Carry Forwards above, Council is still left with a surplus/(deficit) in each activity.

For those activities are aren’t funded by targeted rates we are able to apply the surpluses against the deficits and this looks like the following table:

For those activities that are funded through targeted rates (3 Waters and Roading) any surpluses and deficits are ring fenced to those activities. Any surpluses are carried forward to future years, and any deficits are funded from prior year surpluses from that activity.

This has been achieved in all cases except Drinking Water. Below is the Funding Impact Statement (FIS) for Drinking Water and as you can see from the highlighted line Council has spent $637k more on renewals than budgeted, or rated for. While through the use of carry forwards and reserves we have managed to fund $209k of this, the remaining $428k could not be covered and has had to be borrowed.

In the Long Term Plan for years 1-5 Council has programmed a large renewal program that will be loan funded, however due to failures throughout the year of Councils reticulation network some of this work has had to be undertaken this year and officers propose to reduce renewal work in year 1 of the Long Term Plan by the $428k to offset this early loan drawdown. Essentially Council has (due to asset failures) had to get ahead of the curve and do some of the work planned for year 1 of the Long Term Plan, before the start of the new financial year. This situation was signalled earlier in the year when Council considered the end of year forecast.

Having done all done all this Council has a balanced Funding Impact Statement (as per the table below):

RISK ASSESSMENT and mitigation

The proposed actions ensure that the targeted rates remain ring fenced for the use of 3 waters and roading, and that the general rate funds are only applied to those activities that are to be funded by general rates under Council’s Revenue and Financing Policy.

FOUR WELLBEINGS

This report delivers an update on Council’s finances, and shows that Council is acting in a transparent, fiscally prudent manner, with the best interests of Central Hawkes Bay District in mind.

Delegations or authority

While much of the movements in special funds and carry forwards reflect previous Council resolutions, how to deal with the residual activity surplus (deficits) needs to be decided.

sIGNIFICANCE AND ENGAGEMENT

In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as of some importance.

OPTIONS Analysis

Council as the ability to approve the proposed allocations to carry forwards and special funds, and the drinking water renewal loan of $428k for the 2020/2021 Financial Year and that the 2020/2021 activity surpluses in the general rate funded activities be used to fund the deficits in the general rate funded activities as proposed.

Or Council can chose not approve the proposed allocations, and provide officers with guidance how they wish to allocate the surplus/ (deficits) between special funds/carry forwards/and activities.

Recommended Option

This report recommends option number one, approving the proposed allocations for addressing the matter.

NEXT STEPS

Officers will action whatever decision is made, and proceed to have the Auditor General audit these financial statements.

RECOMMENDATION

a) That Council receives the report entitled Draft Financial Report and Carry Forwards for the 2020/2021 Financial Year.

b) Council approve the proposed allocations to carry forwards and special funds for the 2020/2021 Financial Year.

c) Council approve that the 2020/2021 activity surpluses in the general rate funded activities be used to fund the deficits in the general rate funded activities as proposed.

d) Council approves funding the $428k shortfall in drinking water renewal budget via loan funding.

Finance and Infrastructure Committee Meeting Agenda

12 August 2021

6.12 Review of Land Transport Policies

File Number: COU1-1410

Author: Josh Lloyd, Group Manager - Community Infrastructure and Development

Authoriser: Monique Davidson, Chief Executive

Attachments: 1. Land Transport Policies ⇩

PURPOSE

The matter for consideration by the Committee is the adoption of revised Land Transport Policies

RECOMMENDATION for consideration

That having considered all matters raised in the report:

a) That the Committee adopt the reviewed Land Transport Policies, noting those components of the policy now to be captured as operational policies.

BACKGROUND

Council currently utilises a number of separate, specific and sometimes disparate Policies to provide policy positions for a range of Land Transport topics. The intent of the specific policies is similar in that they seek to provide consistent and clear decision making guidance to decision makers and to those impacted by decisions (stakeholder’s / road users). The separation of the Policies in their current form means that there is room for ambiguity and confusion between policies as they may relate to one another and also that they are practically more difficult to use.

Councils Governance Policy Framework (the Framework) prescribes Councils approach holistically to setting Policies creating and implementing Council policies.

DISCUSSION

Opportunity exists to bundle existing Land Transport Policies into a single policy with specific sections covering each key topic area that would previously have been a unique Policy.

There is not a drive for significant policy position change in any of the Policy areas covered by this report, instead the changes presented in this report by bundling the policies are about usability and clarity.

12 unique Land Transport Policies have been bundled and updated into a single Policy for consideration and adoption today. The Policies that have been bundled to become ‘topics’ in a single Policy are:

· Dust Suppression

· New Footpath Construction

· Allocation of Property Numbers

· Formation, Subdivision and Maintenance of No-Exit Roads

· Enclosure of Road Reserve (License to Occupy)

· Roadside Stabilisation and Tree Management

· Stock Underpass

· Use of Road Reserve for Permanent Commercial Display

· Roadside Weed Control

· Naming of Streets and Roads

· Ad-hoc Road Signs

· Vehicle Crossings

Since the listed policies above were adopted or last reviewed, Council has clarified its approach to policy development and implementation through the creation of a clear Governance Policy Framework (the Framework). The Framework sets out different levels of Policy with a key differentiation between Governance and Organisational/Operational Policies as illustrated in the diagram taken from the Framework below:

Governance Policies are further broken down into two sub-categories being ‘strategic’ and ‘directional’ as illustrated in the diagram below:

Reviewing the Land Transport Policies now has provided the opportunity to clarify their respective position within the Framework. This report seeks direction from Committee about the placing of each policy within the Framework with the important note that this will affect how policies are adopted and brought back for engagement with Council / Committee.

The attached policies differentiate between Governance Directional Policies and Operational Policies. Should Council adopt the recommended resolution, those policies identified as “operational” will no longer require a Council decision for changing. The policies are included in one document though to benefit the customer / stakeholder.

RISK ASSESSMENT and mitigation

There are minimal risks considered in adopting the revised Policies as no substantive or policy position changes have been made. The revised Policies are bundled for ease of use and to ensure alignment/consistency between them.

FOUR WELLBEINGS

The Policies at their core are designed to deliver on aspects of Councils Land Transport Strategic Framework ensuring a safe, resilient and usable transport network for the residents and road-users of Central Hawke’s Bay.

The Policies support economic wellbeing by ensuring prudent, consistent and transparent decisions making in particular as it relates to the investment of public funds to build, manage and maintain road assets.

The Policies support environmental wellbeing with specific policy position for the mitigation of environmental impacts including dust.

The policies support social wellbeing through the physical connections promoted and maintained through the provision of resilient and reliable transport infrastructure. The policies also ensure that our communities can see how and why Council is making decisions.

The Naming of Streets and Roads policy/topic contains reference to the use of Te Reo Maori place names and references issues of cultural sensitivity as key decision-making criteria for the changing of a road/street name.

Delegations or authority

The Committee has delegated authority to make changes to the referenced policies. Should Council adopt the recommended resolution, those policies identified as “operational” will no longer require a Council decision for changing.

sIGNIFICANCE AND ENGAGEMENT

In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as being of some importance.

OPTIONS Analysis

Two options are presented to Committee for consideration:

1. Adopt the revised / bundled Land Transport Policies

Do not adopt the revised / bundled Land Transport Policies and provide officers with direction on next steps.

	Option 1 Adopt the revised / bundled Land Transport Policies	Option 2 Do not adopt the revised / bundled Land Transport Policies and provide officers with direction on next steps.
Financial and Operational Implications	There are no financial implications. Operational improvements will be made by bundling the policies and making minor clarifications to improve usability and consistency.	This to be discussed based on feedback/direction from Committee members if Policies are not adopted.
Long Term Plan and Annual Plan Implications	No implications	No implications
Promotion or Achievement of Community Outcomes	It is considered that the revised and bundled Policies have a higher chance of achieving and promoting community outcomes through improved usability.	This to be discussed based on feedback/direction from Committee members if Policies are not adopted.
Statutory Requirements	A number of the Policies contain statutory references and have requirements to meet statutory needs. The revised policies in draft for adoption are in line with these requirements.	This to be discussed based on feedback/direction from Committee members if Policies are not adopted.
Consistency with Policies and Plans	No implications	No implications

Recommended Option

This report recommends option 1 ‘Adopt the revised / bundled Land Transport Policies’ for addressing the matter.

NEXT STEPS

If the Policies are adopted as they are presented, then Officers will replace existing policies available online with the updated policies. Future policy reviews will only include those policies identified as “governance policies”, as all operational policies will be reviewed at an operational level.

RECOMMENDATION

That having considered all matters raised in the report:

a) That the Committee adopt the reviewed Land Transport Policies, noting those components of the policy now to be captured as operational policies.

[1] District Wastewater Treatment and Discharge Management Strategy, September 2020 Report A:O.3

Key Priority	Responsible Officer	Progress Update
Lead and monitor the Wastewater Treatment Plan projects for across Central Hawke’s Bay.	Darren de Klerk	On Track - A Specific Key Project Status Report is included in this agenda.
Monitor the implementation of #thebigwaterstory	Darren de Klerk	On Track - A Specific Key Project Status Report is included in this agenda.
Complete and lead the Rates Review	Brent Chamberlain	On Track - The committee have completed this work, following the adoption of the Revenue and Financing Policy in October 2020. The decisions from the Rates Review were implemented from 1 July 2021. During the Long Term Plan 2021 – 2031 Council passed a further resolution seeking a further rates review. Timing for this review is complex given timings associated with the revaluation process currently underway. A scope for this project will be brought to the next Finance and Infrastructure Committee meeting for consideration.
Monitor the implementation and progress of Provincial Growth Fund projects.	Darren de Klerk	On Track - A Specific Key Project Status Report on this project is included in the agenda.
Lead the review of the Financial Strategy and associated policies that input into the Long Term Plan 2021-2031.	Brent Chamberlain	Completed – Council have now adopted the Draft Financial Strategy for community consultation as part of the Draft Long Term Plan 2021 – 2031.
Review the current Treasury Policy – Investment, Debt and Liability Management policies.	Brent Chamberlain	On Track – Council have now adopted a new Treasury Policy as part of the Long Term Plan 2021 – 2031. The investment component of this policy will be reviewed in late 2021.
Monitor the implementation of the non-rateable income strategic framework.	Monique Davidson	On Track - Considerable effort continues to be given to the attraction of non-rateable income. The COVID-19 context has provided considerable opportunity for Council in the acceleration of capital investment to act as an economic stimulus. Council are actively working with the government on seeking external funding to deliver on Council and community priorities. At the time of writing this report, key achievements that align with this framework include funding for Mayors Taskforce for Jobs pilot and beyond, redeployment capital packages, water reform, Tourism Infrastructure Fund and PGF projects. Government have recently announced the opening of the Tourism Infrastructure Fund, and Officers are turning attention to preparing applications for this fund. Further work will continue over the coming months following the adoption of the Long Term Plan 2021 – 2031, to assess key policies that form part of the non-rateable income strategic framework.
Develop a Land Transport Strategic Framework and ensure governance input into the three-year business plan before NZTA submission.	Josh Lloyd	Completed – See attached update on implementation of the Land Transport Strategic Framework

	Mileage Expenses	Conferences, Meetings & Training	Phone and Ipads	Total
Mayor Alex Walker	Work Car Supplied	5,032.10	143.69	5,175.79
Cr Kelly Annand	164.82	2,161.02	60.00	2,385.84
Cr Tim Aitken	0.00	795.80	60.00	855.80
Cr Jerry Geer	0.00	781.81	63.60	845.41
Cr Gerald Minehan	0.00	795.80	60.00	855.80
Cr Brent Muggeridge	0.00	795.80	60.00	855.80
Cr Kate Taylor	636.32	2,478.41	63.60	3,178.33
Cr Exham Wichman	0.00	2,161.02	63.60	2,224.62
Cr Pip Burne	0.00	2,191.45	75.00	2,266.45
Roger Maaka	0.00	795.80	60.00	855.80
Total	801.14	17,989.01	709.49	19,499.64

		Total
Opening Balance Brought Forward		2,420.00
Less Expenditure
CHB Country Music Club Rates Payment	1,053.51
Closing Balance		1,366.49

	Total
Onga Onga Historical – Victorian Fair	300.00
Spirit of Adventure	500.00
Cranford Hospice	250.00
Spirit of Adventure	500.00
Workplace Wellbeing	200.00
Terrace End School – Lego Club	100.00
Total	1,850.00