Notice of Meeting: I hereby give notice that an ordinary Meeting of the Strategy and Policy Committee will be held on:  Date:  29 March 2017Time:  10:00am Meeting Room:  Council Chamber Venue:  Waikato Regional Council, 401 Grey Street, Hamilton East  

VRJ PayneChief Executive Officer

  

Strategy and Policy CommitteeAgenda

Chairman  Cr B Simcock Deputy Chairman  Cr T Mahuta      MembersWaikato Regional Council  Cr J Hayman   Cr J Hennebry   Cr K Hodge   Cr S Husband  Cr S Kneebone   Cr F Lichtwark   Cr A Livingston   Cr T Mahuta  Cr D Minogue   Cr R Rimmington   Cr B Simcock   Cr H Vercoe   Cr K White      Quorum  Eight (8) members

Tracey Deane Democracy Advisor 

Date 22 March 2017 

Telephone: 0800 800 401 Tracey.Deane@waikatoregion.govt.nzWebsite: www.waikatoregion.govt.nz 

   

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OBJECTIVE:  To  set  council’s  strategic  direction  and  policy  responses,  signal  regional  issues,  respond  to  external agency  statutory  planning  processes  via  advocacy  submissions,  advise  Council  in  respect  of  thought leadership  across  matters  of  regional  significance,  establish  strategic  priorities  for  organisational direction and policy setting.   SCOPE OF ACTIVITY:  1. This committee will advise council on matters relating to their regional governance role, which 

will include delegation to: (a) Develop council’s strategic direction and recommend policy responses. (b) Develop council’s position on regionally significant issues. (c) Provide  guidance on  regional  governance matters,  and  receive  regular  information  from 

regional governance projects,  such as  the work  that  is being undertaken by  the Waikato Mayoral Forum work streams, which  includes  the development of  the Regional Economic Development Strategy and the Waikato Spatial Plan. 

(d) Prepare submissions  in relation to central government, neighbouring regional council and territorial authority policy documents, strategies and proposals to support alignment with council’s strategic direction and policies. 

 2. To maintain oversight of all council’s policy and plans to ensure alignment with strategy.  3. To  receive  information  that monitors  the  effectiveness of Council’s  strategic  influence  in  the 

region and to review and recommend revision of Council’s position accordingly.  

4. To approve changes to corporate support and financial policies apart from matters that affect or alter Council’s Annual or Long Term Plan. 

 5. To approve Strategic Finance Policy. 

 6. To  approve  Catchment  Management  and  Regional  Pest  Management  Policies,  Plans  and 

Strategies.   CROSS BOUNDARY COLLABORATION:  1. To  foster cross boundary  collaboration on  issues where an  inter‐regional  response will create 

policy or advocacy efficiencies.  2. To be kept  informed of emerging cross boundary  issues and  to provide guidance on Council’s 

position.  3. To provide guidance on cross boundary collaboration, and also receive updates and feedback. 

 4. To provide strategic oversight for programmes related to Upper North Island direction, Auckland 

policy  integration,  regional  development,  and  improving  connectedness  and  regional community. 

    

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POWER TO ACT:   1. To receive reports and presentations on the matters set out in the Scope of Activity.  2. To approve submissions on statutory documents, consistent with council policy. 

 3. To approve investment and liability management policies. 

 4. To  approve  Council’s  Infrastructure  Strategy,  Scheme  Land  Licence  Policy,  Marine  Oil  Spill 

Contingency Plan, and the Regional Pest Management Plan.  

 POWER TO RECOMMEND TO COUNCIL:   1. To provide recommendations for council action in relation to its strategic direction. 

 2. To provide central government advocacy on matters of regional importance. 

 3. To  develop  and  council’s  governance  position  on  matters  of  regional  significance  including 

matters pertaining to cross boundary collaboration.   SUBCOMMITTEES REPORTING TO STRATEGY AND POLICY COMMITTEE:  1. Submissions Subcommittee 

 2. Regional Public Transport Plan Development Subcommittee 

    

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 Item  Table of Contents  Page

1 Apologies  

2 Confirmation of Agenda  

3 Disclosures of Interest  

4 Verbal Update from Waikato Regional Council Communications  

5 Regional Development Update File: 20 00 02 Docs#10052519  This report provides an update of regional development work over the past six months of interest to the Waikato. 

 

6‐11

6 Update on Growth Management and Related ActivitiesFile: 22 05 55 Docs#9875006  This  report highlights current growth management activities. Relationships  to and alignment with other key national and regional policies are also noted.  

12‐19

7 Waikato Aquaculture – overview and future developments File: 22 03 76 Docs#9784450  This  report provides and  overview of  the  current  state of aquaculture  in  the Waikato  region  and  highlights  future  developments  in  fish  and  shellfish farming. 

 

20‐27

8 Waikato Regional Freshwater Strategy UpdateFile: 20 00 08 Docs#9850753  This  report  provides  an  update  on  the  progress  of  the  Regional  Freshwater Strategy  and  an  opportunity  for  the  Committee  to  enquire  of  staff  and contribute. 

 

28‐30

9 Clean Water 2040 document File: 22 04 83 Docs#10104890  This report advises of the ‘Clean Water 90% of rivers and  lakes swimmable by 2040:  Consultation  Document’,  recently  co‐released  by  the Ministry  for  the Environment and the Ministry for Primary Industries. 

 

31‐36

10 Consistency  assessment  of  the  Waikato  Regional  Pest  Management  Plan against the National Policy Direction for Pest Management File: 95 07 01 Docs#10098087  This  report  provides  a  summary  of  the  inconsistencies  identified  in  an assessment of the current Waikato Regional Pest Management Plan 2014‐2034 (RPMP) against the new National Policy Direction  for Pest Management 2015 (NPD). 

 

37‐54

  

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11 Hauraki Gulf Marine Spatial Plan (Sea Change) ‐ Update File: 20 01 08 Docs#10106162  This  report  updates  on  progress  of  the  Hauraki  Gulf  Marine  Spatial  Plan (HGMSP  –  Sea  Change  Tai  Timu  Tai  Pari).    Direction  and  feedback  is  being sought. 

 

55‐57

12 Thames Coromandel District Council Local Bill File: 20 01 08 Docs#10092097  This  report  advises  of  the  proposed  Local  Bill  being  sought  by  Thames Coromandel District Council (TCDC).  

58‐65

13 Update on Hamilton to Auckland Passenger Rail Assessment File: 21 02 11 Docs#10117653  This  report  updates  on work  being  progressed  on  the Hamilton  to Auckland passenger  rail  service  by  the  Project  Steering  Group  of  the  North Waikato Integrated Growth Management Programme Business Case.  

66‐70

14 2018‐2028 Long Term Plan (LTP) DevelopmentFile: 01 12 18A Docs#10029003   This  report will confirm  the Committee’s  role  for oversight of  the 2018‐2018 Long Term Plan process, outline the development programme  for the next six months, and introduce the first pieces of work for the Committee to consider.  

71‐74

15 2018‐2028 Long Term Plan Groups of Activities Structure File: 01 12 18A Docs#10051200  This report seeks for the Committee to confirm the group of activities structure for the 2018‐2028 Long Term Plan.  

75‐83

16 2018‐2028 Long Term Plan Level of Service Review File: 01 12 18A Docs#10052522  This report seeks to confirm the approach for reviewing Levels of Service (LOS) for the 2018‐2028 Long Term Plan.  

84‐87

17 Review of Revenue and Financing PolicyFile: 01 12 18F Docs#10068000, 3900786  This report overviews the process to review the Revenue and Financing Policy as  part  of  the  development  of  the  2018‐2028  Long  Term  Plan.    Feedback  is sought from the Committee on any additional areas of review that need to be incorporated into the work programme.  

88‐131

18 Statement of Investment Policy and Objectives (SIPO) Review Approach and Timelines File: 08 11 55M Docs#10092656  This  report outlines  the proposed process  for  the  review of  the  Statement of Investment Policy and Objectives (SIPO).  

132‐166

Doc #10127789 

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Report to Strategy and Policy Committee March 2017 – To be received

File No: 20 00 02

Date: 13 March 2017

To: Chief Executive Officer

From: Director Science and Strategy

Subject: Regional development update

Section: A (Committee has delegated authority to make decision) Purpose To provide the Strategy and Policy Committee with an update of regional development work over the past six months of interest to the Waikato.

Recommendation: That the report “Regional development update” (Doc # 10052519 dated 13 March 2017) be received for information.

Waikato Regional Council Chair in River Science Applicants have been shortlisted for the Chair in River Science at Te Waiora, Freshwater Management Institute, with interviews to be held in early April. As funder of the chair position, staff will be on the selection panel, along with representatives from NIWA and the University of Waikato. WRC’s Regional Development Fund The council established a Regional Development Fund in 2015 so that it could choose to make a financial contribution towards projects of significant scale and impact for regional development. Whilst council is still committed to building up funds for a period of time, there continues to be interest from around the region for in-kind support from the council for various projects. Over the past six months, enquiries have been made for WRC support from:

i. Regional cycle trail development collective, working to form a regional network of connected cycle trails, with the aim of attracting visitors, growing local economic development opportunities, and leveraging national funding

ii. Grassroots’ ‘Grow Your Own’ rural school visits, run by Auckland University’s Faculty of Medical and Health Sciences, which aims to get more rural and provincial students into medical, pharmacy, nursing and optometry degrees on the basis that these students are more likely to return to rural areas to practice

iii. NZ School of Commercial Diver Training based at Lake Puketirini in Huntly iv. Colville Social Services Collective to upgrade the Colville Village water supply v. the National Equestrian Centre to redevelop facilities to cater for increased demand at

Taupo. Bay of Plenty Regional Council is also seeking advice from staff as that council looks to reframe its infrastructure fund.

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Upper North Island Strategic Alliance (UNISA) The UNISA Mayors and Chair meet for the first time in the triennium on 2 December 2016. The following items were discussed: Upper North Island (UNI) Story, UNISA Value Proposition, UNISA agreement, and UNISA Action Plan. The UNI Story, developed by staff and to be distributed widely, tells us:

UNI is diverse. There is considerable variation in population and culture throughout UNI, with Auckland dominating in size with its population of 1,500,000.

UNI is critical to a successful New Zealand. Despite being only 20% of New Zealand’s land area, UNI contains over half of New Zealand’s GDP and filled jobs, significant natural and infrastructure assets, and acts as New Zealand’s main gateway to the world.

UNI is growing and changing. Population increase expected to be significantly faster than the rest of New Zealand. This will drive investment, job creation and economic opportunity, and also present challenges to our communities, infrastructure and natural environment.

UNI is connected. The region and cities depend on each other in a number of ways and share common opportunities and constraints.

The next UNISA meeting is 31 March 2017, with three meetings scheduled in 2017. Mayors and Chairs will likely sign the UNISA agreement, and the UNI Story will be released for sector consumption. Initial feedback from the Mayors and Chairs indicated an interest in looking at ports at a UNI scale over the next year. Work is underway to prepare a recommended approach for this project. Waikato Plan The Waikato Plan is designed to be a catalyst for a step change in regional social and economic performance, enabling councils, business, community funders and others to speak with one voice on key issues in discussions with the likes of central Government. It was approved for public consultation by a joint committee involving local government and stakeholder representatives on 27 February 2017.

Some of the key actions outlined in the draft plan include collaboration on a regional development strategy, identifying regional priorities for community infrastructure, integration of the Waikato and Auckland transport networks and ongoing implementation of the Waikato Means Business economic development strategy. The plan’s public submissions period will be from 10 March to 10 April. The submission form, the draft Waikato Plan summary and the draft full Waikato Plan will be available at www.waikatoplan.co.nz from 10 March. Once submissions close, public hearings are due later in April and early May, with implementation of the final plan due to begin in August. Waikato Means Business The Waikato Means Business (WMB) programme has been in full operation for two years since the completion of the strategy. The programme is supported by an annual Implementation Plan, governed by a Steering Group made up of representatives and experts from business, local government and Māori business. In February 2017, the Waikato Mayoral Forum selected Bob Simcock and Gray Baldwin (Councillor, South Waikato District Council) as the two local government representatives on the steering group. They join Dallas Fisher (Chair), Tom Findlay, Mark Flowers, Mike Pohio, Don Scarlet, Donna Flavell, Traci Houpapa and Parekawhia McLean. Waikato Regional Council provides an annual grant of $250,000 to support the projects initiated by WMB. This is further supported by funding of $100,000 per annum to help fund the Programme Manager role. A key objective of the programme is to use this funding as a seed-resource and leverage it by accessing resources from others to help advance the WMB programme and projects.

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In both years since implementation of the strategy began, the level of funding support leveraged from other sources has exceeded that provided by WRC. In addition, significant in-kind contributions continue to be made by WRC and a number of other organisations. The table below describes the funding which has been received and/or committed for the year until 30 June 2017.

Item Funder Project Amount

1 WRC Implementation Project funding $250,000 2 WRC Programme Manager funding $100,000 Total Core Funding $350,000

3 WRC Contribution to NZIER labour market analysis $10,000 4 MBIE Innovation Ecosystem Review $50,000 5 WEL Energy Trust

(16/17) ED Capacity & Capacity Project, Waikato Story management, WMB programme management

$160,000

6 MBIE Waikato Migrant Support and Labour Market Group facilitator

$ 100,000 approx.

7 MBIE Contribution to NZIER labour market analysis $10,000 Total Additional Funding $330,000

Total $680,000

Table 1: WMB Funding 2016/17 More information on Waikato Means Business and specific implementation projects can be found at www.waikatomeansbusiness.nz. Engagement with Central Government The University of Waikato and the Waikato DHB lodged a business case and proposal for a Waikato Graduate Medical School with the government in October 2016. No decision has been made by the government. The Waikato region has now been formally included in the government’s regional growth programme. The Minister for Economic Development has appointed a senior government official, Mike James (Ministry of Transport), to act as a regional liaison for economic development matters in the Waikato. Mike is being supported by officials from the Ministry of Business, Innovation and Employment’s Auckland Policy office. Mike attends WMB Steering Group meetings as a non-voting participant. A set of joint projects is currently being developed between WMB, the Waikato Plan and central government for implementation in 2017/18. Local Government Commission proposal for Wairarapa The Local Government Commission announced a proposal on 15 March for a combined district council for the Wairarapa to be called the Wairarapa District Council. This would replace the existing Masterton District Council, the Carterton District Council, and the South Wairarapa District Council.

Key features of the proposal are that: The Wairarapa District Council would be a territorial authority The Wairarapa would remain part of the Wellington region. Greater Wellington Regional

Council (GWRC) would continue to be the regional council for the Wairarapa. GWRC would continue to carry out its current roles and responsibilities

There would be a new Wairarapa Committee of the GWRC to strengthen Wairarapa input into regional council issues affecting the district

The Wairarapa District Council would have a mayor and 12 councillors. The mayor would be elected by voters from across the combined district. The councillors would be elected by voters of each of seven wards

There would be five community boards centred on each Wairarapa town. There would be a total of 21 elected community board members

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There would also be a Māori Standing Committee and a Rural Standing Committee. Major sectors’ outlook The Ministry for Primary Industries released figures in December 2016 that suggest “the outlook across the primary sector is stable for the current year, as the dairy industry begins to rebound and growth continues for the horticulture and forestry sectors”. The report assess the current and expected performance of New Zealand’s primary industries highlighting: dairy export revenue is forecasted to rise 3% in 2017, but is expected to increase 24% to $17

billion in 2018 as milk production is forecast to return to previous levels after 2 years of decline demand from China and an increase in wood available for harvest are expected to help

forestry exports reach $5.3 billion in 2017, and exceed $6.0 billion by 2020. Figures from the Ministry of Business, Innovation and Employment show a tourism spend in the Waikato of $2,402m for the year ending January 31, with a reasonably equal contribution by international and domestic tourists across New Zealand - an increase of 8% over the previous year. 2016 Quality of life survey – Waikato results 84% of Waikato residents rate their quality of life positively, with 29% saying that it has improved over the past year. These are two of the findings of the 2016 Quality of Life survey. The Waikato Regional Council, jointly with Hamilton City Council, participated in the 2016 Quality of Life survey. The perceptions of more than 7,000 New Zealanders including 1,280 Waikato regional residents were recorded in relation to overall quality of life, health and wellbeing, crime and safety, community, culture and social networks, Council decision-making processes, environment (built and natural), public transport, economic wellbeing and housing. Key survey findings are attached (Appendix 1). The Waikato Quality of Life survey results will be used to update and support the Waikato Progress Indicators (WPI) for selected indicators. This update will be presented to the May 2017 Strategy and Policy Committee meeting. The results also inform our work ensuring people and communities are well connected to each other and can meet their social and economic aspirations. Assessment of significance Having had regard to the decision making provisions in the Local Government Act 2002 and Council’s Policy on Significance, a decision in accordance with the recommendations is not considered to have a high degree of significance. Conclusion The Waikato is taking strategic action to progress regional development through council activity, progressing the Waikato Plan, Waikato Means Business and engagement with central government. Katie Mayes Manager Strategy Science and Strategy

Tracey May Director Science and Strategy

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Appendix 1: 2016 Quality of Life survey – Summary of Waikato results

The 2016 Quality of Life survey measures perceptions of

New Zealanders aged 18 and over across a range of factors

that impact on quality of life. These include health and

wellbeing, crime and safety, community, culture and social

networks, council decision-making processes, environment,

public transport, economic wellbeing, and housing. A

random selection of residents from each Council was made

from the electoral roll, and respondents completed the

survey online or via a hardcopy questionnaire. A total of

7155 New Zealanders completed the survey – 1280

residents from the Waikato (537 from Hamilton and 743

other regional residents), giving a high level of confidence in

the results.

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Report to Strategy and Policy Committee March 2017 – To be received

File No: 22 05 55

Date: 14 March 2017

To: Chief Executive Officer

From: Director Science and Strategy

Subject: Update on Growth Management and Related Activities

Section: A (Committee has delegated authority to make decision)

Purpose To provide the Strategy and Policy committee with a report highlighting current growth management activities. Relationships to and alignment with other key national and regional policies are also noted.

Recommendation: 1. That the report “Update on Growth Management and Related Activities” (Doc # 9875006 dated 14

March 2017) be received for information.

Background There are a number of growth management activities and policy changes occurring nationally, regionally and inter-regionally. Many of these projects or activities have linkages to other key regional strategic platforms such as the Waikato Plan. National Growth Management Activity 1. The National Policy Statement on Urban Development Capacity The National Policy Statement on Urban Development Capacity (NPS-UDC) came into effect on 3 November 2016 and provides national direction to local government on making provision for urban development (see Attachment 1 for a summary table of NPS-UDC provisions and timeframes for implementation). The NPS-UDC applies across the region, but imposes particular requirements on Hamilton City Council, Waikato District Council, Waipa District Council and Waikato Regional Council for the Hamilton Urban Area as an area of high growth1. Meeting the requirements of the NPS is being coordinated through the Future Proof partnership.

1 The Hamilton Urban Area includes Hamilton, and part of the Waikato and Waikato districts as classified by Statistics NZ.

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Deliverables required by the NPS-UDC include (in sequence): Establishing a monitoring regime –a proposed monitoring framework is in development Undertaking housing and business land assessments (including assessing development

feasibility) –this work is about to be begin and will be completed by the end of June Setting development capacity targets for housing in statutory (Resource Management

Act) planning documents – i.e. the Waikato Regional Policy Statement (RPS), Hamilton District Plan, Waikato District Plan and Waipa District Plan

Developing (and consulting on) a Future Development Strategy to show how the identified targets will be met into the long term.

The requirements of the NPS-UDC will have direct impacts on the Future Proof Strategy Update, the Regional Policy Statement and District Plans. The main impact on Waikato Regional Council will be translating the NPS policy requirements into appropriate provisions in the Waikato Regional Policy Statement by 31 December 2018. The Draft 2018 Government Policy Statement on Land Transport (GPS) includes provision for meeting the land transport needs of high growth urban areas as a strategic priority and this will direct development of policy in the 2018 Waikato Regional Land Transport Plan. Regional and sub-regional growth management related activities 2. Waikato Plan The Waikato Plan is intended to provide a strategic and cross sector united view on regional priorities and focus areas for the Waikato region. While its purpose is not focused on growth management, four of the five priorities contained in the Plan are linked including planning for population change, connecting our communities through targeted investment, addressing water allocation and quality, and advancing regional economic development. The latter priority identified in the Waikato Plan has a strong link to Waikato Means Business, the Waikato region’s economic development strategy. Further updates to Waikato Means Business will be informed by priorities identified the Waikato Plan. The Waikato Plan will also align with and complement the Future Proof Strategy update. The Waikato Plan is due to go out for public consultation between March and April 2017. Again, further updates to the Future Proof Strategy will take direction from the Waikato Plan. 3. Waikato Means Business The Waikato Means Business Strategy identified priorities include building, attracting and retaining skills and talent, growing global industries maintaining and building upon our locational advantage. These priorities will help enable and facilitate growth. Waikato Means Business notes that the region works with and complements activity in the upper North Island. Freight between Waikato, Auckland and the Bay of Plenty represents over half of New Zealand’s freight movements. The region has excellent transport links to Auckland International Airport and the Ports of Auckland and Tauranga for imports and exports. These transport corridors can enable and attract growth and development. Waikato Means Business implementation includes an action to model the costs and benefits of different land use scenarios along the greater Cambridge to Auckland corridor. This modelling is to help determine how well each scenario will assist in achieving the strategy’s identified economic goals e.g. one per cent productivity growth per annum. The Future Proof Strategy update will include a related piece of work to meet the requirements of the NPS for Urban Development Capacity –a land development capacity and feasibility assessment across

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the sub-region including the greater Cambridge to Auckland corridor. Given this, Future Proof has agreed to work alongside Waikato Means Business in undertaking this work. 4. Future Proof Strategy update The 2009 Future Proof Strategy (Strategy) provides a framework for growth management within the Hamilton City, Waipa and Waikato District sub- region. Strategy partners include Hamilton City Council, Waikato District Council, Waipa District Council, Waikato Regional Council and iwi. The partners work alongside the NZ Transport Agency to ensure coordinated and aligned growth management planning and implementation. Key components of the operative Strategy have been embedded into key operative regional statutory plans including the Regional Policy Statement and Regional Land Transport Plan. The 2009 Strategy is currently being updated to incorporate the northern Waikato area, to update the evidence base which underpins the Strategy and to take account of emerging national and other regional policy developments including the Waikato Plan and Waikato Means Business. The Strategy update will occur in two phases to take account of the NPS-UDC as shown in Figure 1. Figure 1: Future Proof Strategy Update Phasing

Phase one will update population, household projections and settlement pattern, and be completed by December 2017. Public consultation on this phase will occur in May 2017. Workshops with each Future Proof partner are planned. A workshop for the Strategy and Policy Committee is scheduled following the 29 March committee meeting. Phase two will incorporate NPS-UDC requirements, and findings from related evidence. It is likely to be completed by late 2018. The updated Strategy will focus on the two main urban nodes for the sub-region –Hamilton in the south and Auckland to the north and connections to Auckland and the Bay of Plenty. The updated

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Strategy will also align with the Waikato Plan which identifies the Waikato region’s locational advantage as a strategic opportunity. 5. The North Waikato Integrated Growth Management Programme Business Case The North Waikato Integrated Growth Management Programme Business Case (NW PBC) will identify a land use/settlement pattern for North Waikato, and the associated infrastructure and services (three waters, transport, social and community) that are required to support anticipated growth over the next 30 years. These business case components align well with challenges and opportunities identified in the Waikato Plan. These include how best to manage population growth in the Auckland to Cambridge area, and how to maximise outcomes for the region through aligned planning. The NW PBC partners include Waikato District Council, Waikato Regional Council, the NZ Transport Agency, Auckland Council, Auckland Transport and Hamilton City Council. The scope of work includes cross-boundary public transport connections (including passenger rail links between Auckland and the North Waikato area). The NW PBC preferred programme will completed by the end of June to inform the development of the 2018 Regional Land Transport Plan, the 2018-21 Long Term Plan process and the Future Proof Strategy Update. It is intended to complement Auckland Council’s Transport for Future Urban Growth integrated planning project which has identified a third of all future growth in Auckland is to occur in the south. The Future Urban Land Supply Strategy (Auckland Council, 2015) was updated recently by Auckland Council to take account of the outcomes of the Auckland Transport Alignment Project, Transport for Future Urban Growth project and the decisions version of the Proposed Auckland Unitary Plan (adopted in August 2016). The draft updated strategy has confirmed that one third of new greenfield development (approximately 7,200 households –up from 5,600 – 6,600 as identified in the 2015 Strategy) will occur in south Auckland, with the remainder being in the north and northwest. Consultation on this refreshed Future Urban Land Supply Strategy will occur in March - April 2017.

Other urban development related national policy drivers Central government has instigated a number of national policy changes and proposed legislative amendments to help enable more effective and efficient urban development. Some key examples are summarised below with links made to local activity or responses. National Housing Infrastructure Fund The government announced in 2016 a one-off contestable Housing Infrastructure Fund (the Fund) which councils in high-growth areas can apply to bring forward the transport and water infrastructure required for new housing – especially where financing issues are holding up development.

It will accelerate the short and medium-term supply of new housing where it’s needed most. This will be done by investing up-front in infrastructure to ensure more housing can be built in a timely fashion.

The Fund will directly finance water infrastructure through an interest-free loan of up to 10 years to allow for councils to receive revenue from the new houses, from development contributions and when people move in and start paying rates. Transport infrastructure will be funded through alterations to the Funding Assistance Rate subsidy provided to councils under the National Land Transport Fund.

Hamilton City Council and Waikato District Council have submitted indicative proposals to the Fund in December 2016. Hamilton’s proposal is for infrastructure in Rotokauri and Peacocke, and Waikato Districts is for infrastructure in Te Kauwhata. Final allocation decisions on the Fund are expected to be announced by government by the end of June 2017.

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Hamilton Housing Accord Hamilton City Council and the Government signed a Housing Accord on 22 December 2016 to increase housing supply and improve housing affordability in Hamilton. The Accord sets housing targets of 1300 households and section consents in 2017; 1400 in 2018 and 1500 in 2019. At an upper North Island scale, similar housing accords have been agreed between councils and government in Auckland and Tauranga. Urban Development Authorities proposal Public consultation has opened on proposed legislation to fast track the redevelopment and regeneration of urban areas to better meet housing and commercial needs. The proposed legislation (the Urban Development Authorities Act) would:

Empower nationally or locally significant urban development projects to access more enabling development powers and land use rules

Establish new urban development authorities to support these projects where required.

Central government and territorial authorities would have to work together to identify and agree on urban development projects, and would consult the public before granting the relevant enabling powers. The powers potentially available for an urban development project would relate to:

Land – powers to assemble parcels of land, including existing compulsory acquisition powers under the Public Works Act 1981

Planning and resource consenting – powers to override existing and proposed district plans and regional plans, and streamlined consenting processes

Infrastructure – powers to plan and build infrastructure such as roads, water pipes and reserves

Funding – powers to buy, sell and lease land and buildings; powers to borrow to fund infrastructure; and powers to levy charges to cover infrastructure costs.

An urban development authority would not have building consenting powers. None of the proposed powers would override any Treaty of Waitangi settlements, national environmental standards would have to be met, and the relevant powers would only apply to a particular project and would expire when the project is completed. The proposed legislation is intended to complement the Government’s recent introduction of the NPS-UDC, requiring councils to provide sufficient land capacity for housing and business needs. The proposed Urban Development Authorities Act will provide a toolbox for more rapid implementation to support urban development. Waikato Regional Council is currently preparing a submission response to this proposal which is planned to be reported through to Council in May. Future Proof is also preparing a submission response. Assessment of significance To the best of the writer’s knowledge, this decision is not significantly inconsistent with nor is anticipated to have consequences that will be significantly inconsistent with any policy adopted by this local authority or any plan required by the Local Government Act 2002 or any other enactment.

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Greg Morton Tracey May Senior Regional Advisor Growth and Infrastructure Director Science and Strategy Attachment:

1. Summary of NPS for Urban Development Capacity provisions and timeframes for implementation

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Attachment 1: Summary of NPS for Urban Development Capacity provisions and timeframes for implementation

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Report to Strategy and Policy Committee March 2017 – To be received

File No: 22 03 76

Date: 22 February 2017

To: Chief Executive Officer

From: Director Science and Strategy

Subject: Waikato Aquaculture – overview and future developments

Section: A (Committee has delegated authority to make decision)

Purpose To overview the current state of aquaculture in the Waikato region and to highlight for the committee future developments in fish and shellfish farming.

Recommendation:

That the report “Waikato Aquaculture – overview and future developments” (Doc # 9784450 dated 22

February 2017) be received for information.

Background Aquaculture is a significant industry in the Waikato region, particularly in the Thames-Coromandel district. In terms of production and employment, Waikato is the second biggest region for aquaculture in New Zealand, behind Marlborough. Waikato Regional Council is responsible for managing the environmental effects and planning for future development of the sector. The Ministry for Primary Industries manages the impacts of aquaculture on fishing activities and manages commercial, recreational and customary fisheries. This report provides an overview of aquaculture in the Waikato along with the national and global context. The aquaculture sector in New Zealand Aquaculture is the farming of any aquatic species, including fish, shellfish, crustaceans (such as lobsters), seaweeds and sponges, and is the fastest growing agri-business sector in the global economy. Total global production is over 70 million tonnes, supplying half the world’s seafood. Marine farming is any aquaculture that occurs in the marine environment, as opposed to land-based tanks or freshwater farms. In New Zealand marine farming dominates the aquaculture sector and makes up 20% of the seafood sector1. Farmed green-lipped mussels are New Zealand’s second largest seafood export by value, worth $224 million in 20152.

1 New Zealand Trade and Enterprise (www.nzte.govt.nz). 2 Seafood New Zealand, Economic review of the seafood industry, December 2015 (www.seafood.org.nz).

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Marine farming in New Zealand employs over 3000 people and generates $400 million in revenue, of which $298 were export earnings3. The sector is currently dominated by the growing of green-lipped mussels ($250 million) along with pacific salmon ($130 million) and oysters ($25 million). The sector has a goal of reaching $1 billion in revenue by 2025. Marine farming occurs in several regions around the country, depending on the availability of suitable water. For example king salmon requires colder water and is only grown in the South Island while pacific oysters prefer warmer conditions and thrive in northern waters. Green-lipped mussels grow well throughout the country. Growing space is also limited by exposure to waves, preferring calm sheltered waters, and by conflicts with other uses and values of the coastal marine area. The main growing areas are shown in figure 1.

Figure 1: Aquaculture production in New Zealand Central government is committed to supporting the aquaculture sector and released a strategy and five-year action plan in 2011. By the middle of 2017, the Ministry for the Environment, in conjunction with the Ministry for Primary Industries, is expected to start public consultation on national direction for aquaculture, in the form of a national policy statement and/or national environmental standard.

3 Aquaculture New Zealand statistics for 2011 (www.aquaculture.org.nz).

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Aquaculture in Waikato The Coromandel is a significant contributor to the sector, producing one-quarter of New Zealand’s farmed mussels and nearly one-third of the pacific oysters. An economic assessment in 2011 found that the sector employed 300 FTEs in farming and processing, and generated another 135 jobs indirectly, within the region. About 70% of the crop is processed in Tauranga or Auckland, directly employing another 250. Including indirect and induced employment, aquaculture in Waikato supports nearly 1,200 jobs, while paying approximately $19 million in wages and salaries. There are currently 1450 hectares of marine farms in the region, mostly in the Wilson Bay zone (1200 hectares). There are about 230 hectares of small mussel farms spread around the Coromandel, but concentrated in Manaia Harbour, Coromandel Harbour and the islands north of Coromandel Harbour. There are 70 hectares of oyster farms spread between Coromandel, Te Kouma, Whangapoua and Whitianga Harbours. On the west coast there is a small oyster farm in Kawhia Harbour and a mussel spat4 catching farm in Aotea Harbour. Figure 2 shows the location of these farms.

Figure 2: Marine farms and zones in the Waikato.

4 Spat are the free-swimming larval form of mussels. They are collected at spat catching farms and distributed to other marine farms for growing on. The main source of spat for the sector is beach-cast seaweed from Ninety Mile Beach.

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The Wilson Bay zone is six kilometres long (roughly north to south) and five kilometres wide, creating a total footprint of 3000 hectares. Once the minimum 75 metre separation between farms within the zone, and the one kilometre wide separation between Areas A and B is taken into account, the zone can accommodate 1200 hectares of shellfish farms. Currently only mussels are grown in Wilson Bay. The new Coromandel Marine Farming Zone (shown in orange in figure 2) was established in 2011 for the purpose of fed aquaculture, such as fish farming. This 300 hectare zone is intended to provide an opportunity for the sector to diversify into new, higher value species. There are currently no farms in this zone and council has recently initiated the process for releasing the zone (discussed further below).

Figure 3: Mussel farm in Kennedy Bay. Waikato Regional Coastal Plan provisions on aquaculture The Regional Coastal Plan acknowledges that marine farming is an important industry and attempts to provide for its sustainable growth within environmental limits. The policies and rules of the plan were drafted in 1999 and have remained unchanged since 2001. The Wilson Bay zone was created at that time but development of half of the zone was delayed by the aquaculture moratorium that effectively lasted from the end of 2001 to 2009. Some additional provisions were added in 2011 to create the Coromandel Marine Farming Zone and provide for fish farming. The rules of the plan are now considered well out of date and overly restrictive. With some minor exceptions, marine farming is prohibited outside of the existing farms and zones. Apart from the release of the Coromandel Marine Farming Zone for fish farming, no new space can be made available for marine farming until the Regional Coastal Plan is reviewed.

Figure 4: Oyster farm in Kawhia Harbour.

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Potential growth in marine farming in Waikato Mussel farm production is increasing in the Waikato. While all available mussel farming space has been allocated, some has not been consented or developed. The unconsented space consists of 104 hectares that has been allocated to Te Ohu Kaimoana as the trustee for settlement assets. The undeveloped space is approximately 200 hectares within Area B of the Wilson Bay zone that has been consented but is stage 2 of the development of that Area. Most of the consent holders within Area B have completed stage 1 and were recently given permission to commence stage 2. Since 2011 the smaller farms outside the zone have been able to apply for an extension of 10% or 1 hectare (whichever is greater) every five years. This applies to about 40 farms. Over 30 of the farms have been granted extensions. The sector has predicted that it can increase production from about 30,000 tonnes of mussels per annum to 60,000 tonnes. This is based on the full development of Area B of the Wilson Bay zone and small extensions to the farms outside the zone. If additional space is allocated to the sector then production could be even higher. The Ministry for Primary Industries has published projections of future growth in aquaculture for each region as part of its work required by the Maori Commercial Aquaculture Claims Settlement Act 2004. This estimates that mussel farming in the Waikato will increase by 650 hectares by 2035 and oyster farming by 65 hectares. Sea Change implementation and the review of the regional coastal plan The Sea Change Tai Timu Tai Pari Stakeholder Working Group identified aquaculture as an important topic for the Hauraki Gulf Marine Spatial Plan. During their deliberations they set up an Aquaculture Round-Table to specifically address planning for marine farming. Following consideration of the Round-Table’s recommendations the Stakeholder Working Group adopted 12 objectives for aquaculture including that “there is a thriving aquaculture industry in the Hauraki Gulf that supports local communities, including mana whenua”. The Marine Spatial Plan identifies 13 areas as potential marine farming areas (see figure 5). These candidate sites will be investigated during the review of the regional coastal plan, and if found to be suitable, aquaculture development will be enabled in those locations.

Figure 5: The thirteen potential marine farming areas (purple, green and yellow).

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Developments in fish farming and the Coromandel Marine Farming Zone Growth in the aquaculture sector will include diversification into new species, such as fish. These are seen as much higher-value species than shellfish. For example, the only fish farmed in significant quantities in New Zealand is king salmon which is grown in Marlborough, Canterbury and Southland. Production in 2011 was 14,000 tonnes, earning $128 million in revenue for the sector. Compared to mussel farming, king salmon is 3.5 times more valuable on a per tonne basis and occupies a much smaller amount of public space in the coastal marine area. Research into the life cycle of kingfish and hapuku has reached the stage that they are ready for sea trials to determine their feasibility for commercial scale development. There are currently no fish farms in the North Island, partly because the water is too warm for king salmon, but North Island waters are considered suitable for kingfish and hapuku.

Figure 6: Hapuku fingerlings being raised at NIWA’s Bream Bay hatchery In 2011 the Coromandel Marine Farming Zone was created by an Act of parliament. The Resource Management Amendment (No. 2) Act 2011 amended the Waikato Regional Coastal Plan to insert the zone and rules that manage its use. The zone is 300 hectares in size and is estimated to produce about 8,000 tonnes per year of fish. The creation of the zone coincided with a downturn in aquaculture investment resulting from the global financial crisis. Due to the lack of interest the zone was not released. There has now been renewed interest in fish farming and last year Council agreed to release the zone to potential marine farmers. Releasing the Coromandel Marine Farming Zone by a weighted attribute tender The zone is released through a weighted attribute tender process. The purpose of this is to allocate the available fish farming space to the applicant or applicants that will make the best use of this public space and achieve the best outcome for the community, the region and the nation. A weighted attribute tender is evaluated against a pre-determined set of criteria which are each given specific weightings. The advantage of the weighted attribute tender process is that it allows non-monetary criteria to be included in a transparent decision making process. Competing bids can then be compared in terms of, for example, the employment they might generate, the applicant’s environmental track record and other relevant matters. The Regional Coastal Plan specifies the criteria that must be used in the tender process and Council has determined what weighting should apply to them. The criteria and their weightings are given in table 2.

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Initial weightings were proposed by staff and modified in response to feedback from Council, who required a five percent reduction in the weighting of the financial contribution and a five percent increase in the weighting of the applicant’s environmental management practices. The final weightings were adopted by Council in 2012. Table 2: Weighted attribute tender criteria

Criteria Weighting

The extent to which the proposal achieves the purpose of the Coromandel marine farming zone consistent with Policy 6.1.1D

15%

Promotion of the sustainable management of natural resources 10%

Contribution to the economic and social wellbeing of the region and country 40%

Environmental management practices of the applicant 15%

Monetary contribution 20%

The successful bidder(s) will be issued with an authorisation that allows them to apply for a resource consent. The consent application must be consistent with their tender proposal. Authorisations cannot be transferred to another party. Importantly, issuing an authorisation does not guarantee the granting of a consent. The authorisation expires after two years if no consent application is made.

Figure 7: Kingfish farm pen in South Australia. A typical farm might have 20 to 40 pens. Fish farming is a discretionary activity within the Coromandel Marine Farming Zone. The Regional Coastal Plan includes a clear and robust set of information requirements and decision making criteria that will result in the consent being declined if the applicant cannot demonstrate its sustainability. If the consent is declined the holder of the authorisation may re-apply for consent or surrender the authorisation. A re-application must still be consistent with the applicant’s tender proposal. Tender bids were called for at the end of January 2017 and close on 14 April 2017. The proposals will be assessed by a staff team including an economist, scientist and policy advisor. Their assessment will be reviewed by the executive leadership team and recommendations reported to Council in May or June for a final decision.

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Assessment of Significance Having regard to the decision making provisions in the LGA 2002 and Councils Significance Policy, a decision in accordance with the recommendations is not considered to have a high degree of significance. Conclusion Marine farming is currently a small sector in the Waikato economy but a major component of the Coromandel economy and has considerable potential for future growth. Some of that potential will be unlocked with the release of the Coromandel Marine Farming Zone for fish farming. Any further expansion of shellfish or fish farming cannot occur until the Waikato Regional Coastal Plan is amended.

Tony Quickfall Manager Policy

Tracey May Director Science and Strategy

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Report to Strategy and Policy Committee March 2017 – To be received

File No: 20 00 08

Date: 14 March 2017

To: Chief Executive Officer

From: Director Science and Strategy

Subject: Waikato Regional Freshwater Strategy update Purpose To provide the Strategy and Policy Committee with an update on the progress of the Regional Freshwater Water Strategy and provide the Committee with an opportunity to enquire of staff and to contribute comment.

Recommendation: That the report “Waikato Regional Freshwater Strategy update” (Doc # 9850753 dated 14 March 2017) be received for information.

Background Water is New Zealand’s foremost strategic asset. In its simplest terms, the New Zealand economy is currently focussed upon turning our rainwater into exports and experiences for visitors. In this way, Waikato water is critical to the interests of the wider regional community and the nation as a whole. It is the quality and availability of our natural resources that underpin our economy and our success as a nation, and not any particular sector that currently uses these resources. The importance of freshwater to the economy has been recognised nationally with the:

increase in central government policy activity, including support for the multi-stakeholder Land and Water Forum

push to understand, define and recognise iwi rights and interests with respect to freshwater desire to nationally standardise reporting on the condition of freshwaters

A credible regional response to central government policy and legislative initiatives will need the considered inputs of the entire community. We now have a good understanding of the position of regional interests as a result of the 2016 Let’s Talk Water engagement project (https://www.waikatoregion.govt.nz/council/policy-and-plans/waikato-regional-freshwater-strategy/) that resulted in the preparation of an Issues and Opportunities document which was considered by the Council in June 2016. On the basis of feedback received, the Council resolved to prepare a Waikato Freshwater Strategy to guide Council activities that affect freshwater resources for the foreseeable future. From historical monitoring activities, we also have a good understanding of the current state of our freshwater resources (recognising that in many areas this reflects the effects of land use back to the 1960s) and of the current use, but we do need a more detailed understanding of the future situation. In particularly we need to be able to model:

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land use effects to come projected changes in freshwater supply and demand as a result climate change interactions between freshwater and other elements of the economy (critical for inter-

regional value) location specific relationships between land use and resulting condition of our waterways the effects of a range of current and potential public policy interventions including ‘what if’

scenarios and sensitivity analysis.

The national picture will be informed by the summation of regional activities and, as the freshwater allocation authority, the Waikato Regional Council is in the ideal position to lead this work that seeks solutions that are appropriate for this region and that can be contributed to the national debate. This year is a general election year and domestically the state of freshwater resources is already shaping up to be the subject of media interest with an increasing number of editorial, NGO and academic sector opinions. This can be expected to increasingly focus on the performance and the effectiveness of management agencies. Regional Freshwater Strategy It is intended to complete a Waikato Regional Freshwater Strategy by 30 June 2017. The Strategy will address existing issues and will include emerging issues anticipated to affect the quality and quantity of the regional freshwater resource into the foreseeable future (30 - 50 years from the present). It will take account of regionally spatial differences in resource characteristics and projected supply and demand and will present clear and implementable actions for activities to be included into the 2018 – 2028 Long Term Planning process. The previous Council has recognised the value of the Issues and Opportunities paper as a synthesis of regional views for the future management of regional freshwater resources and offered it to partners and stakeholders, as a base to inform engagement and advocacy in the ongoing national debate about the management and allocation of freshwater resources. The Issues and Opportunities paper identified 17 issues and grouped them into three areas. These are the need for:

1. Better information - including on the supply and demand balance and allocation pressures, water usage and freshwater climate science

2. Smarter methods - with an emphasis on data acquisition, information management, database design and models to analyse options including allocation methods and economic instruments

3. Focussed advocacy - for legislative reform and for on-going decision-making The preparation of a regional freshwater strategy links directly to council’s recently adopted strategic direction and, in particular, WRC’s mission of working together to build a Waikato region that has a healthy environment, a strong economy and vibrant communities. Two key priorities, that of:

Managing freshwater more effectively to maximise regional benefits Positively influencing future land use choices to ensure long term sustainability

are germane to this work and imply a transition from the current state to enable long-term community outcomes to be achieved.

The business of the Strategy will be to translate the findings of the Let’s Talk Water engagement project as found in the Issues and Opportunities paper into a clear suite of actions to be included in the 2018 Long Term Plan for:

Advocacy to central government for legislative change to provide for the use of economic and financial incentives to complement current regulation (Resource Management Act 1991)

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Advocacy to central government for a for a national prioritisation (nationally important catchments) programme for implementing National Policy Statement in Freshwater Management, including timeframes

Prioritised regional plan actions focussing on policy and rules for anticipated future environmental and societal conditions

Support for external partners and stakeholders wishing to contribute to the regional strategy direction e.g. citizen science

Non-regulatory actions to support national policy and regional plan requirements, including catchment management approaches

Enhanced data acquisition and spatial modelling capability to provide the evidential base for above actions.

Assessment of significance Although the subject area is of considerable strategic significance, to the best of the writer’s knowledge, this decision is not significantly inconsistent with nor is anticipated to have consequences that will be significantly inconsistent with any policy adopted by this local authority or any plan required by the Local Government Act 2002 or any other enactment. Conclusion The management of freshwater will continue to be a key strategic issue for the Waikato Region for decades to come. The Let’s Talk Water engagement project in early 2016 has enabled a wide canvassing of perspectives that has fed into a comprehensive regional Issues and Opportunities foundation document that can inform the national debate. The preparation of a Waikato Regional Freshwater Strategy enables the value already gained to be incorporated into future regional work programming (policy and operational) and national engagement to be built upon.

Blair Dickie Principal Strategic Advisor Science and Strategy

Tracey May Director Science and Strategy

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Report to Strategy and Policy Committee March 2017 – To be received

File No: 22 04 83

Date: 14 March 2017

To: Chief Executive Officer

From: Director Science and Strategy

Subject: Clean Water 2040 document

Section: A (Committee has delegated authority to make decision)

Purpose To advise the Strategy and Policy Committee of the Clean Water 90% of rivers and lakes swimmable by 2040: Consultation Document1, recently co-released by the Ministry for the Environment and the Ministry for Primary Industries.

Recommendation:

That the report Clean Water document” (Doc # 10104890 14 March 2017) be received for information.

Background On 23 February 2017 Minister for the Environment, Hon Dr Nick Smith and Minister for Primary Industries, Hon Nathan Guy, jointly released the government’s consultation document, Clean Water 90% of rivers and lakes swimmable by 20402. The full transcript of the speech made at the launch is included as Attachment 1 to this report. Issue The consultation document announces a further suite of freshwater reforms. These include new policy to improve “swimmability”, stock exclusion regulations, further procedural and monitoring requirements on regional councils, and the announcement of a Freshwater Improvement Fund. Areas of concern relate primarily to unintended consequences of the proposed “Swimmability” regime and closer prescription of resource management processes, as well as resource implications for regional councils. Submission Staff are preparing a draft submission for the Council’s Submissions Subcommittee to consider when it meets on 4 April 2017. The Clean Water Consultation document includes five components:

Proposing a target of 90 per cent of rivers and lakes swimmable by 2040

New maps and information on the current water quality for swimming

1 https://www.beehive.govt.nz/sites/all/files/Clean-Water-document.pdf 2 https://beehive.govt.nz/release/90-rivers-and-lakes-swimmable-2040

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proposed amendments to the National Policy Statement for Freshwater Management (NPSFM) 2014

Inviting applications for the Freshwater Improvement Fund ($100M) Detail of policy proposals for excluding stock from waterways.

Swimmability in Waikato rivers and lakes According to the published maps, 72 per cent by length of all New Zealand rivers and lakes currently meet the proposed definition of swimmable, and the target is to increase that to 90 per cent by 2040. This means an additional 10,000km of swimmable rivers and lakes by 2040, or 400km per year. In the Waikato, 49 per cent of rivers and lakes currently meet the proposed definition of swimmable (44 per cent of rivers and streams and 79 per cent of lakes). Regional targets to achieve the national goals are to be worked through with regional councils by March 2018. Some regional targets will need to be greater than the 90 per cent and others, where it is more difficult to achieve, will be less. NPSFM amendments The NPSFM was released in 2011 and reviewed in 2014. Councils are required to implement its provisions by 2025. The current proposals do not change the general direction of the NPSFM. Some provisions are intended to provide greater clarity to councils in their implementation efforts, while others add to the list of things to be implemented. Aspects of the proposed amendments intended to clarify existing requirements include:

Te Mana o te Wai: Sections have been reworded to clarify what te mana o te wai means, and its impact on decision making.

Maintaining or improving overall water quality: Previous wording suggested that councils could trade off degradation in one part of a region against improvements elsewhere, this is at odds with the Resource Management Act. The new wording clarifies that water quality should be maintained or improved within a freshwater management unit.

Effects of infrastructure: Clarifying when councils might set targets below national bottom lines.

Economic wellbeing: In practical terms, the affordability of measures to improve water quality is a consideration in deciding how ambitious targets should be – there was some concern that this was not reflected in the NPSFM framework. It should be noted that the proposal is to include economic wellbeing as a matter to be considered in freshwater planning, not as a value or objective in its own right.

Coastal lakes and lagoons: Minor changes to remove ambiguity about what standards apply.

There are four areas of substantive change: Swimming and recreational values: “secondary recreation” has been removed as an attribute,

in favour of the swimming standards discussed above. Macroinvertebrates: it is proposed that councils be required to monitor macroinvertebrates

as part of their assessment of ecosystem health. Managing nitrogen and phosphorus: a specific requirement has been added to require councils

to set in-stream objectives for dissolved nitrogen and phosphorus as part of their approach to managing periphyton.

Monitoring and reporting requirements: the scope of regional council monitoring plans have been extended to include freshwater accounting, Mātauranga Māori, and the health of indigenous flora and fauna.

The table of national values (Appendix 1 of the NPSFM) has also been significantly reworked. This reflects the shift in focus from “wadeability” to “swimmability”, as well as closer attention to mahinga kai and wai tapu. The description of “natural form and character” has also been expanded.

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Criteria established for the Freshwater Improvement Fund Last year the government approved $100 million Freshwater Improvement Fund for projects that improve freshwater management. The fund is available for the next ten years. Eligible waterbodies will be showing signs of stress, but will not have yet reached a tipping point. The fund will cover a maximum of 50 percent of project costs, and grants will be for a minimum of $200,000. The first round of applications open immediately and close 13 April 2017. Stock Exclusion Regulations Government has previously signalled its intent to require the exclusion of livestock from waterways. It is proposed that dairy cattle and pigs be excluded from most lakes, rivers and streams by 1 July 2017. By 2030, this would be extended to all waterways, lakes and wetlands on the plains, and to all cattle and deer on rolling hill country (and where break-feeding on steep hills). Possible implications for Waikato Regional Council in relation to determining targets for swimmability Initial discussion with staff around the implications for council focus around five themes: timeframe, affordability, fairness, major land-use change and new regulatory tools. 1. Timeframe:

Timeframes for compliance do not provide for sufficient time for iwi and the regional community to have meaningful conversations in respect in the development of any proposed regional water quality targets.

Clean Waters requires these targets to apply across the region and to involve the community in the development of these targets: o Treaty Settlement legislation requires the five river iwi to be involved in water related

discussions as they relate to the Waikato and Waipa River Catchments. Waikato Regional Council has set up a co-management and co-governance arrangement with the river iwi in the development of the Proposed Waikato Regional Plan Change 1 (Healthy Rivers Wai Ora) notified on 22 October 2016. Any regional target development would need to involve the river iwi. Furthermore other iwi authorities within the region are likely to have a strong interest in being involved in developing regional water quality targets.

It is uncertain what technical information regional councils can use or modelling that is

available to set these regional targets within the timeframe. The capacity of the technical community to support all regional councils within this timeframe is likely to be constrained or lacking.

2. Affordability

There is no requirement to look at community affordability in setting these proposed regional targets and it is unachievable to do so within the timeframe.

3. Fairness

Whilst those with interests in the Waikato and Waipa river catchments have had time to debate water quality and the interventions to achieve improved water quality (noting this will continue through the Schedule 1 process), other communities that have interest in other major river catchments within the Waikato Region have not been afforded this opportunity and the timeframe does not allow for that involvement to occur to any meaningful level.

4. Major land-use change

We are aware that removing stock from waterways and riparian planting will not be sufficient in reducing E.coli/cyanobacteria levels to swimmable levels and major land-use change (beyond what is proposed in Plan Change 1) is likely the only avenue to achieve this.

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5. New regulatory tools Regional councils will need new regulatory tools to assist in developing interventions to give effect to ‘Clean Waters’.

At the time of report preparation, only an initial understanding of the proposals and implications are available with a more considered response to be prepared for the Submission Subcommittee’s consideration at its April 2017 meeting, in the form of a draft submission.

Assessment of significance The subject matter is highly significant to the ongoing success of the Waikato region and the wellbeing of its communities as well as the core role and functions of the regional council. However, to the best of the writer’s knowledge, this decision to receive the report is not significantly inconsistent with nor is anticipated to have consequences that will be significantly inconsistent with any policy adopted by this local authority or any plan required by the Local Government Act 2002 or any other enactment. Conclusion The government’s consultation document, Clean Water 90% of rivers and lakes swimmable by 2040 includes five key components, described above. Staff are currently preparing a submission which is likely to look at timeframes, affordability, fairness, major land-use change and new regulatory tools. This submission will be considered by councillors at the Submission Subcommittee on 4 April 2017.

Trish Routley Senior Policy Advisor

Tracey May Director Science and Strategy

Attachment:

1. Speech by Hon Nick Smith Minister of the Environment, 20 February 2017 Clean Water 90% of our rivers and lakes swimmable by 2040

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Attachment 1: Transcript from Hon Nick Smith

23 FEBRUARY, 2017

90% of rivers and lakes swimmable by 2040

The Government today announced a target of 90 per cent of New Zealand’s lakes and rivers meeting swimmable water quality standards by 2040, alongside releasing new policy, regulations, information maps and funding to help achieve the new goal.

“This ambitious plan to improve the water quality in our lakes and rivers recognises that New Zealanders expect to be able to take a dip in their local river or lake without getting a nasty bug,” Environment Minister Dr Nick Smith says.

“The plan is backed up by national regulations requiring stock to be fenced out of waterways, new national policy requirements on regional councils to strengthen their plan rules on issues such as sewage discharges and planting riparian margins, a new Freshwater Improvement Fund and new maps that clearly identify where improvements are needed.

“This 90 per cent goal by 2040 is challenging and is estimated to cost the Government, farmers and councils $2 billion over the next 23 years. It will make us a world leader in water quality standards for swimming, and that’s important for New Zealand’s growing tourism industry. It will return our rivers and lakes to a standard not seen in 50 years while recognising that our frequent major rainfalls mean a 100 per cent standard is not realistic.”

The target covers the length of rivers over 0.4m deep and the perimeters of lakes greater than 1.5km, which total 54,000km. The plan is about improving the frequency that we can swim in our lakes and rivers, noting that even our cleanest rivers breach swimming water quality standards during storms.

The swimmable target is based on meeting the water quality standard at least 80 per cent of the time, in line with European and US definitions. Currently 72 per cent by length meet this definition, and the target is to increase that to 90 per cent by 2040. This means an additional 10,000km of swimmable rivers and lakes by 2040, or 400km per year.

“The maps I am releasing today provide the most comprehensive and consistent information on water quality for swimming of New Zealand’s rivers and lakes ever published. These will help focus councils and communities on improving their local water quality, as well as help people make decisions about where they can safely swim. The maps are connected to the Land, Air, Water Aotearoa website that provides real-time information on water quality, which is particularly relevant for the fair and intermittent categories.

“The challenge of improving water quality varies significantly across New Zealand. This plan requires improvements in water quality across all regions and all categories. The target not only requires an improvement in areas that are swimmable, ie into the fair category, but also rivers and lakes being moved from fair to good, and good to excellent. Regional targets to achieve the national goals are to be worked through with regional councils by March 2018. Some regional targets will need to be greater than the 90 per cent and others, where it is more difficult to achieve, will be less.

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The National Policy Statement (NPS) for Freshwater Management is being strengthened to support the new 90 per cent by 2040 swimmability target, as well as changes to address the issues of ecological health and nutrients by:

replacing “wadeable” with “swimmable”

adding macroinvertebrate monitoring for ecological health

strengthening references to “Te Mana o te Wai”

clarifying the consideration of economic opportunities

requiring instream limits for nitrogen and phosphorus

clarifying inclusion of coastal lakes and lagoons

clarifying the policy on exceptions

strengthening the requirement for monitoring and improving quality.

“The new regulations on excluding stock from waterways are an important part of this plan to improve water quality. The rules progressively apply to dairy, pig, dairy support, beef and deer farms from this year to 2030 relative to the steepness of the country, at an expected cost of $367 million,” Dr Smith says.

“We are today opening bids for the new $100m Freshwater Improvement Fund and announcing the eligibility and assessment criteria, which closes on 13 April. This comes on top of the $350m already committed by the government, of which more than $140m has been spent on specific river and lake clean-ups.

“This is the third phase of the Government’s work programme to improve New Zealand freshwater management and builds on the NPS introduced in 2011 and the National Objectives Framework in 2014. I commend and acknowledge the Freshwater Iwi Leaders Group and the Land and Water Forum, who have worked tirelessly in assisting with these policy developments.”

The detail of the NPS and Stock Exclusion Regulations are open for consultation until 28 April 2017.

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Report to Strategy and Policy Committee March 2017 –

To be received

File No: 95 07 01

Date: 13 March 2017

To: Chief Executive Officer

From: Director Integrated Catchment Management

Subject: Consistency assessment of the Waikato Regional Pest Management Plan against the National Policy Direction for Pest Management

Purpose The purpose of this report is to provide the Policy and Strategy Committee with a summary of the inconsistencies identified in an assessment of the current Waikato Regional Pest Management Plan 2014-2024 (RPMP) against the new National Policy Direction for Pest Management 2015 (NPD). Given the findings of the assessment, council is required to make a declaration to the Ministry for Primary Industries (MPI) that the RPMP is inconsistent with the NPD. The inconsistencies must then be resolved either by minor amendment or by initiating a review of the RPMP.

Recommendations: 1. That the report ‘Consistency assessment of the Waikato Regional Pest Management Plan

against the National Policy Direction for Pest Management’ (Doc# 10098087 dated 13 March 2017) be received for information

2. That the findings of the assessment confirms the current Waikato Regional Pest Management Plan is inconsistent with the National Policy Direction for Pest Management 2015 be endorsed

3. That the declaration to Ministry for Primary Industries to confirm that the Waikato Regional Pest Management Plan is inconsistent with National Policy Direction for Pest Management 2015 be enacted.

Background The NPD was promulgated in 2015, while the current RPMP was adopted in 2014. The NPD is a statutory instrument produced under Part 5 of the Biosecurity Act 1993 (the Act) and includes: • Directions on the content and process requirements for developing pest and pathway

management plans and small-scale management programmes • Directions on setting good neighbour rules in regional pest management plans • Appropriate methodologies for Cost Benefit Analysis (CBA) and cost allocations. All RPMPs are required to be consistent with the NPD and the Act requires that a consistency check against the NPD be carried out within eighteen months of the direction being approved, amended, or revoked and replaced. The NPD was approved by MPI on 24 September 2015. If an RPMP is determined to be inconsistent, the inconsistencies must be resolved either by minor amendment or initiating a review of the plan.

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The NPD is available to download at: https://www.mpi.govt.nz/protection-and-response/biosecurity/national-policy-direction-for-pest-management/. Assessment of consistency An analysis of consistency has been completed by Place Group Limited and this confirms the following in reference to the current RPMP: • The criteria used for site-led programmes do not effectively identify affected landowners and

occupiers • Three different CBA models are used in the RPMP. Two of the three CBA models do not adequately

outline benefits or address risk considerations • Cost allocation methodologies and assessments are not fully addressed • Programme descriptions and intermediate outcomes are not adequately differentiated • There are multiple minor technical inconsistencies regarding terminology and cross-referencing. Further detail in relation to the above is provided in Table 1 below. The full consistency assessment is provided in Attachment A. Table 1: Summary of NPD requirements and RPMP inconsistencies

NPD Section NPD Requirement RPMP Inconsistency

Significant amendments required – currently being scoped.

Section 4 – Directions for Setting Objectives

RPMP must give sufficient certainty to owners and occupiers so that they are aware that the outcome applies to them.

The RPMP does not fully meet the ‘sufficient certainly test’ in relation to Site Led Programmes to effectively identify affected land owners and occupiers.

Section 6 – Directions on Analysing Benefits and Costs.

RPMP must include a CBA for all pests and include in its methodology consideration of impacts, options, benefits, costs, assumptions, risks of achievement and a preferred option.

Three different CBA models have been used to develop the RPMP.

Two of the three CBA models used for the RPMP do not quite address all the required considerations and do not adequately consider benefits.

Section 7 – Directions on proposed allocations of costs for pest and pathway management plans

Requires RPMPs to assess indirect and direct costs, and include in its methodology an assessment of exacerbators and beneficiaries to allocate costs for pest and pathway management plans.

RPMP does not address all the required considerations for cost allocation including:

Estimation of indirect and direct costs

Stage of infestation/management objectives of each organism.

Passive and active exacerbators Best allocation methods with

consideration to Part 7(2)(d). Minor amendments required – picked up through next RPMP review.

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Section 5 – Directions on Programme Description

RPMPs must use the specific names and descriptions for programmes as follows:

Exclusive Programme Eradication Programme Progressive Containment

Programme Sustained Control Programme Site-led Pest Programme

Programme descriptions are currently addressed as “intermediate outcomes” with the RPMP. The NDP requires intermediate outcomes to be differentiated from programmes.

All Sections RPMP must use terminology and cross referencing consistent with the NPD.

The following terminology and cross referencing issues have been identified:

Adverse ‘effects’ are referred to as ‘threats’ throughout the RPMP.

‘Protecting Values in Place’ outcomes are not referred to anywhere in the RPMP.

Animal Pest Management Plans, rather than including ‘Exclusion’ as one of the five options, the classification ‘Advisory Animal’ is included. This category is not included in the NPD.

RPMP contains a list of ‘Advisory Plants’. This is not required under the NPD.

RPMP lists intermediate outcomes/programmes as ‘Management Categories’. This is not consistent with NPD requirements.

Cross referencing in RPMP Appendix 3 does not match with the NPD.

Proposed next steps Given the findings of the above assessment, staff are seeking endorsement from the Policy and Strategy Committee for the recommendations set out in this report. Following endorsement from the Committee, the proposed next steps are to: 1. Notify MPI in regard to the inconsistencies identified and declare the RPMP inconsistent with the

NPD 2. Further consider and address the inconsistencies as part of the next RPMP review. In regard to step two, there is no deadline set out in the NPD as to when the inconsistencies need to be addressed, however staff consider it appropriate that this be resolved as part of the next RPMP review. The timing and associated budget required for a RPMP review will be considered further through the next Long Term Plan (LTP).

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Assessment of Significance Having had regard to the decision making provisions in the Local Government Act 2002 and council’s Policy on Significance, a decision in accordance with the recommendation is not considered to have a high degree of significance. Staff are of the opinion that the content and recommendations in this report are consistent with the decision making requirements contained in Part Six of the Local Government Act 2002 and that the decision making requirements of the Local Government Act 2002 have been met.

Patrick Whaley

Manager Integrated Catchment Services

Clare Crickett

Director Integrated Catchment Management

Attachment:

1. NPD vs RPMP Consistency Table

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Attachment A

Analysis of National Policy Direction for Pest Management 2015 against the Waikato Regional Pest Management Plan 2014-2024 Direction on Setting Objectives – Pest Management Plan

National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

(1) For each subject in a proposal for a pest management plan, or in a pest management plan, the objectives in the plan must: (a) state the particular adverse effect or effects of the subject on the matters listed in section 54(a) of the Act that the plan addresses; and

Section 54(a) of the Act states adverse effects as harmful organisms on: economic wellbeing, the environment, human health, enjoyment of the natural environment, and the relationship between Māori, their culture, and their traditions and their ancestral lands, waters, sites, wāhi tapu, and taonga. The RPMP outlines ‘adverse impact’ as: the severity of a plant/ animals external, uncompensated, actual or potential effect on the environment (includes agricultural production, indigenous biodiversity and indigenous biodiversity, public health threats) and Maori culture and traditions. It follows by outlining plants and animal pests being associated with one or more of the three following threats: production threat, environment threat or public threat - Tables 1 and 2 outline each pest against the three threat categories. This is the primary pest categorisation / justification used throughout the plan.

Consistent - However instead classifies these effects as three different ‘threats’

(b) state the pest management intermediate outcomes that the plan is seeking to achieve, being one or more of the following intermediate outcomes: (i) "exclusion" which means to prevent the establishment of the subject that is present in New Zealand but not yet established in an area;

The five outcomes are defined in Part 2 Terms of Definition. Each specific plant/ animal is assigned one of the five different management categories in Part 2. Called management categories not intermediate outcomes. ‘’Advisory animal’’ in Animal pest RPMP instead of ‘’exclusion’’ - however completely different definition than exclusion so is not just a name

A few names are inconsistent - “Protecting values in place” is referred to as ‘site led’ in RPMP, and use of the new phrase “advisory animal’’ Are not called intermediate outcomes in RPMP, instead management category.

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National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

(ii) "eradication" which means to reduce the infestation level of the subject to zero levels in an area in the short to medium term; (iii) "progressive containment" which means to contain or reduce the geographic distribution of the subject to an area over time; (iv) "sustained control" which means to provide for ongoing control of the subject to reduce its impacts and its spread to other properties; (v) "protecting values in places" which means that the subject that is capable of causing damage to a place is excluded or eradicated from that place, or is contained, reduced, or controlled within the place to an extent that protects the values of that place; and

difference. Means to reduce the risk of subject animal from affecting environment, production and people in the region.

(c) Outcomes: Exclusion, Eradication, Progressive Containment, and Sustained Control, specify -

(i) the geographic area to which the outcome applies; and

Most appear to be region wide, or at high risk sites. E.g. alligator weed, there is “surveillance of high risk sites and measure the outcome of any direct control,” Or “Prevent the establishment of bat-wing passion flower in the Waikato region.”

Consistent

(ii) the extent to which the outcome will be achieved (if applicable); and

Includes a table of “Means of Achievement “which includes: Statutory Obligation, the Plan Rule, Whether Good Neighbour rule applies, Monitoring, Information and advice, Direct Control and Biological control options

Consistent

(iii) the period within which the outcome is expected to be achieved; and

Includes as Objective for the Plan period (2014-2024) and a long-term Objective. E.g. Long Term is a zero density of alligator weed in the Waikato Region and reduce to zero density of all known infestations and as practicable, reduce towards zero density any further infestations over the duration of the Plan”

Consistent

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National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

(d) Outcome: Protecting Values in Place, specify -

(i) one of the following: (A) the geographic area to which the outcome applies (if practicable); or (B) a description of a place to which the outcome applies; or (C) the criteria for defining the place to which the outcome applies; and

Some geographic areas are defined E.g. Mexican Water Lily is known in one site in the region, Lake Oakuri. Whilst others refer to high value biodiversity sites, with no geographic area. High value biodiversity sites are included in the Regional Policy Statement (RPS) under criteria. (Good Neighbour Rule 5.4.1 - subject to process requirements in section 4.2.3, is applicable to some site led pest. E.g. Asparagus (bushy or ferny); destroy all plants within 100m of HBA. The Good Neighbour Rule does not apply to some site led pest outcomes

Consistent High value biodiversity sites are outlined in the RPS, through specific criteria for defining the place (Option C).

(ii) the extent to which the outcome will be achieved (if applicable); and

Includes a table of “Means of Achievement “which includes: Statutory Obligation, the Plan Rule, Whether Good Neighbour rule applies, Monitoring, Information and advice, Direct Control and Biological control options

Consistent

(iii) the period within which the outcome is expected to be achieved; and

Long Term Objective usually refers to the duration of this plan/ by 2024. Some pests have long term objectives of zero density, whilst others are reducing the infestation in the region during the plan duration.

Consistent

(e) In relation to sub clause (l)(d)(i)(B) and (C), if a description or criteria is used to describe places to which an outcome applies, the description or criteria must give sufficient certainty, in the view of the relevant regional council (in the case of regional pest or pathway management plans) or the Minister responsible for the plan (in the case of national pest or pathway management plans), to land owners and occupiers so that they are aware that the outcome applies to them; and

Under “Means of Achievement” some subjects have Information and Advice which include affect land occupiers and interested parties. E.g. Asparagus (Bushy or ferny): “Waikato Regional Council will provide information and advice on the effects of bushy and ferny asparagus to affected land occupiers and interested parties, in accordance with section 11.1 of the plan.” But often the geographic locations are not described adequately enough to easily identify affected land owners/ occupiers.

Inconsistent - description of location is not detailed enough to be able to easily identify affected land occupiers. E.g. criteria describe high value biodiversity sites which could be quite a process of then identifying affected parties.

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National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

(f) if the period within which the pest management intermediate outcome is expected to be achieved is more than 10 years, state what is intended to be achieved in the first 10 years of the plan, or during the current term of the plan prior to next review (as applicable).

Some pest outcomes for this plan, are stated as “reducing infestation in the region for the duration of the plan”.

Consistent

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Directions on Setting Objectives - Pathway Management Plan

National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

The National Policy Direction outlines specific guidelines for Pathway Management Plans, much like the guidelines for Pest Management Plans above.

Chapter 15 outlines Pathway Management Plans for Pest Plants. This is a small chapter of the RPMP. Full criteria in NPD are not met, merely an educational advisory section on how to reduce the spread of harmful organisms. Refers to pests outlined in section 5 - Pest Management Plan. Different pest dispersal methods are discussed (E.g. Pest dispersal through contaminated machinery and equipment, pest dispersal through contaminated stock feed, crop and pasture seeds, etc.). For each of these dispersal issues, the plan outlines how to manage these E.g. WRC does not permit the sale of plants listed in section 5, knowledge for farmers to be aware of and questions to ask when sourcing stock feed, etc.

Not relevant or applicable to current RPMP

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Directions on Setting Objectives - Small-scale Management Programme

National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

The National Policy Direction outlines specific guidelines for Pathway Management Plans, much like the guidelines for Pest Management Plans above.

Is not included. Small paragraph regarding small-scale management programme under Section 7- Other management responses. Section 7.1.1 Small-scale management programmes states: WRC may undertake small scale management programmes for ‘’unwanted organisms’’ under section 100V of the Act. This provision could be particularly useful for harmful plants and animals not yet found in the Waikato region but which may arrive during the plan period. Waikato Regional Council may request a Chief Technical Officer to determine an organism as ‘’unwanted’’.

Not relevant or applicable to current RPMP

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Direction on Analysing Benefits and Costs – CBA for Simon Harris (Using MPI consistency checklist) (Appendix 1 outlines CBA for RPMP)

National Policy Direction for Pest Management 2015 Requirements (Using NPD Consistency Checklist)

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

Does the cost benefit analysis assessment sufficiently state for each subject, to an appropriate level of detail:

The impacts of the subject

(Using chocolate vine as an example) ‘’.... It produces black fruit that are bird spread…. has the potential to cause damage to environmental values by occupying native habitats.’’

Consistent

The option for response Do nothing (No RPMP), containment, eradication Consistent

The benefits and costs of each option Cost / Benefit Analysis is done on the intended scenario (containment), with following notes about where excess costs, etc. would come from if eradication alternative was taken. NPV of costs and production losses for each alternative are assessed and listed

Consistent

The assumption these are based upon Appendix 1 outlines different criteria used by the Harris e.g. cost of control, area, etc. Consistent

The risks to achieving the outcomes and measures to be taken to mitigate these

Included in a table with rankings for different risks e.g. moderate risk Consistent

The preferred option based on the above ‘’The results suggest that the containment scenario has lower NPV of costs than either the do-nothing approach or the eradication approach.’’

Consistent

Have the assessments been documented and are they publically available along with the Plan proposal?

Included in Appendix 1 of RPMP on Waikato Regional Council website Consistent

Direction on Analysing Benefits and Costs – CBA done by Waikato Regional Council Staff for 2014 RPMP (Using MPI consistency checklist)

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National Policy Direction for Pest Management 2015 Requirements (Using NPD Consistency Checklist)

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

Does the cost benefit analysis assessment sufficiently state for each subject, to an appropriate level of detail:

The impacts of the subject

(Using Japanese Walnut as an example) Competitive ability states - “Very competitive to most native species”

Consistent

The option for response Do nothing (No RPMP), containment, eradication Consistent

The benefits and costs of each option Costs of each option is outlined, with total costs for containment and eradication over 10 years stated also. However, appears to only be costs, and does not mentions benefits of each option as predominately. States that benefits outweigh costs if .. “Conservation values protected exceed $10.90 or if 1% of area is controlled in the absence of a strategy.” – This done using” base assumptions.”

Inconsistent

The assumption these are based upon Based on base assumption, containment assumptions, and eradication assumptions – all with their own subsections such as… “”Initial area infested”, ”proportion of land occupiers controlling pests.”. Unsure how they calculate the No RPMP/ do nothing option.

Consistent

The risks to achieving the outcomes and measures to be taken to mitigate these

Risks do not appear to be outlined throughout Inconsistent

The preferred option based on the above

“The desired outcome of the Regional Pest Management Plan (RPMP) is to prevent this plant from spreading from existing sites and eradicate plants that are in, or close to, significant natural areas.” Goes on to explain why in relation to each of the options.

Consistent

Have the assessments been documented and are they publically available along with the Plan proposal?

Included in Appendix 1 of RPMP on Waikato Regional Council website Consistent

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Direction on Analysing Benefits and Costs – CBA prepared for previous pest management plans (Using MPI consistency checklist)

National Policy Direction for Pest Management 2015 Requirements (Using NPD Consistency Checklist)

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

Does the cost benefit analysis assessment sufficiently state for each subject, to an appropriate level of detail:

The impacts of the subject

(Using African Feather Grass as an example) Under competitive ability - “Can displace competing specie due to spread of rhizomes. Forms dense clumps that exclude desirable vegetation.” Does not directly state what impacts the plant causes.

Consistent

The option for response Do nothing (No RPMP), eradication Consistent

The benefits and costs of each option Assumption calculations are formed for each option. Once again benefits are not as widely presented than costs.

Inconsistent

The assumption these are based upon Assumption are based on for example…” Initial area infested”, ”proportion of land occupiers controlling pests.”

Consistent

The risks to achieving the outcomes and measures to be taken to mitigate these

Risks do not appear to be outlined throughout Inconsistent

The preferred option based on the above

“Eradication is the preferred option as it produces a positive net benefit. The regional net benefit is $92,804, therefore the requirements of section 72(1)(b) of the Act are met.”

Consistent

Have the assessments been documented and are they publically available along with the Plan proposal?

Included in Appendix 1 of RPMP on Waikato Regional Council website Consistent

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Direction on Proposed Allocation of Costs for Pest Management Plan (Using MPI consistency checklist)

National Policy Direction for Pest Management 2015 Requirements (Using NPD Consistency Checklist)

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

When deciding on an appropriate grouping of subjects for an analysis for cost allocation, has the proposer considered the following?

Whether the subjects have similar groups of people who are beneficiaries and exacerbators?

Appendix 3 outlines proposed funding of costs Subjects have similar beneficiaries and exacerbators.

Consistent

Whether the exacerbators have similar legislative responsibilities and rights?

“The Crown agencies also have a limited ability to change behaviour because they are constrained by legislation” – In Note 1

Consistent

Whether the organisms are at a similar stage of infestation or whether there are similar management objectives for the organisms?

Not outlined in plan. Inconsistent

When determining the cost allocation to be proposed for a pest management plan have all the matters specified in Part 7 (2) of the NPD been taken into account?

Identifying and estimation of the direct and indirect costs of the plan

Could not find in Appendix 3. Direct cost estimated in Tale 6 under Section 12 Funding Provisions. Indirect costs are not outlined in this table, but could this be because in Note 1 Appendix 3, it is outlined that land occupiers are both exacerbators and beneficiaries and therefore costs cannot be efficiently allocated to land owners/ occupiers. Therefore, most costs are direct, and any indirect costs cannot easily be calculated for land owners who manage pests on their land.

Inconsistent

Identifying the beneficiaries of the plan (where possible)

Beneficiaries for each individual pest plant outlined in Appendix 3 Consistent

Identifying active and passive exacerbators (where possible)

Exacerbators for each individual pest plant outlined in Appendix 3 - not active or passive though.

Inconsistent

When determining the best allocation method and whether it is to have beneficiaries or exacerbators or a mixture of both bearing the costs of the plan, have all the factors in the NPD Part 7 (2)(d) been considered?

Note 4 - Proposer must assess how costs can be allocated fairly and practically. Cost primarily fall on land occupiers to control pests on their land is outlined as the fairest and most appropriate method to allocate costs. Good neighbour rules also apply to some pests. If a pest is difficult to control, the direct control by the Council can occur. Does not outline all matters under Part 7(2)(d) however.

Inconsistent

Has the process and assessments for determining the allocation of cost for each subject, or grouping of subjects,

Process available through Appendix 3 on Waikato Regional Council website.

Consistent

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within the plan been documented, and made publically available?

Direction on Programme Description

National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

1. For each subject in a pest management plan or pathway management plan, the plan must contain one or more of the following programmes, and may not contain any other types of programmes a. ‘’Exclusion Programme’’ in which the intermediate outcome for the programme is to prevent the establishment of the subject, or an organism being spread by the subject, that is present in New Zealand but not yet established in an area.

Each programme from a - e is outlined in Part 2 Definitions of Terms in the RPMP, they are all more or less word for word what is written in the NPD definitions on the left. Each pest plant or animal in Sections 5 and 6 are assigned one of these programmes. Appears to not differentiate an intermediate outcome from the programme. Other programmes are also outlined in Section 7 and Section 11 e.g. Weedbuster Programme. Pests are listed alphabetically, then stated which programme they fall under. Would be more efficient to categories the pests by programmes.

Inconsistent - seems to be confusion between differentiating the outcome and the programme.

(b) ‘’Eradication Programme’’ in which the intermediate outcome for the programme is to reduce the infestation level of the subject, to zero levels in an area in the short to medium term.

(c) ‘’Progressive Containment Programme’’ in which the intermediate outcome for the programme is to be contain or reduce the geographic distribution.

(d) ‘’Sustained Control Programme’’ in which the intermediate outcome for the programme is to provide for ongoing control of the subject, or an organism being spread by the subject, to reduce its impacts on values and spread to other properties.

(e) ‘’Site-led Pest Programme’’ in which the intermediate outcome for the programme is that the subject, or an organism being spread by the subject, that is capable of causing damage

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National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on Consistency

to a place is excluded or eradicated from that place, or is contained, reduced or controlled within the place to an extent that protects the values of that place.

(f) For pathway management plans, if none of the programmes in sub clause (a) to (e) are applicable, the plan must contain a ‘’Pathway Programme” in which the intermediate outcome for the programme is to reduce the spread of harmful organisms.

Small pathway plan in Section 15 of RPMP Not relevant

(2) The specific names for programmes as set out in sub clause (1)(a) to (f) must be as appropriate in all pest management plans and pathway management plans.

The programme names are exclusion, eradication, progressive containment, sustained control, and site-led. Advisory animal is included – not specific on what/ if any programme this falls under.

Consistent - except for use of advisory animal in animal section.

(3) The programme selected for a subject in a plan under sub clause (1) must be consistent with the pest management intermediate outcome stated for the subject in the plan under clause 4 of this national policy direction.

Appears to not differentiate an intermediate outcome from the programme. No strategic linkages.

Inconsistent

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Direction on Good Neighbour Rules - Regional Pest Management Plan

National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on consistency

1. Before a rule can be identified as a good neighbour rule in a regional pest management plan, the regional council must be satisfied of the matters in sub clause (a), (c), and (d) and must comply with the requirements in sub clause (b) and (e):

(a) In the absence of the rule, the pest would spread to land that is adjacent or nearby within the life of the plan and would cause unreasonable cost to an occupier of that land.

Most of the Good Neighbour Rules in NPD outline the method used to make a good neighbour rule for a specific location or pest. In the RPMP good neighbour rules are individually included or excluded for each pest plant or animal throughout Section 5 and 6. The RPMP outlined the implementation of the Good Neighbour Rule in Section 4.2.3.3, where it is stated that a site by site evaluation is needed to justify whether good neighbour rules are applicable. Appendix 4 of RPMP outlines the analysis of each good neighbour rule and its associated pest plant or animal - using word for word (more or less) criteria from the NPD in the Appendix.

Consistent - all in Appendix 4

(b) In determining whether the pest would spread as described in sub clause (a) the regional council must consider the proximity and characteristics of the adjacent or nearby land and the biological characteristics and behaviour of the particular pest.

(c) The occupier of the land that is adjacent or nearby, as described in sub clause (a), is taking reasonable measure to manage the pest or its impacts.

(d) The rule does not set a requirement on an occupier that is greater than that required to manage the spread of the pest to adjacent or nearby land as described in sub clause (a).

(e) In determining the rules to be set to manage the costs to an occupier of land that is adjacent or nearby, of the pest spreading, the regional council must consider:

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National Policy Direction for Pest Management 2015 Requirements

WRC Regional Pest Management Plan 2014-2024 Assessment Conclusion on consistency

(i) the biological characteristic and behaviour of the particular pest; and (ii) whether the costs of compliance with the rule are reasonable relative to the costs that such an occupier would incur, from the pest spreading, in the absence of a rule.

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Report to Strategy and Policy Committee March 2017 - For Decision

File No: 20 01 08

Date: 10 March 2017

To: Chief Executive

From: Director Science and Strategy

Subject: Hauraki Gulf Marine Spatial Plan (Sea Change) - Update

Section A (Committee has delegated authority to make decision)

Purpose To update the Committee on progress of the Hauraki Gulf Marine Spatial Plan (HGMSP - Sea Change Tai Timu Tai Pari), and seeks direction on adoption of the HGMSP and feedback to the Hauraki Gulf Forum.

Recommendations:

1. That the report Hauraki Gulf Marine Spatial Plan (Sea Change) (Doc # 10106162 dated 29 March 2017) be received

2. That Councils representative on the Hauraki Gulf Forum notes Council “support in-principle” for the integrated management approach to Sea Change

3. That Council staff are presently working with affected territorial authorities of the region to gauge their comments on the HGMSP

4. That the comment and input received from relevant territorial authorities is fed into Councils implementation responses to the HGMSP

5. That a comprehensive report on HGMSP implementation be provided to the May meeting of the Committee and that this report discusses:

a. Funding implications of implementation b. Actions and roles and responsibilities of Council c. Timetable for delivery of implementation methods d. Overview of partner agencies implementation approach

6. That the Waikato Regional Council HGMSP Implementation report be shared with the Hauraki Gulf Forum post the May Committee meeting.

Background The Hauraki Gulf Marine Spatial Plan (HGMSP – Sea Change Tai Timu Tai Pari) commenced in 2013. Waikato Regional Council was a founding project partner along with Auckland Council, Ministry of Primary Industries, Hauraki Gulf Forum, the Department of Conservation and mana whenua iwi. The Hauraki Gulf Forum was founded under the Hauraki Gulf Marine Park Act 2000 with the purpose of the Act being:

“To (a) integrate the management of the natural, historic, and physical resources of the Hauraki Gulf,

its islands, and catchments

(b) establish the Hauraki Gulf Marine Park

(c) establish objectives for the management of the Hauraki Gulf, its islands, and catchments

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(d) recognise the historic, traditional, cultural, and spiritual relationship of the tangata whenua

with the Hauraki Gulf and its islands

(e) establish the Hauraki Gulf Forum.” The Hauraki Gulf Marine Park includes the entire eastern coastal marine area of the Waikato Region, and all the Coromandel and Hauraki Plains catchments extending up to the headwaters of the Waihou and Piako Rivers in South Waikato. WRC is a statutory partner of the Hauraki Gulf Forum, along with the territorial authorities of Thames-Coromandel District, Hauraki District, Matamata-Piako District and Waikato District, the territorial authorities are also represented on the Hauraki Gulf Forum. The HGMSP ‘Sea Change’ arose from 3-yearly State of the Environment reports produced by the Forum, with those reports identifying a declining trend in the state of the Gulf. The HGMSP was a developed through a collaborative process (known as “Sea Change”) for the purpose of addressing the declining state of the Gulf. A ‘launch version’ of HGMSP was formally launched and released in December of 2016. Minor formatting editing is being undertaken and a final document is expected to be released by the end of March. The content of the final version will not have altered form the launch version, but there will be improvements to document formatting. An overview of this document was presented to Council in December 2016. Council asked staff to make contact with relevant territorial authorities to discuss the document and to seek comments. Next Phase With the Sea Change project now complete, and the finalisation of the HGMSP, all agencies are turning their minds to implementation. Individual agencies will each be undertaking their own implementation assessments which will be overseen by the Sea Change Project Board. The Hauraki Gulf Forum will receive updates on the implementation process. While the HGMSP is non-statutory and imposes no obligations on any agency, there is an expectation that partner agencies will adopt the HGMSP with implementation being fitted within their own statutory functions and addressed through individual work programmes and funding rounds. WRC staff have started a WRC-specific assessment of “what it means for us”, and are looking to present a proposed implementation plan for WRC to the Committee in May. Issues Staff have undertaken an initial assessment of the HGMSP and have identified some practical considerations around implementation. While most of the actions relating to WRC are achievable, some timeframes proposed are unrealistic and the methods for delivery are unclear. The HGMSP is also deliberately silent on lead agencies and funding requirements for actions recognising that each agency will undertake its own implementation assessments. Some agencies have clear statutory responsibilities for actions such as the Department of Conservation for proposed marine parks and protected areas and the Ministry of Primary Industries for fisheries management. From our initial assessment, WRC will have three possible roles, and there are three possible implementation outcomes. Possible WRC Roles

a. Lead the implementation of actions, either individually or jointly b. Support and inform others who are leading the implementation of actions c. No involvement (e.g. action is outside WRC’s statutory function).

Possible Implementation Actions

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a. Actions fall within existing WRC work programmes or budgets or are able to be delivered through existing work programmes

b. Existing WRC work programmes and budgets are able to be amended or adjusted to varying degrees to implement recommended actions

c. There is no existing or planned work programme for recommended actions, and the actions will require new programmes and budget if they were to be implemented.

Incorporating HGMSP into our Work The Sea Change Project Board and Project Steering Group considered the means where agencies could support the HGMSP, and identified two possibilities:

a. Agencies might receive the HGMSP b. Agencies might adopt the HGMSP.

“Receiving” the HGMSP (for information) is the lowest form of commitment. WRC has consistently made public statements in support of the HGMSP and the Sea Change process, while being cautious around committing to any recommend outcomes. “Receiving” the HGMSP would be inconsistent with previous public and consistent statements from WRC, and would not meet the expectations of other project partners, the Project Board of the Project Steering Group. “Adopting” the HGMSP provides a level of commitment and support. However simply “adopting” also has some risk in that it might be seen as a commitment to implement. Due to the uncertainties and considerations around implementation, “adopting” the HGMSP potentially sets WRC up for a commitment that may not be achievable, so is not recommended. The middle ground would be “adopt in principle”. This recognises some commitment to the process and the outcomes, but “in-principle” signals a cautious approach which is reflective of the uncertainty around implementation. It is staff’s recommendation that “adopt in-principle” the HGMSP is the right mix of consistent messaging for support, while signalling a level of uncertainty around implementation. Assessment of Significance To the best of the writer’s knowledge, this decision is not significantly inconsistent with nor is anticipated to have consequences that will be significantly inconsistent with any policy adopted by this local authority or any plan required by the Local Government Act 2002 or any other enactment. Legislative context To the best of the writer’s knowledge, this decision and recommendation to “adopt in principle” is not significantly inconsistent with nor is anticipated to have consequences that will be significantly inconsistent with any policy or strategic direction adopted by Council or any plan required by the LGA or any other enactment. Conclusion This report seeks a Council position on the Haruaki Gulf Marine Spatial Plan so as to inform communications with the Hauraki Gulf Forum and provide direction for staff in preparing an implementation programme. Simply receiving the HGMSP would be inconsistent with WRC’s position and communications to date, and the recommendation to adopt in principle is considered to provide the right balance between supporting a process that the Council committed to and precaution around commitment to implement.

Tony Quickfall Manager Policy

Tracey May Director Science and Strategy

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Report to Strategy and Policy Committee March 2017 – To be received

File No: 20 01 08

Date: 29 March 2017

To: Chief Executive

From: Director Science and Strategy

Subject: Thames Coromandel District Council Local Bill

Section: A (Committee has delegated authority to make decision)

Purpose To advise the Committee of a proposed Local Bill being sought by Thames Coromandel District Council (TCDC).

Recommendations:

1. That the report Thames Coromandel District Council Local Bill (Doc # 10092097 dated 29 March

2017) be received for information 2. That Council support Thames Coromandel District Council in their approach of seeking a

Local Bill for mangrove management 3. That Council takes a neutral position in regard to the content of the Bill 4. That Council and Thames Coromandel District Council continue to work cooperatively under

the Statement of Intent and that Thames Coromandel District Council keeps Waikato Regional Council informed of the progress of the proposed Local Bill on a regular basis.

Background On 16 February 2017, TCDC staff presented a Supplementary Order Paper to an Ordinary meeting of Council proposing a Local Bill to for the managed removal of mangroves. A copy of the paper is attached in Attachment A. TCDC subsequently made the following resolutions to:

a) Authorise the Mayor to seek the formal endorsement of other councils as potential cosponsors of a Local Bill relating to mangrove management

b) Instruct staff to progress the development of a Local Bill relating to mangrove management. Management of mangroves has a long history on the Coromandel Peninsula, with TCDC and Waikato Regional Council at the centre of mangroves management. By way of brief history:

The Waikato Regional Coastal Plan requires resource consent for mangrove removal. WRC’s ICM Directorate holds resource consents for the removal of mangroves at Whangamata

and Tairua. Exercise of these consents has been challenging and some unauthorised removal of mangroves

has continued through the term of the consent. Removal of mangroves under these consents is staged, with monitoring trends and triggers needing to be met before removal of the next

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stage can commence. At Whangamata removal of a subsequent stage was temporarily paused due to monitoring requirements not being met.

In May 2016, TCDC and WRC signed a Statement of Intent (Attachment B) for collaborative mangroves management. This includes a review of the Regional Coastal Plan to “facilitate the removal” of mangroves.

In December 2016, WRC staff commenced a review of the mangroves provisions of the Regional Coastal Plan in accordance with the Statement of Intent, as part of the wider Regional Coastal Plan Review. The mangroves review is on-going and has a planned date for draft provisions of mid-2017.

The Bill The proposed process being promoted by TCDC is as follows:

a. Seek support from local authorities from Northland to Bay of Plenty that have an interest in mangrove removal. To date, we are aware that Bay of Plenty Regional Council has provided support and other local authorities are currently considering their position on the Bill.

b. Seek co-sponsors for the Local Bill. TCDC would be the primary sponsor, and co-sponsoring from neighbouring local authorities that share a contiguous coastline would lend significant weight to the Bill.

c. Draft and present the Bill to parliament. The intention of the Bill would be to facilitate the removal of mangroves in the TCDC local authority area (and the other contiguous authority areas that co-sponsor the Bill).

d. The Bill would require the local Coromandel MP to introduce and promote the Bill through Parliament.

The effect of the Bill, if successful, would be to over-ride any RMA restrictions. In other words, it would over-ride the Waikato Regional Policy Statement and Waikato Regional Coastal Plan, any provisions of National Policy Statements, National Environment Standards or the RMA as it relates to mangroves management within the TCDC area. Local bills are subject to a public submissions process. Timing To be considered this calendar year (because of elections), the Bill would need to be introduced to Parliament by June 2017. If successful it could come into effect in 2018/19 depending on priorities and progress through Parliament. Likelihood of Success A Local Bill is not guaranteed of being passed, and is dependent on a number of highly variable factors. It is not possible at this stage to accurately advise of the likely success. Bill vs Plan Change Staff are progressing a review of the mangroves provisions of the Regional Coastal Plan in accordance with the Statement of Intent. There are two possible scenarios that may affect the current plan review process: Scenario 1 – The Local Bill is unsuccessful Under scenario 1, the work on progressing the plan review would proceed, and would be unaffected. Scenario 2 – The Local Bill is successful Scenario 2 would result in legislation being passed to facilitate the removal of mangroves. Under this scenario, the Bill would over-ride any plan review relating to mangroves, and the Regional Coastal Plan would need to be amended in accordance with the Bill.

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Scenario 2 presents some element of risk, in that substantive work may have been undertaken on a mangroves plan change that could be made redundant. However, if the Bill passage progresses, any mangroves work (research, information and analysis) that had been progressed would be available to inform the Bill. There are two possibilities within this scenario:

a. The mangroves plan review information usefully informs the Bill, and the Bill (if passed) is generally aligned with the WRC plan review process.

b. The mangroves plan review information is counter to the intent of the Bill and the Bill (if passed) is misaligned with the WRC plan review process.

At the time of writing, there is insufficient information available to provide any accurate advice on which if these scenarios is likely and whether the mangroves review information might reliably inform Councils input into the Bill. Customer impact Both the Bill and the WRC mangroves plan review are of high interest to the Coromandel community. There is no single position, and the community has mixed views over both support for and opposition to the removal of mangroves. Provided that WRC progresses the Regional Coastal Plan review in accordance with the Statement of Intent, any negative customer feedback should be limited to the issue (i.e. whether mangroves should be removed or not), rather than process. In other words, WRC’s focus for the mangroves plan review should remain on due process, and a reliable evidence base of information, rather than the outcome. Statutory Responsibilities and Legal Implications The mangroves plan review falls under the RMA. While the Statement of Intent provides a good faith framework, it has no legal standing. Both the Regional Policy Statement and the RMA are the presiding legislative documents which must be given effect to. WRC must follow due process for the mangroves plan review, to minimise the risk of any judicial review or legal challenge over process. For this reason it is essential that the mangroves outcome (remove, protect or allow some removal) is not pre-determined ahead of the review process. Despite diverse positions and a guiding Statement of Intent, WRC must maintain an objective approach to the plan review in order to minimise risk of legal challenge and for any amendments to be defended in the Environment Court. If the Bill is unsuccessful, WRC would not want to find itself in a position of bias that might compromise the integrity of the RMA process relating to the mangroves plan change, and be open to legal challenge. For these reasons, it is recommended that WRC maintains a neutral position on the Bill, and allows the Bill to run its course, and that WRC responds accordingly if formally requested to support the Bill. Financial Implications A successful Bill may result in costs and resources being spent on the mangroves plan review being made redundant. Staff estimate the cost the mangroves plan review to be around $150,000, excluding staff time. It would be possible to “pause” the plan review process until the outcome of the Bill is known. While this may avoid some cost expenditure if the Bill was successful, the following considerations are important:

a. The mangroves plan review has been budgeted for and is underway. b. “Pausing” the review would cause additional delay in a resolution to the mangroves issue if

the Bill was unsuccessful, and may further frustrate the Coromandel community.

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Assessment of Significance Having regard to the decision making provisions in the LGA 2002 and Councils Significance Policy, a decision in accordance with the recommendations is not considered to have a high degree of significance. Mangroves management has a long history, and a Local Bill is just one further possible tool to fulfil some of the Coromandel community’s aspirations of removing mangroves. In the meantime, WRC staff have commenced the review of the mangroves provisions of the Regional Coastal Plan. While the outcome of this process cannot be pre-determined, it is expected that the mangroves plan review will result in substantial improvements to the coastal plan provisions around mangroves management, and better balance between protection and removal.

Tony Quickfall Manager Policy

Tracey May Director Science and Strategy

Attachments:

1. TCDC Supplementary Order Paper 2. TCDC and WRC Statement of Intent

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Attachment 1: TCDC Supplementary Order Paper TO Thames-Coromandel District Council FROM Peter Wishart- Strategic Relationships Manager Sam Napia - Director Strategic Relationships and Projects DATE 16 February 2017 SUBJECT A Local Bill Relating to Mangrove Management 1 Purpose of report The purpose of this report is to further inform Council of the process of a Local Bill to Address the removal of mangroves. 2 Background Mangroves and their management have been a long-term, controversial issue within the District. In May 2016, a Statement of Intent (SoI)1 was signed between the Waikato Regional Council (WRC) and the Thames-Coromandel District Council (TCDC). The SoI records the councils' desire to work collaboratively with their communities of interest to address the issue of mangrove management. One important action arising from the SoI was for WRC to initiate a plan change to facilitate mangrove removal in advance of the review of the Regional Coastal Plan. In discussion with WRC staff, we understand that this action has commenced and that the various components of the mangroves policy review are being aligned. In the meantime, the current resource consent held by WRC, for mangrove removal in the Whangamata harbour, is live. Attached to that consent is an environmental monitoring management plan (EMMP). A condition of consent2 requires that the EMMP be reviewed prior to the commencement of stage two removal (and thereafter, every five years). A draft EMMP review report has been presented to the parties3 to the consent, and consultation with these parties will soon commence. As part of this review, it was requested that TCDC, as a party to the SoI, have observer status in the consultation process. The request was given due consideration by WRC, but in the end WRC advised that it could not accommodate observers in the EMMP review process. 1 See Attachment A. 2 Condition 37 - WRC resource consent 122986. 3 The parties here referred to include the Royal Forest Protection Society; the Department of Conservation; Whangamata Harbour Care Incorporated; Whangamata Residents and Ratepayers Association Incorporated; Ngati Whanaunga.

Whilst these two actions are progressing, TCDC staff have been asked to provide this information on a Local Bill. The requested information specifically relates to the potential for such a Bill to be co-sponsored by more than one local authority. 3 Issue A possible plan change, being an action arising out of the SoI with WRC, is progressing. The resource consent for mangrove removal is live. In the meantime, however, staff have been asked to provide information on the process for initiating a Local Bill for mangrove removal. 4 Discussion A Local Bill is a public bill promoted by a local authority, or local authorities. Such bills deal with matters confined to a particular locality to allow a function not authorised in the general

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law to be undertaken. It is important to note that a Local Bill cannot amend a public Act, except purely consequentially. Because mangrove management is an issue that affects councils from the Bay of Plenty to the Far North, the question that has been raised is whether a Local Bill can operate across districts, noting that it is possible to have Local Bill co-sponsors whose boundaries are contiguous. The Thames-Coromandel District Council can promote a Local Bill in relation to mangrove removal in its own area; it is noted that this matter been reported on in the past4. However, staff have been asked to address the possibility of other councils joining in to a Local Bill if they so choose; specifically, Auckland Council through to Western Bay of Plenty District Council, including TCDC and Hauraki District Council. It is theoretically possible to link these councils to the same Bill because it can be demonstrated that there is an unbroken contiguous chain of these local authorities5. It bears noting that the essential connection between all four authorities, were all four to cosponsor a Local Bill, is the Hauraki District Council. Beyond this matter of contiguity, in summary, the requirements for a Local Bill are that the Bill:

o Is promoted by a local authority o Affects a particular locality only o Is on a single subject matter o Is intended to change or limit the effect of the general law in its application to the

particular locality concerned o Must not have the objective of amending general Acts but may seek to create an exception

to it in respect of a particular locality, which is one of the principal reasons for promoting Local Bills

o May not have region-wide effects in respect of a function which is not generally administered as a regional matter

o Needs to be promoted by a local Member of Parliament. The local member does not have to agree with the policy proposal to promote the Bill

o The person who ultimately decides whether a Bill meets the criteria to be a Local Bill is the Speaker of the House.

4 Report to Council by Area Manager Whangamata/Tairua/Pauanui dated 14 August 2009. 5 See Attachment B: Map of North Island regional and territorial local authority boundaries.

Since the signing of the SoI in May last year, exploratory discussions around the possibility of initiating a Local Bill have occurred at the governance and executive levels of WRC and TCDC. It is recommended that this option be further explored. 5 Suggested resolution(s) That the Thames-Coromandel District Council:

a) Receives this 'A Local Bill Relating to Mangrove Management' report, dated 16 February 2017. b) Authorises the Mayor to seek the formal endorsement of other councils as potential

cosponsors of a Local Bill relating to mangrove management. c) Instructs staff to progress the development of a Local Bill relating to mangrove management.

References-Tabled/Agenda Attachments Attachment A: Statement of Intent (Doc Set # 469200) Attachment B: Map of North Island local government (Doc Set # 4692081)

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Attachment 2: WRC and TCDC Statement of Intent

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Report to Strategy and Policy Committee – March 2017 - To be received

File No: 21 02 11

Date: 16 March 2017

To: Chief Executive

From: Director Science and Strategy

Subject: Update on Hamilton to Auckland passenger rail assessment

Section: A (Committee has delegated authority to make decision) Purpose To update the Strategy and Policy Committee on work being progressed on the Hamilton to Auckland passenger rail service by the Project Steering Group of the North Waikato Integrated Growth Management Programme Business Case.

Recommendation:

That the report “Update on Hamilton to Auckland passenger rail assessment” (Doc # 10117653 dated 16

March 2017) be received.

Background The Hamilton to Auckland Passenger Rail Working Party (RWP)1 was formed in 2010 to work through the technical and operational feasibility of establishing a passenger rail service between Hamilton and Auckland, and to make recommendations to member organisations on the preferred service option and funding requirements. The preferred service option that was recommended by the RWP was: “A 2-year pilot trial of Hamilton to Auckland passenger rail service via the Waterfront route (through

Sylvia Park/ Glen Innes) onto the Strand station and carrying on to Newmarket as the termination

point for the peak service.”

The final RWP Recommendation Report along with the preferred service proposal was presented to Waikato Regional Council and partner councils (Auckland Council, Hamilton City Council, Waikato and Waipa District Councils) in November 2011. However the proposal was not supported by Waikato Regional Council and the partner councils due to the potential financial impacts on the community, and the associated network constraint issues which will need to be resolved in order to improve the service efficiency and reliability. A summary of the key findings from the final RWC Recommendation Report, including the detailed analysis of the preferred option, is outlined in attachment 1. The final RWP Recommendation Report

1 The RWP comprises representatives from Waikato Regional Council, Hamilton City Council, Waikato and Waipa District Councils, KiwiRail, Auckland Transport, Auckland Council, NZTA and the Campaign for Better Transport

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and the accompanying technical studies are available on Waikato Regional Council website - http://www.waikatoregion.govt.nz/Services/Regional-services/Transport-services/Passenger-rail/. Current policy context for passenger rail The role of inter-regional passenger rail was considered further during the review of Waikato Regional Land Transport Plan (RLTP) in 2014/15. The operative 2015-25 RLTP identifies that the passenger rail service between Hamilton and Auckland is a medium to long term priority for the Waikato region and the immediate focus is around route protection and to promote the North Island Main Truck railway as a primary freight corridor for the upper North Island (Policy 41). The Plan recognises that whilst the passenger rail is not a current priority for the region, the role of rail in providing for passenger services will need to be re-examined again in the context of future land use and population growth in north Waikato, and in the broader context of determining future transport priorities following completion of the Waikato Expressway. The RLTP also identifies a number of critical constraints/factors that will need to be considered to support a passenger rail service between Auckland and Waikato, including the completion of third rail line in Auckland and the extension of electrification of the rail line from Papakura to Pukekohe. The Draft Waikato Plan developed under the guidance of a joint committee established by the Waikato Mayoral Forum includes actions that focus on improving cross-boundary public transport connections. It identifies connecting our communities through targeted investment as one of five priorities for the region, and integrating Auckland and Waikato’s transport networks as one of 10 first order priority actions. Finally, the Waikato Means Business Strategy 2014 identifies maintaining and building our location advantage, and building, attracting and retaining skills and talent as strategic priorities and areas of focus for the region. While there is not a clear policy mandate for the provision of an inter-regional passenger rail service, the current regional policies do reflect the Waikato region’s desire to improve inter-regional planning/collaboration and transport connections between Waikato and Auckland, and to look at ways to maximise the potential of each region and drive economic activity and growth. Current Action – Assessment of 2011 Auckland to Hamilton passenger rail proposal A joint Auckland-Waikato political meeting was held on 19 July 2016 to bring together elected representatives and senior staff from Auckland Council, Waikato District Council, Waikato Regional Council, Hamilton City Council and key stakeholder organisations (WaterCare, Auckland Transport and the New Zealand Transport Agency) to discuss and confirm key cross-boundary issues and to agree on shared objectives and investment opportunities. There was general consensus amongst meeting participants that the size and scale of anticipated growth in both Auckland and the Waikato means it cannot be business as usual if cross-boundary issues are to be addressed and that a multi-stakeholder and sub-regional approach is needed, including coordination of planning and investment. At the meeting the group also agreed on a list of actions, including a position paper on passenger rail to be prepared, with a shared view across councils, Auckland Transport and NZTA. This paper will help to inform the strategic transport planning documents (i.e. RLTP and RLTP) and will form an important mechanism for engaging with central government on passenger rail issue. Given that the position paper will need to be supported by robust growth and land use information for the North Waikato/South Auckland area, the Steering Group established for the North Waikato Integrated Growth Management Programme Business Case (NW PBC) has agreed to progress the rail

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assessment under the steering group umbrella as a distinct piece of work. The steering group consists of Waikato District Council, Waikato Regional Council, NZ Transport Agency, Auckland Transport, and Auckland Council. Hamilton City Council has also been included on the Steering Group to assist with the rail review work. It was also proposed that the starting point of this rail review project will be a review of the key assumptions and service proposal identified in the 2011 Final RWP Report. The 2011 work will be reviewed in light of any new information to ascertain if conditions have changed and whether the preferred service proposal identified by the RWP is still ‘operationally feasible’ under the current policy and operating environment. The work is currently underway and it is expected that the assessment will be completed by end of March this year. Next Steps It is expected that once the assessment is completed, a report will be prepared by the NW PBC Steering Group to outline the key findings and to make recommendations on appropriate options for next steps. This report will be forwarded by the Steering Group to the NW PBC project partner organisations (including Waikato Regional Council) in April/May to seek their decision on a preferred way forward in respect to Hamilton to Auckland passenger rail service. Assessment of Significance To the best of the writer’s knowledge, this decision is not significantly inconsistent with nor is anticipated to have consequences that will be significantly inconsistent with any policy adopted by this local authority or any plan required by the Local Government Act 2002 or any other enactment.

Annika Lane Manager Integration

Tracey May Director Science and Strategy

Attachment

1. Final Recommendation Report of the Rail Working Party – summary of the preferred service proposal between Hamilton and Auckland (August 2011)

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Attachment 1: 2011 Final Recommendation Report of the Rail Working Party – Summary of the preferred service proposal A number of service options were investigated by the RWP, however considering the operational viability of the various options and taking account of customer preference and other information available, the RWP identified the preferred service option to be: “Hamilton to Auckland service via the Waterfront route (through Sylvia Park/ Glen Innes) onto the Strand station and carrying on to Newmarket as the termination point for the peak service.” The service proposal included: Two peak and two off-peak trips every weekday Services five days a week excluding public holidays The service was to be operated by one Silver Fern (SF) railcar with a seating capacity of 96 passengers to start with. The railcar has been refurbished to a high standard including, new interiors, larger windows and power points for laptop use. The proposal was intended for the service to run between the Frankton rail station in Hamilton and Newmarket in Auckland (via the Strand station) at peak times. The off-peak service would operate between Frankton in Hamilton and Britomart station in Auckland. The proposed service included stops at the following stations: Frankton, Hamilton The Base, Hamilton Huntly, Waikato District Te Kauwhata, Waikato District Tuakau, Waikato District Papatoetoe, Auckland The Strand, Auckland Newmarket, Auckland It was expected that the maximum travel time is 2 hours 20 minutes from Hamilton to the Strand and the average travel time is estimated to be closer to 2 hours. The proposed timetable for the services is set out below:

Two peak services Monday to Friday

Depart Hamilton (Frankton station) 06:00

Arrive the Base, Hamilton 06:10

Arrive Strand, Auckland 08:20

Arrive Newmarket, Auckland 08:27

Depart Strand, Auckland 17:30

Arrive Hamilton 19:45

Off peak services (2 off peak services; one departing Auckland and one departing Hamilton) Depart Auckland (Britomart) 09:30

Arrive Hamilton 11:45

Depart Hamilton 14:30

Arrive Auckland (Britomart) 16:45

Depart Auckland (Strand) 17:30 (return peak service noted above)

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A detailed financial analysis was carried by the RWP for the preferred service option, and this is provided below. Fare assumptions It was proposed that base fare will be set at $24 one way from Hamilton to Auckland, based on the market research and customer feedback. Patronage assessments The final RWP Recommendation Report provided a broad analysis of the patronage forecasts which are outlined in the table below.

Daily Peak Period Patronage Forecasts (flow in each direction) Station Low forecast Medium forecast High forecast

Hamilton, Frankton 16 30 54 Hamilton, The Base 25 40 36 Huntly 5 7 10 Te Kauwhata 3 5 7 Tuakau 16 27 35 Total all stations 65 109 142

Costs Cost projected below are based on operating costs provided by KiwiRail in December 2010. Operating cost (per annum) $1.97 million Infrastructure cost (station upgrade) $0.92 million Contingency and marketing expenditure $100,000 Total cost for a 2 year trial period $2.99 million Note: No estimation has been made of management or other administrative costs on Waikato Regional Council for managing this service. Funding requirements Base on the medium patronage projections, with the services stopping at all stations using a single Silver Fern unit, the revenues from passengers would cover about 40 per cent of the costs of operation, leaving an average funding gap of $1.2 million per year over the 15 year period. Overall, the project would achieve a Benefit Cost Ratio (BCR) of about 1.4 throughout its operating period. It should also be noted, as part of the RWP process, the NZTA has clearly stated that this project will not receive any subsidy from the National Land Transport Programme as it does not align with the national funding priorities from the Government Policy Statement on land transport (GPS), and the project will need to be funded entirely through local share funding.

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Doc #10029003

Report to Strategy and Policy Committee March 2017 –Decision required

File No: 01 12 18A

Date: 6 March 2017

To: Chief Executive Officer

From: Chief Financial Officer

Subject: 2018-2028 Long Term Plan (LTP) Development

Section A (Committee has delegated authority to make decision)

Purposes

This report will:a) confirm the Strategy and Policy Committee’s role for oversight of the 2018-2028 Long Term Plan (LTP)

process,b) outline the LTP development programme and set out the work plan for the next six months,c) introduce the first pieces of work for the Committee to consider (elsewhere in this agenda):

i) Group of Activities (GOA) Structure (Doc #10051200)ii) Approach to the Levels of Service (LOS) Review (Doc #10052522)iii) Approach to reviewing the Revenue and Financing Policy (Doc #10068000)iv) Approach to reviewing the Statement of Investment Policy and Objectives (SIPO) (Doc

#10092656)

Recommendations:

1. That the report ‘2018-2028 Long Term Plan Development’ (Doc # 10029003) dated 6 March be received,and

2. That the Long Term Plan (LTP) development programme, as presented, be confirmed.

Background

Local Government Long Term Plans (LTPs) are developed every three years, with a 10 year horizon. As adocument the LTP is required to describe:

What we do - the activities/services we undertake and fund, detailing the level of service for eachand the key measures we will use to show we are delivering on that service,

Why we do it - what outcomes we intend to achieve, the legislative and community mandate thatexists,

What each activity costs and how it is funded, How we manage our finances and coordinate our resources, The impact on all rates.

The 2018-2028 LTP development programme was introduced at the council induction workshop in November2016, and a report presented to council in December 2016 outlined the key ‘building blocks’ of the LTP.

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Doc #10029003

It has previously been agreed that the key objectives for this project are to develop a long term plan which: reflects the council’s strategic direction, is a document which provides better “line of sight” for staff, is a robust 3 year plan (unlikely to need LTP amendments each year and remains a relevant reference

for its three year life and for developing the next plan), complies with legislation and receives an unqualified audit report.

In summary, there are 12 key building blocks, fundamental to an integrated Waikato Regional Council LTP:

1 Strategic Direction2 Context Setting3 Groups of Activities structure4 Engagement Coordination5 Significance and Engagement Policy6 Key Forecasting Assumptions7 Levels of Service (LOS) Reviews8 Service Delivery Reviews (s17A of the Local Government Act)9 Performance Measurement Framework10 Infrastructure Strategy11 Financial Strategy12 Revenue and Financing Policy

2018-2028 LONG TERM PLAN TIMING

Role of Strategy and Policy Committee

Oversight of the LTP development falls within the Scope of Activity of the Strategy and Policy Committee (theCommittee):

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Doc #10029003

Scope of activity…To maintain oversight of all council’s policy and plans to ensure alignment with strategy.

It is proposed that the Committee be the reference group for LTP development, consider reports relating toeach stage of the LTP work programme, and make recommendations to Council to achieve the desiredobjectives.

NB: The Infrastructure Strategy will be considered first through the Integrated Catchment ManagementCommittee before coming to the Strategy and Policy Committee.

Work to date

Staff have established a Project Control Group (PCG) comprising the Chief Financial Officer (Mike Garrett),Director Community and Services (Neville Williams), Finance Manager (Janine Becker), Corporate PlanningManager (Jane Hamblyn), and LTP Project Manager (Nicole Hubbard) to:

Review the project process and manage risks and issues Confirm the viability of the project approach Provide peer reviews of all project deliverables Coordinate inputs into the project planning Celebrate and broadcast the success of the project

To assist the planning of the LTP a strategy group of senior managers from across the organisation has beenset up to provide advice and direction.

Of the key building blocks, items 1 and 2 in the list have been completed:

Key Building Block

1 Strategic Direction Our Strategic Direction 2016-2019 was adopted December 20162 Context Setting Business We Are In workshops were held early 8-9 February 2017 with a

final session to be arranged.

From a staff point of view, work has commenced on many of the other items, guided by the LTP GovernanceGroup, the LTP Strategy Group (as described above), and specific work programmes.

The next six months

Key building block items for consideration by the Committee, and Council, are set out in the table,overleaf. The three items scheduled for this Committee meeting of 29 March are includedelsewhere in this agenda.

The next major item is LTP engagement co-ordination (key building block item 4). Work is currentlyunderway on an Integrated Engagement, Communication and Media (ECM) Plan. The proposal isfor a three phased approach to LTP engagement and consultation. The first (pre-engagement) phasebetween April and June 2017 consists of seeking input on high level issues and identifying commonpriorities from our key influencers and partners.Phase 2 (June 2017 - February 2018) will be spent raising awareness of the roles and responsibilitiesof the Regional Council and generating interest in participating in the LTP process. Phase 3 (February– April 2018) will be for seeking feedback, and will include the formal submission period. After thistime the process moves in to hearings, deliberations and adoption of the LTP by 30 June 2018.

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Doc #10029003

Date Key Building Block Action Committee To Council29 Mar 3 Groups of Activities

structureConfirm proposed structure(Doc #10051200)

S&P Committee 27 Aprilas required

7 Levels of Service (LOS)Reviews

Confirm proposed approach(Doc #10052522)

S&P Committee

12 Revenue andFinancing Policy

Confirm scope for review ofRevenue and FinancingPolicy (Doc #10068000)

S&P Committee

April(TBC)

4 EngagementCoordination

Integrated Engagement,Communication and Media(ECM) Plan

April

16 May 5 Significance andEngagement Policy

Draft policy for endorsement S&P Committee 25 Mayas required

6 Key ForecastingAssumptions

First draft for consideration S&P Committee

8 Service deliveryreviews

Confirm proposed approach S&P Committee

11 Financial Strategy First draft of financialassumptions forconsideration

S&P Committee

27 Jun 9 PerformanceMeasurementFramework

Confirm aspects offramework related todevelopment of LTPmeasures

S&P Committee 27 Julyas required

7 Levels of Service (LOS)Reviews

Workshop LOS options. Councilworkshop

10 Aug 10 Infrastructure Strategy First draft for consideration ICM Committee 31 Augustas required

August(DateTBC)

7 Levels of Service (LOS)Reviews

Report pre-engagementresults to Council and anyupdates on LOS options.

Councilworkshop

31 Augustas required

19 Sep 10 Infrastructure Strategy Revised draft for approval S&P Committee 26 Septemberas required

Summary and Conclusion

The development of the 2018-2028 Long Term Plan (LTP) includes an 18 month programme of work whichcommenced in December 2016, and which will be completed in June 2018.

The Strategy and Policy Committee will receive and consider matters relating to this developmentprogramme.

Nicole HubbardLTP Project Manager

Jane HamblynCorporate Planning Manager

Mike GarrettChief Financial Officer

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Doc #10051200

Report to Strategy and Policy Committee March 2017 –Decision required

File No: 01 12 18A

Date: 16 March 2017

To: Chief Executive Officer

From: Chief Financial Officer

Subject: 2018-2028 Long Term Plan groups of activities structure

Section B (For recommendation to council)

PurposeTo confirm the groups of activities structure for the 2018-2028 Long Term Plan.

Recommendation:

1. That the report 2018-2028 Long Term Plan groups of activities structure (Doc # 10051200) dated 6March be received, and

2. That the 2018-2028 Long Term Plan (LTP) groups of activities structure, as presented, berecommended to council for adoption.

BackgroundSchedule 10 of the Local Government Act 2002 requires all councils to organise their work into groups ofactivities (GOAs). GOAs are a fundamental building block for the long term plan (LTP) that have implicationsfor:

the level of detail disclosed in the LTP; financial and planning information systems; transparency and ease of understanding within the community.

Following the Fit for Purpose restructure, a new GOA structure was developed for the 2015-2025 LTPcontaining seven GOAs and 24 activities (as outlined in table overleaf). The GOA structure was developedbased on the following set of principles developed in 2012:

better accountability and transparency through having a more detailed GOA structure, closelyaligned to organisational structure;

describe to the community why we do the work we do, rather than what we do; ensure council has the right level of aggregation of activities to enable meaningful strategic

discussions both internally and externally.

Proposed structure for the 2018-2028 Long Term PlanThe GOA structure used in the 2015-2025 LTP aligns with the current organisational structure and with nochanges to the long term outcomes of council (Healthy Environment, Strong Economy and VibrantCommunities) staff recommend that the current GOA structure largely be retained for the 2018-2028 LTP,with the addition of one new GOA (separating out the Civil Defence Emergency Management Group activity)and changes to the name of one GOA and four activities. The primary benefit in not dramatically altering thestructure is it will ensure consistency between the 2015-2025 and 2018-2028 LTPs.

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2015-2025 LTP GOA structure Proposed 2018-2028 LTP GOA structureGroup of Activities Activities Group of Activities ActivitiesScience and Strategy Environmental monitoring Science and Strategy Environmental monitoring

Environmental information Environmental science and information(previously environmental information)The addition of ‘science’ to the titlehighlights that it is science based evidenceunderpinning council’s decision making onthe allocation and management of theregion’s resources.

Social and economicinformation

Social and economic information

Regional strategy development Regional strategy developmentResource management policy Resource management policyIntegration and infrastructure Integration and infrastructure

Resource Use Consent processing andcompliance

Resource Use Consent processing and compliance

Investigations and incidentresponse

Investigations and incident response

Maritime services Maritime servicesCommunity andServices

Governance Community andServices

GovernanceIwi partnerships Iwi Maori participation (previously iwi

partnerships)Tai-ranga-whenua requested this changeas it better reflects the breadth ofengagement undertaken by WRC.

Community partnerships Community partnershipsPlanning and reporting Planning and reporting

Waikato CivilDefence EmergencyManagement Group

Waikato Civil Defence EmergencyManagement GroupThis is a new GOA to reflect that theWaikato CDEM Group is not solely WRC’sbusiness, but rather a group made up oflocal authorities, emergency services,government departments etc.

EmergencyManagement

CDEM Group Regional hazards andemergency responseThis name waschosen as it reflectsboth the operationaland strategic(planning) side of theactivity.

WRC emergency managementWRC emergency management Resilient developmentResilient development

IntegratedCatchmentManagement

Catchment management andplanning

IntegratedCatchmentManagement

Catchment management and planning

Environmental farming systems Land management advisory services(previously environmental farmingsystems)This activity name is a betterrepresentation of the work this activityundertakes.

Biosecurity BiosecurityBiodiversity Biodiversity

Flood Protection andControl Works

Flood protection Flood Protection andControl Works

Flood protectionRiver management River managementLand drainage Land drainage

Public Transport Public transport Public transport Public transportNote: yellow highlights are changes

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Consequences of an additional GOAThe consequences of including a new GOA are minimal. The Waikato CDEM Group GOA will be added intothe GOA section in the LTP document along with performance measures and financial statements.

ConclusionIt is proposed that the GOA structure for the 2018-2028 LTP remains largely unchanged from the 2015-2025LTP to ensure consistency between the two plans. However, there has been the addition of one new GOAand name changes for four activities.

Anthea SayerSenior Corporate Planner

Mike GarrettChief Financial Officer

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Appendix 1 - Summary of each group of activities as per 2015-2025 LTPWill be updated for the 2018-2028 Long Term Plan

Community and servicesThis group of activities includes four activities:

governance iwi partnerships planning and reporting community partnerships.

GovernanceThis activity supports the chairperson and councillors in their roles and ensures council processes, such astriennial elections and meetings, are run correctly and decision making processes are robust and transparent.This includes working in partnerships and collaboratively by providing for iwi, community and key stakeholderrepresentation on the council’s standing subcommittees and councillor representation on other localgovernment, key stakeholder and community groups. Maintaining the integrity of the council’s processes isalso supported by the provision of corporate legal advisory services and timely and appropriate responses toofficial information requests and Ombudsmen’s office enquiries.

Iwi partnershipsWaikato Regional Council works with iwi and hapū at a political and operational level to ensure the traditionalrole of tangata whenua as kaitiaki is respected and there are avenues available for tangata whenua and Māoricommunities to contribute to the council’s decision making. The council is building its capacity to deliver onco-management obligations arising from Treaty of Waitangi settlements.

Planning and reportingThis activity includes development of statutory plans and reports to improve transparency and accountabilityto our residents and ratepayers. These include long term plans, annual plans and annual reports. Financialand service performance is reported to the council quarterly and reported to the public annually via an annualreport. Regular monitoring and reporting is important as it assesses whether the council’s policies andservices achieve their intended objectives.

Community partnershipsThis activity reflects the importance the council places on collaboration, demonstrated by our mission of"working with others to build a Waikato that has a healthy environment, strong economy and vibrantcommunities”. Work programmes within this activity include Enviroschools, road safety, clean heatincentives, waste minimisation, and corporate and business sustainability. These programmes share a focuson multi-agency relationships to bring about sustainable behaviour change.

Emergency managementThis group of activities includes three activities:

Civil Defence and Emergency Management (CDEM) Group Waikato Regional Council emergency management Resilient development.

Civil defence and emergency management groupUnder the CDEM Act 2002, CDEM is a function and responsibility of regional, district and city councils.Consequently, all local authorities throughout New Zealand have joined together on a regional basis to formCDEM groups. These groups, in partnership with emergency services and other organisations, are responsiblefor emergency management locally.

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The Waikato CDEM Group comprises the Waikato Regional Council and 10 territorial authorities, inconjunction with emergency services, welfare agencies and utility providers. It has four emergency operatingareas – South Waikato, Taupō, Waikato Valley and Thames Valley. These provide CDEM services at the locallevel. The Waikato CDEM Group works closely with research institutions, utility operators and centralgovernment, which all have vested interests and responsibilities to reduce risks and improve communityresilience.

The Waikato CDEM Group is responsible for delivering on the 4 Rs (readiness, response, reduction andrecovery) as outlined in the CDEM Group Plan. This involves operational planning to ensure that CDEMorganisations and the community have the capacity and a capability to respond to an emergency. It includescommunity, organisational and business readiness and involves all activities required in the pre-emergencyperiod. Specific readiness activities include maintaining the Group Emergency Coordination Centre, publiceducation and awareness, training and exercises, information management, liaison and communityresilience/participation.

The Waikato Regional Council performs the statutory role of administering authority on behalf of the WaikatoCDEM Group Joint Committee and the Coordinating Executive Group (CEG) through a service levelagreement. Waikato Regional Council is also responsible for the CDEM Group Emergency Management Office(GEMO) which coordinates the ‘day-to-day’ planning and project work on behalf of the group and CEG. TheGEMO is physically located at Waikato Regional Council offices. Like the administering authority and GEMO,the Group Emergency Coordination Centre is based at Waikato Regional Council and is activated when thereis a need for a coordinated regional response to an emergency or during major national or regional exercises.

Waikato Regional Council emergency managementWaikato Regional Council provides facilities, staff, resources and information in support of the Waikato CDEMGroup.

Under the Resource Management Act (RMA) 1991, the council must collate information on hazardoussubstances and respond to emergencies involving the accidental release of these substances. Also requiredunder the RMA is the round the clock monitoring and provision of flood event information to the communityas required.

The Maritime Transport Act 1994 requires the council to plan for and respond to certain marine oil spillswithin the region. Tier 1 (industry) and tier 2 (regional) marine oil spill contingency plans are kept updatedand approved by the Waikato Regional Council and Maritime New Zealand respectively. Regional (tier 2)marine oil spill exercises with relevant agencies are also undertaken annually.

Resilient developmentThis activity involves the collection and provision of strategic information and advice to district councils, theWaikato CDEM Group and landowners on a range of hazards, on behalf of the regional community andstakeholders. The information is used to help identify areas of the region most at risk from hazard events,and to minimise risk and damage to people, homes, businesses and infrastructure. This ensures risks fromhazards are reduced over time and sound decisions are made about the future development of hazard proneareas.

By better understanding natural hazard risks, communities can prepare for or avoid them. The council pullstogether and analyses a wide range of information to identify where homes and businesses are most at riskfrom floods, erosion and other natural hazards, as well as building and maintaining infrastructure to reduceidentified risks. This work includes collaborating with district councils to ensure people avoid building inhazardous areas into the future.

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Flood protection and control worksThis group of activities includes flood protection, land drainage and river management deliveredgeographically by zone. There are eight zones in the Waikato region. Each zone is represented by communitymembers on a catchment committee.

Flood protectionWaikato Regional Council provides communities with an agreed level of protection from floods. The councilis the primary agency responsible for flood protection and assets, which include stopbanks, floodgates, pumpstations, channels/streams and pumps. The flood protection services are focused on those specificgeographic areas where schemes have been agreed with communities. The services are closely connected tohazard, risk and land use management.This activity also includes the Lake Taupō Foreshore Erosion and Flood Strategy and associated workprogramme. The strategy was developed jointly with Taupō District Council to manage foreshore erosionaround Lake Taupō. It is implemented in conjunction with Taupō District Council, Tūwharetoa Māori TrustBoard, hydro power generators and property owners.

Land drainageWaikato Regional Council manages a multi-million dollar system of natural and built infrastructure to keepproductive pastoral land draining freely. There are over 90 individual land drainage schemes. Each scheme isfully funded under its own targeted rating.

River managementWaikato Regional Council manages rivers and streams to reduce effects on communities of bank erosion,channel instability and blockages. Programmes are based on priority and the level of risk to people andproperty.

A guiding principle for the council is ‘integrated’ catchment management which seeks to promote thesustainable management of the region’s natural resources. There are strong linkages between the activitiesin this group and the Integrated Catchment Management and Emergency Management groups of activities.

Integrated catchment managementThis group of activities includes:

catchment planning and management biosecurity biodiversity environmental farming systems.

Integrated catchment management brings together a range of the council’s functions to deliver services bycatchment to achieve multiple benefits, such as soil stability and improved water quality. A ‘whole ofcatchment’ or integrated catchment approach allows us to direct funding and resources in a more strategicand prioritised manner. There are eight catchments, known as zones, in the Waikato region.

A comprehensive catchment liaison subcommittee structure with region-wide coverage underpins thisapproach. This enables the council to connect with communities more efficiently and has resulted in a highlevel of community support for the protection measures, programmes and management systems in place.

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Catchment planning and managementThis activity includes both maintenance of existing soil conservation schemes and new works projectsaccording to the priorities established within each zone. This activity includes shallow lakes and harbourmanagement.

New works projects include erosion protection, fencing and planting, weed control, lake and wetlandprotection, enhancement and restoration, and bush fragment protection. New works projects are activelysought by landowners and are in most cases part funded by the council and part funded by the landownersvia a targeted rate (usually on a 35:65 ratio). Funding is also available for maintenance of catchment worksunder previous land improvement agreements and more recently, memoranda of encumbrance. Extensiveand comprehensive catchment retirement works are already in place.

Sites owned and managed by the council (principally grazing lease land that is part of our various floodprotection and drainage schemes) are prioritised for ecological enhancement works in partnership with localstakeholders and community groups. In particular, the lowland areas of the Waihou, Waipa and Waikatorivers lend themselves to development of wetlands and habitats for native bird and fish species.

BiosecurityThe biosecurity programme delivers animal and plant pest management through the provision of informationand advice, surveillance, monitoring and inspections, direct control, pathway management, working withpeople on community based initiatives and research. The council funds pest control work through a regionwide rate based on capital value.

The council sets objectives, methods and rules through the Waikato Regional Pest Management Plan (RPMP).The RPMP details which plants and animals are declared pests in the Waikato region. It explains why they arepests and outlines how each pest will be managed over a 10 year period. The current RPMP was madeoperative in August 2014. Implementing the new regional pest management plan, with new pests, new rulesand new approaches for some pests will remain a high priority for the life of the long term plan.

Under the RPMP, land occupiers are required to take responsibility for pests on their land and, for somepests, to carry out control measures. Failure to comply may give rise to enforcement action includingprosecution. An operational plan is prepared annually outlining the nature and scope of activities the councilintends to undertake in implementing the RPMP for that financial year.

BiodiversityThe biodiversity programme focuses on supporting landowners and communities to protect and enhance theregion's natural heritage. Waikato contains numerous natural areas that provide habitats for native plant andanimal species, and provide ecosystem services to the region. Priorities for this programme include significantnatural areas that are rare and/or contain threatened species. Other projects include Hamilton Halo, ProjectEcho and pest plant control at geothermal sites.

This activity also manages the council’s relationships with community groups involved in ecologicalprotection and restoration, such as the Waikato Biodiversity Forum and Beachcare. Through the NaturalHeritage Partnership Programme (NHPP), the council provides contestable grant funding for environmentalprojects ranging from land purchases to protect special places of ecological significance to small scalecommunity grants. The NHPP is funded through a targeted rate on all rateable properties. This fund alsosupports the Maungatautari Ecological Island project.

Environmental farming systemsThis activity includes a number of projects aimed at educating on and raising awareness of agriculturalsustainability issues and promoting best practice. The projects include sustainable agriculture, industryeducation, farmer education, and integrated catchment management.These projects currently support a broad variety of work in the region. This work includes:

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drystock and dairy liaison groups Ballance Farm Environment Awards Landcare group coordination dairy effluent initiatives such as the pond storage calculator, the Effluent Expo, development of the

dairy effluent code of practice, development of the effluent compliance checklist and presence atnumerous field days with DairyNZ on effluent rules and other sustainability issues

delivery of integrated farm plans and nutrient management advice other nutrient management extension through development of a code of practice and training of

fertiliser company representatives drystock industry initiatives, such as resource production and the promotion of self management

tools support to the Effluent on Maize trial and research afforestation projects, such as the afforestation grant scheme, and the Honda Tree Fund.

Public transportWaikato Regional Council provides public transport services within the Hamilton urban area and to key ruralcentres around the region. It also provides other services in the region to serve local needs, and seasonalservices to meet strong summer demand. In addition, the council provides Total Mobility services in threeurban areas in the region.

Resource useThis group of activities includes three activities:

consent processing and compliance monitoring investigations and incident response maritime services.

Consent processing and compliance monitoringThe consent processing activity provides consenting and compliance monitoring for all ResourceManagement Act related activities and Building Act responsibilities. Compliance with resource consents ismonitored on a prioritised basis. Council proactively monitors compliance with two of the 73 permittedactivities in the Waikato Regional Plan, namely farm animal effluent and soil disturbance.

Investigations and incident responseThis activity involves responding to notifications from members of the public about environmental incidents,investigating serious breaches of environmental or maritime regulation and coordinating any subsequentenforcement action.

The council runs a 24 hour, 7 day a week response service to ensure the environment, people or propertyare not seriously affected on an ongoing basis by pollution incidents or the non-compliant activities ofresource users. Where significant non-compliance has been found to occur, the council investigates anincident to enable decisions to be made on appropriate enforcement actions.

Maritime servicesThis activity is split into three primary workstreams – namely policy and procedures, compliance with andeducation of the navigation safety bylaw, and operations. Operations includes compliance activities, debrisremoval, and inspecting and maintaining the region’s network of navigation aids.

The navigational safety bylaw covers all navigable waterways in the Waikato region (with the exception ofLake Taupō) and is aimed at ensuring the safety of users on these waterways. It sets out safe practices forpeople using the lakes, rivers and harbours for water skiing, swimming, boating, kayaking or other wateractivities safely, by seeking to reduce the conflicts between different activities.

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The reviewed bylaw was adopted by council in May 2013, with the key change of compulsory wearing oflifejackets in vessels 6 meters long or less.

The bylaw is scheduled to be formally internally reviewed in 2018 which may prompt a full review involvingpublic consultation.

Science and strategyThere are six activities within the Science and strategy group of activities.

environmental monitoring environmental information social and economic information regional strategy and development integration and infrastructure resource management policy.

Environmental monitoringEnvironmental informationSocial and economic informationThese three activities support evidence based planning and decision making through gathering, analysingand documenting environmental, social, cultural and economic information. The information is used to:

meet the council’s legislated responsibilities inform the development, implementation and review of council policies assess resource consents monitor the state and trends of the environment track progress towards the council’s strategic direction.

Regional strategy and developmentThis activity involves leading the Waikato region towards becoming more strategic and forward thinking. Thecouncil undertakes strategic thinking with key regional stakeholders including scanning and research,development of non-statutory regional strategies and plans, economic and spatial plans and collaborativemanagement of regional issues.

Integration and infrastructureThis activity ensures there is a connector between the delivery of science, strategy and policy, and thecommunity. It ensures key stakeholders throughout the region are aware of current science, strategy andpolicy projects and processes and are able to contribute effectively to these. This activity also focuses on thedevelopment and delivery of infrastructure and transport policy for the region.

Resource management policyThis activity develops and reviews policy for the Waikato that meets statutory requirements. The ResourceManagement Act 1991 requires the council to produce a regional policy statement and review it every 10years. The council is also required to maintain and review the effectiveness of the regional plan and regionalcoastal plan.

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Report to Strategy and Policy Committee March 2017 – Decision required

File No: 01 12 18A

Date: 6 March 2017

To: Chief Executive

From: Chief Financial Officer – Mike Garrett

Subject: 2018-2028 LTP Levels of Service Review

Section B (For recommendation to Council) Purpose To confirm the approach to reviewing Levels of Service (LOS) for the 2018-2028 Long Term Plan (LTP).

Recommendation:

1. That the report 2018-2028 LTP Levels of Service Review (Doc #10052522) dated 6 March be received, and

2. That the approach to reviewing levels of service for the 2018-2028 LTP, as presented, be approved for recommendation to Council.

Background A key building block in developing the Long Term Plan is reviewing each activity and determining changes to levels of service that will better meet the council’s strategic direction. Schedule 10 of the Local Government Act 2002 requires that performance management information be developed for all groups of activities including the major levels of service, performance measure and targets. Levels of service are the outputs that council expects will be generated by the activity, and which are supported by quantifiable performance measures. A level of service will cover one of more attributes of the activity. It is these levels of service that make the contribution to community wellbeing. Other useful ways of thinking about levels of service are:

What is it about the activity that provides value to the community? How do the users experience the service?

A good level of service must:

Flow logically from the rationale for service delivery, Demonstrate a customer focus, Present a clear picture of the activity and its contribution to community wellbeing and overall

importance to council, Identify attributes that are within council’s control.

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Current levels of service are outlined in the 2015-2025 LTP, and may also be identified in other activity specific documentation including business plans or asset management plans. Reviewing levels of service ensures that council is funding the services to the level that is important to our community and fits with our strategic direction for the next three years. Approach to reviewing levels of service The approach outlined below has been developed on the assumption that council will have a similar funding envelope to current budgets. This may mean the scope of some activities would have to decrease, greater efficiencies would need to be found or some aspects of the activities would need to cease in order to be able to respond to new requirements in the strategic direction.

Process Approximate Timing

1. Pre-engagement with key stakeholders

March – May 2017 These three phases will be undertaken in parallel.

Engage with key stakeholders to gather feedback on the sorts of things they would like us to focus on over the next 10 years.

This information will support activity leads to develop options for changes in levels of service.

The pre-engagement plan (identifying who, what and how to engage) is currently being developed and will be presented to Council for discussion in April.

2. Establish or formalise cross-organisational groups

The establishment or formalisation of cross organisational groups to provide strategic thinking, support, and advice to activity leads about how our organisation could respond to the strategic direction.

Some of these groups currently exist, e.g. the Land and Water Portfolio, and the Biodiversity working group, while other groups would need to either be formalised, e.g. the informal climate change group, or established.

Confirmation of cross-organisational groups will be undertaken by the LTP Strategy Group by early April.

3. Identify issues and opportunities per activity and prioritised per GOA

Activity leaders to build on the work that has been done as part of the Business We Are In templates, the initial conversations with Councillors, and stakeholder feedback by identifying options in response to the new strategic direction.

Activity leads can use the cross-organisational groups for support in identifying options what an activity could do more of, less of, or do differently to maximise efficiency or realise multiple benefits.

Information collated at this stage will identify the benefits of the project or programme, consequences of not continuing with the work or doing it at a slower pace, and the associated costs. This information will also be utilised for a business case if one is required later in the process.

The options identified at an activity level will be discussed and prioritised* within the Group of Activities (GOA) to ensure consistency, and recognise alignment and efficiencies.

Corporate planning staff will assist with facilitating and supporting this work.

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Process Approximate Timing

4. ELT to review high level LOS options Early June 2017 ELT will review the levels of service options proposed for each of the activities and prioritise* across GOAs.

* A prioritisation framework will be developed for use by the organisation when considering levels of service options.

5. Discuss LOS options with Council Late June 2017 A high level summary of levels of service options will be discussed with Council to gather feedback on what we are already doing that we will continue with, what we will do differently, what we will do extra of, and what we will do less of, within the fiscal envelope.

More thinking is required on how we will do this but the intention is to get a ‘top down’ direction on levels of service and budget priorities

6. Pre-engagement with the general public June 2017 Undertake pre-engagement with the public, encouraging people to share with us their thoughts on the sorts of things they would like us to focus on over the next 10 years.

This information will then be used to check the levels of service options presented to Council covers public expectations, or if additional changes should be included. Any changes will be presented to Council in late August for consideration.

8. Develop business cases July - August 2017 Following confirmation from Council on any areas that the level of service should change or increase, activity leaders will develop business cases for those projects or programmes of work not currently funded.

9. Report pre-engagement results to Council Late August 2017 Provide feedback to Councillors on the outcome of pre-engagement with the general public, and any changes that should be included in levels of service as a result of this feedback.

10. ELT to review business cases and present back to Council September 2017 Business cases will be reviewed and prioritised by ELT against the fiscal envelope before being presented to council for discussion and confirmation.

11. Start budget process Mid September 2017 The confirmation of levels of service and business cases will form the basis for developing the LTP budget.

Other considerations Any significant changes to levels of service will subsequently trigger the legislative requirement to undertake a service delivery review under s17A of the LGA (unless the cost of undertaking the reviews outweighs the benefit and or the services is tied to a contract that cannot be changed over the next two years). Should a service deliver review by triggered, staff will programme this work to occur after the completion of the levels of service review.

Next steps

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Following confirmation of the proposed approach to reviewing levels of service, staff will undertake work to review levels of service and report back to Council in June 2017.

Nicole Hubbard LTP Project Manager

Mike Garrett Chief Financial Officer

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Docs # 10068000

Report to Strategy and Policy Committee March 2017– To be received

File No: 01 12 18F

Date: 6 March 2017

To: Chief Executive Officer

From: Chief Financial Officer

Subject: Review of Revenue and Financing Policy

Section: A (Committee has delegated authority to make decision)

PurposeThis report overviews the process to review the Revenue and Financing Policy as part of thedevelopment of the 2018 – 2028 Long Term Plan (LTP). It seeks feedback from the committee on anyadditional areas of review that need to be incorporated in to the work programme.

Recommendation:

That the report “Review of Revenue and Financing Policy” (Doc #10068000 dated 6 March 2017)be received for information

BackgroundThe Local Government Act 2002 (LGA) requires the council to adopt a suite of funding and financialpolicies “in order to provide predictability and certainty about sources and levels of funding”. Thepolicies required are:

A revenue and financing policy; and A liability management policy; and An investment policy; and A policy on development contributions or financial contributions; and A policy on the remission an postponement of rates on Maori freehold land

In adopting the policies above (with the exclusion of a liability management policy and an investmentpolicy), the council must consult on a draft policy in a manner that gives effect to the principles ofconsultation also set out in the LGA.

As part of the work programme to set the LTP, a review of the funding and financial policies listed willbe undertaken (with the exception of a policy on development contributions which the council doesnot have the power to assess, and financial contributions which are limited to the provisions of theRegional Coastal Plan).

This report specifically seeks to address the review of the Revenue and Financing Policy as a keyfoundation document for the LTP.

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Doc # 10068000 Page 2

Revenue and Financing Policy overviewThe current Revenue and Financing Policy identifies the purpose and objectives of the policy as follows:

The council will manage its financial affairs prudently and in a manner that promotes thecurrent and future interests of the community. The aim of its Revenue and Financing Policy isto promote consistent, prudent, effective and sustainable financial management of the counciland to fund its activities from the most appropriate sources, after consideration of who benefitsfrom each activity.

Waikato Regional Council has reviewed its financing policy to maximise the efficiency andequity of its funding mechanisms and to further its objective to promote regional sustainability.The ideal financing policy will ensure that costs are closely aligned to the receipt of benefitsand the need for the work being undertaken. It will also minimise distortion and maximiseequity. This ideal is difficult to achieve, nevertheless Waikato Regional Council believes thatthe policies contained in this document move in that direction.

The policy also sets out guiding principles for the funding of activities: Affordability Paying for benefits received Paying for costs imposed Transparency and accountability Financial prudence and sustainability Optimal capital usage Efficiency and effectiveness Overall impact on the community.

Funding of operating expenditure is currently met through the use of the following funding tools: General rate Uniform annual general charge (UAGC) Targeted rates Fees and charges Investment revenue Financial contributions Grants and contributions Rentals and royalties Reserve funds

0%10%20%30%40%50%60%70%80%90%

100%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Funding mix

General rate UAGC Targeted rates

Investment income Government grants Fees and charges

Graph: Summary of funding percentages from the 2015 – 2025 LTP

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Doc # 10068000 Page 3

Capital expenditure funding is current met through the use of the following funding tools: General rates Targeted rates Grants and subsidies Fees and charges Proceeds from asset sales Borrowing

The detail of the Revenue and Financing Policy presents a summary of the considerations that thecouncil is required to make in determining how the activities it undertakes are to be funded. Section101(3) LGA sets out these matters, being:

The community outcomes to which the activity primarily contributes; and The distribution of benefits between the community as a whole, any identifiable part of the

community, and individuals; and The period in or over which those benefits are expected to occur; and The extent to which the actions or inaction of particular individuals or a group contribute to

the need to undertake the activity; and The costs and benefits, including consequences for transparency and accountability, of funding

the activity distinctly from other activities; and The overall impact of any allocation of liability for revenue needs on the community.

Areas identified for reviewTo date, staff have identified the following matters for consideration as part of the review of theRevenue and Financing Policy:

Funding of the council’s state of the environment monitoring programme, including the basison which charges are set

Funding policy / recovery targets in relation to the council’s regulatory activities. Currently, 80per cent of costs are recovered through fees and charges. Staff will also investigate thefeasibility of setting fixed charges for certain services

Funding policy in relation to economic development implementation activities. This work willfall within the review of the investment fund Statement of Investment Policy and Objectives

Review of the funding for Lake Taupo foreshore works in conjunction with Taupo DistrictCouncil

Funding of capital works the provide additional outcomes beyond core flood protection levelsof service (for example, fish friendly pumps)

Comprehensive review of the current policy with respect to the allocation of costs betweenpublic / private causation and benefits, as well as the utilisation of rating tools used for funding

ConclusionAs part of the work programme to develop the 2018 – 2028 Long Term Plan, staff will be undertakingcomprehensive reviews of the funding and financial policies that underpin the LTP budget. This reportsummarises the matters that staff have currently programmed to review, and seeks confirmation fromthe committee of any other matters that need to be included in the programme of work.

Janine BeckerManager, Finance

Mike GarrettChief Financial Officer

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Doc # 10068000 Page 4

AttachmentsRevenue and Financing Policy 2015 – 2025 (doc #3713552)

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Doc # 3900786

Revenue and FinancingPolicy

2015-2025

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Doc # 3900786 Page i

Table of contents1 Background 3

2 Guiding principles 4

2.1 Affordability 4

2.2 Paying for benefits received 4

2.3 Paying for costs imposed 4

2.4 Transparency and accountability 4

2.5 Financial prudence and sustainability 4

2.6 Optimal capital usage 4

2.7 Efficiency and effectiveness 4

2.8 Overall social, economic, environmental and cultural impacts 5

3 Funding operating expenditure 5

3.1 General rate 5

3.2 Uniform Annual General Charge 5

3.3 Targeted rates 6

3.4 Fees and charges 6

3.5 Investment revenue 8

3.6 Financial contributions 8

3.7 Grants and contributions 9

3.8 Rentals and royalties 9

3.9 Reserve funds 9

3.10 Other mechanisms 9

4 Funding capital expenditure 9

4.1 General rates 10

4.2 Targeted rates 10

4.3 Grants and subsidies 10

4.4 Fees and charges 10

4.5 Proceeds from asset sales 10

4.6 Borrowing 10

5 Rating policy 10

General rates 11

Targeted rates 11

6 Funding analysis of group activities 13

6.1 Group of activities: Community and services 136.1.1 Governance 136.1.2 Organisational planning and reporting 146.1.3 Iwi partnerships 156.1.4 Community partnerships 16

6.2 Group of activities: Emergency management 176.2.1 Waikato Civil Defence and Emergency Management Group 176.2.2 WRC Emergency management 186.2.3 Resilient development 19

6.3 Group of activities: Flood protection and control works 206.3.1 Flood protection 206.3.2 Land drainage 216.3.3 River management 22

6.4 Group of activities: Integrated catchment management 236.4.1 Biosecurity 236.4.2 Biodiversity 246.4.3 Farming systems 256.4.4 Catchment planning and management 26

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Doc # 1048736 Page ii

6.5 Group of activities: Public transport 276.5.1 Public transport 27

6.6 Group of activities: Resource use 286.6.1 Consent processing and compliance monitoring 286.6.2 Investigations and incident response 296.6.3 Maritime services 30

6.7 Group of activities: Science and strategy 316.7.1 Environmental monitoring 316.7.2 Environmental information 326.7.3 Social and economic information 336.7.4 Regional strategy and development 346.7.5 Regional Integration and infrastructure 356.7.6 Resource management policy 37

7 Overall impact on community well-being 38

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1 BackgroundThis document has been prepared in accordance with the Local Government Act 2002, and inparticular sections 101-103. It identifies the funding sources and mechanisms that will be used tofinance the council’s operating expenses and capital expenditure for the financial years 1 July2015 to 30 June 2025.

The council will manage its financial affairs prudently and in a manner that promotes the currentand future interests of the community. The aim of its Revenue and Financing Policy is topromote consistent, prudent, effective and sustainable financial management of the council andto fund its activities from the most appropriate sources, after consideration of who benefits fromeach activity.

The council undertakes a range of activities that require funding1. This policy outlines how eachof the activities is to be funded, taking into account the above considerations. The amount ofrevenue and the factors required are detailed in the Funding Impact Statement2.

Waikato Regional Council has reviewed its financing policy to maximise the efficiency and equityof its funding mechanisms and to further its objective to promote regional sustainability. Theideal financing policy will ensure that costs are closely aligned to the receipt of benefits and theneed for the work being undertaken. It will also minimise distortion and maximise equity. Thisideal is difficult to achieve, nevertheless Waikato Regional Council believes that the policiescontained in this document move in that direction.

This policy should be read in conjunction with the 2015 - 2025 Long Term Plan, FinancialStrategy, Treasury Policy and the Policy on Financial Contributions.

1 An “activity” is a good or service provided by, or on behalf of the Council.2 The Funding Impact Statement - Doc 3256800

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2 Guiding principlesWaikato Regional Council’s 2015 - 2025 Long Term Plan (LTP) contains the following set ofguiding principles. It should be noted that conflicts between the principles and practice mayarise. Resolving this conflict will involve the need to trade off competing principles.

2.1 AffordabilityThe council’s funding decisions are influenced by concepts such as people’s ability to pay andthe desire to provide broad access for people to particular services, in addition to the concept ofuser pays. Rates are a form of tax and not purely a charge for services received. Affordabilityissues influence both the overall level of rates and the level of uniform charges within rates.

2.2 Paying for benefits receivedIn general, if a council activity mainly benefits a particular person or group, then that person orgroup should contribute to the cost of the activity. In addition, payment should be made for theactivity at the same or similar time as the benefits are received (intergenerational equity).

2.3 Paying for costs imposedIn general, if the actions or inaction of a particular person or group create a need for the councilto carry out an activity, then that person or group should contribute to the cost of the activity.This is sometimes referred to as the polluter pays principle or the causer pays principle.

2.4 Transparency and accountabilityWhere the principles of payment for benefits and paying for costs (as described above) suggestthat a particular person or group should contribute to the cost of an activity, then that activityshould be funded separately from other activities if it is practicable to do so.

2.5 Financial prudence and sustainabilityWaikato Regional Council’s revenues, expenses, assets, liabilities, investment and generalfinancial dealings should be managed in a prudent and sustainable manner.

2.6 Optimal capital usageWaikato Regional Council’s limited financial resources should be used in such a way as tomaximise the benefits provided to the community, while minimising the burden on ratepayers.Among other things, this principle influences the council’s decisions on the best mix of funding(between rates income, other revenue sources, borrowings and asset sales) for its assets andactivities.

2.7 Efficiency and effectivenessThe council’s revenue and financing policies should have regard to the costs of implementingthem and how effective they will be in achieving their objectives.

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2.8 Overall impact on the communityDecisions on how the council’s needs for revenue will be met (by ratepayer and other groups)should take into account the impact of the decision of the current and future social, economic,environmental and cultural well-being of the community.

3 Funding operating expenditureWaikato Regional Council will generally fund its operating expenditure out of operating revenue.Rates and levies will usually be set at a level to ensure that Waikato Regional Council achievesthis objective. Waikato Regional Council has a number of potential sources of funds. Each ofthese can be considered for funding a particular activity.

3.1 General rateThe general rate is used to fund part or all of activities that are of ‘public benefit’ where no otherdirect source of revenue is identified as appropriate to cover the cost of the activities. Thegeneral rate is a rate applied on a differential basis using projected values (in accordance withsection 131 of the Local Government (Rating) Act 2002) on the capital value of every rateableproperty within the Waikato Regional Council boundary. The differential recognises the differentgeneral revaluation cycles of the territorial authorities in the region. The council considers thatcapital value continues to be the most appropriate basis for the general rate. Under the LocalGovernment Act 2002, an important factor in determining the most appropriate system isdeciding which basis best reflected the services provided by the council (the benefit principle).

However, the council also considered other criteria such as:

whether the activity is deemed to have considerable general community benefit (or directbeneficiaries cannot be accurately determined or identified)

whether the size of a rateable property reflects the benefit received from these activities. Forinstance, is there greater benefit accruing to a rural property owner with a large land holdingthan an urban resident on a 600m2 section?

whether higher value land reflects greater benefit received from such activities

whether the value of improvements reflect the benefit received

the degree of development of the land which in return reflects investment in the land foreither productive earning or capital gain,

the impact of changing the current rating system on the burden of rates among differentindividual groups of ratepayers.

3.2 Uniform Annual General ChargeA Uniform Annual General Charge (UAGC) is a fixed amount charged to each rateable property.The impact of a UAGC is to set a component of rates as a fixed charge per property andseparate this charge from the valuation base used to apply the general rate. Under the LocalGovernment (Rating) Act a limit of 30 per cent of total rates revenue can be applied via a UAGCor fixed rate per property. The council considers that there are three categories where a UAGCcould be considered:

Where the expenditure is a ‘public good’ to which every ratepayer has equal access.

Where the expenditure is related to ‘people’ rather than property. For example, WaikatoRegional Council's regional hazards expenditure is directed largely at the protection ofpeople, not property values.

Where the expenditure does not directly change the condition or economic value of aproperty or resource. Waikato Regional Council believes that expenditure that enhances aparticular resource or improves the value of a property (such as flood control works) should

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be funded through a capital value, land value or land area charge. However, more universalcosts may be appropriate for a UAGC.

3.3 Targeted ratesTargeted rates are rates that are used to fund a discrete activity and can only be used for thepurpose for which they were collected. The council can set one or more targeted rates to fund asingle function, or a single targeted rate to fund multiple functions. Targeted rates can be set onall properties in the region or only on properties that have been identified as belonging to adefined subset, the same as required for a differential of a general rate.

The categories are:

property value - annual, land or capital

location

land area

land use

the provision or availability of a service by or on behalf of the council

any activities that are permitted, controlled or discretionary for the area in which land issubject under an operative (or proposed) Regional Plan under the Resource ManagementAct 1991, subject to there being no submissions in opposition to the plan.

The rates may be calculated as a:

fixed dollar per rating unit

fixed charge per factor

differential charge per factor.

Factors that may be used in calculating targeted rates are also defined in the Act. They are:

property value - annual, land or capital

land area

number of separately used or inhabited parts of the rating unit

the extent of provision of service to rating unit by the council.

Waikato Regional Council has used targeted rates extensively in the past. A targeted rate allowsfor multiple factors to be used in calculating the rate. For example, targeted rates provide theflexibility to match benefit to funding in complex flood protection schemes. Waikato RegionalCouncil has also set targeted rates where specific activities can be identified, such as floodprotection and catchment management rates.

3.4 Fees and chargesThe actual costs and fees set are outlined in the Funding Impact Statement. The main fees andcharges arise from several pieces of legislation.

Application chargesSection 36(1) of the Resource Management Act 1991 (RMA) authorises the council to fixadministrative charges, including those payable by applicants for plan changes or resourceconsents, and by holders of resource consents. An outline of current policy and charges adoptedby the council is provided below.

Changes to policy statements and plans (RMA section 36 (1)(a))For assessing applications for the preparation of, or changes to policy statements or regionalplans, the council will charge applicants actual and reasonable costs.

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Resource consent application processing (RMA section 36 (1)(b))For carrying out its functions in relation to receiving, processing and deciding on resourceconsent applications (including assessment of application for certificates of compliance) and forconsidering and deciding on changes to, or reviews of, consent conditions and transfer ofconsents, the council will charge applicants and consent holders actual and reasonable costs, orfixed specific amounts for specified consents. Actual and reasonable costs are based on stafftime multiplied by the charge-out rate plus direct costs including disbursements, notification andhearing costs. An indication of likely costs, based on average costs for processing a particularcategory of consent, can be provided at the time of making an application. However, actualcharges may vary, depending on the complexity of the environmental issue involved and theprocess to be followed. Fixed application charges are available for:

low complexity consents, or those with low environmental and public impact including:1. dairy discharge2. bridge3. culvert4. Taupo Land Use >20 hectares

bore consents.

Monitoring and supervision (RMA section 36(1 )(c))All monitoring excluding that charged under annual consent holder charges will be charged onan actual cost basis. Consent holders or their agents will be advised that:

consent site-specific monitoring and supervision may be necessary and an indication of thenature and/or frequency of this work will be given

they will be required to pay actual and reasonable charges for the consent or site-specificmonitoring and supervision once it has been undertaken by the council.

Where costs cannot be attributed to all consents within a class, actual and reasonable costs willbe directly charged for monitoring and supervision calculated as staff time multiplied by thecharge-out rate plus direct costs including disbursements.

Provision of information and advice (RMA section 36(1 )(e))Actual and reasonable costs will be charged for the provision of documents, technical advice andconsultancy services. The first half-hour of staff time involved in providing this advice will be notcharged, after which the total staff time spent providing information will be charged.

Navigation safety (LGA section 684B)Pursuant to section 684B of the Local Government Act 1974, Waikato Regional Council hasmade a bylaw in respect of navigation safety within the Waikato region. Section 684B9(h) of theLocal Government Act allows the regional council to set fees in respect of activities that it has toundertake to implement the bylaw. Waikato Regional Council has set fees for the following:

application for special events (Bylaw 3.8), or suspension or exemption of any provisionswithin this bylaw (Bylaw 4.2)

public notice in respect of a special event (Bylaw 3.8)

lost or destroyed certificate of registration, application for a duplicate copy of any certificateor licence issued under these bylaws that has been lost or destroyed

mooring registration issued in accordance with Bylaw 3.9

mooring inspection fee

visitor mooring rental

transfer of mooring licence

registration of personal watercraft

Management of Navigation Safety related activities in respect of Port Taharoa

Management and inspections related to Navigation Safety activities

Assessment and report on any RMA consent application which has the potential to affectnavigational safety.

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Resource consent holder chargesThese are charges made to consent holders under RMA section 36 for:

administration work

monitoring fees

information gathering

state of environment reporting

pressure analysis.

Report chargesCopies of technical reports will be charged at a fixed rate plus the cost of colour pages. Policydocuments will be charged at fixed charges.

User chargesLegislation including the LGA, RMA 1991, Biosecurity Act 1993, Land Drainage Act 1908 andSoil Conservation and Rivers Control Act 1941 provide for the application of ‘User charges’ in theprovision of works and services. The term ‘User charges’ is a general term to describe thecharges made directly to users of a service or facility for the private benefit received. Theconcept of user pays is consistent with the 'benefit/contributor principal', in that revenue sourcesshould be related to the benefit received. It is also consistent with the principle that thosecausing adverse environmental change (exacerbators) pay for the consequential work. Whereindividual consumers can be identified, and charges for consumption practically administered,user charges for all or part of the cost of service should be pursued.

In some cases user charges may be impractical, as the cost of obtaining information necessaryto charge is administratively too expensive or the cost of the charging mechanism itselfoutweighs any practical benefit.

3.5 Investment revenueThe council has a range of investments from which income is derived. This revenue is used tofund a regional development fund, fund the implementation of a regional economic developmentstrategy and to supplement general rate funding in order to help meet the cost of the council’sregular operating activities and thereby reduce the rating burden on ratepayers. The ratessubsidy previously provided through the application of returns from the council’s investment fundis to be phased out over the period of the 2015 – 2025 Long Term Plan, with funding redirectedto the regional development fund. The prioritised order of how the investment fund returns areapplied is set out in the council’s Treasury Policy and Statement of Investment Policy andObjectives (SIPO).

3.6 Financial contributionsSection 108(2)(a) of the RMA authorises the council to include, as a condition of resourceconsents, the requirement for a financial contribution for purposes specified in a regional plan.Financial contributions may mean money, land, works or services. The Regional Plan mustspecify the purpose(s) for which a financial contribution can be required and specify a maximumamount or set out a formula by which such maximum can be determined. The Waikato RegionalPlan does not currently specify that it will use financial contributions. However financialcontributions may be required for coastal permits granted under the Regional Coastal Plan.

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3.7 Grants and contributionsThe council is able to obtain grants and contributions from central government, Crown entities,territorial authorities and utility operators to fund some of its activities. Grants and contributionsare used to fund activities which have both public and private benefit.

3.8 Rentals and royaltiesThe council receives rents from properties it owns. These properties largely relate to landattached to council flood protection schemes. Royalties may also be received for sand extractionand the harvesting of timber on council properties. There is a strong case that the councilreceive royalties for a wider set of resource uses. This would require some policy changes by theNew Zealand Government.

3.9 Reserve fundsReserves arise where funding has been obtained for a particular activity and, at a point in time,not all the revenue has been spent on the activity. Maintaining reserves ensures that revenue isused for its intended purpose and enables revenue to be maintained at a constant level when theservice provided is continuing at the same level.

The council maintains reserves relating to targeted rates which have been provided by regionalratepayers for specific activities. While the cash associated with reserves may be used asfunding for other activities within the organisation, it will continue to be identified as an asset andinterest will be credited to the area for which the revenue was raised.

3.10 Other mechanismsThe use of any other funding sources should be assessed with regard to the guiding principles.

4 Funding capital expenditureWaikato Regional Council considers that the following sources of funding are appropriate for itscapital expenses. These funding sources may be applied either directly to capital projects whenexpenditure is made on them, or towards financing interest and principal repayments onborrowings that were raised to fund the expenditure.

Intergenerational equity principles, which are dealt with under the council’s guiding principle ofpaying for benefits received when they are received, suggest that the purchase or constructionof long-lived assets should be funded by way of borrowings. In that way, repayments are spreadover time, instead of paying the entire cost of the assets in the year they are built. For long-livedassets, the funding sources below can be used to finance principal repayments on borrowings,rather than for directly funding capital projects. In the case of the replacement / renewal ofexisting assets, the council funds the depreciation expense associated with the asset through thesources identified below.

Where the council assesses a targeted rate for the repayment of capital and associated interestcosts for the construction of new assets, it will not seek to fund depreciation for the period of thecapital loan. This ensures that ratepayers are not charged twice – for the initial construction andfor the future replacement of the asset.

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4.1 General ratesGeneral rates are seen as an appropriate capital funding mechanism for projects where there isa public good element. This approach is consistent with the guiding principle of paying forbenefits received.

Where an existing asset provides a public good or positive externalities, it is appropriate to fundreplacement of that asset from general rates, especially where the general rate includes anexplicit charge to recover depreciation.

General rates are also appropriate for funding capital projects where imposing the cost on theperson or groups who will benefit from the project would place too great a burden on them. Thisis consistent with the guiding principle of affordability.

4.2 Targeted ratesTargeted rates are seen as an appropriate capital funding mechanism for projects where theproject mainly benefits a specific group of ratepayers or where the action or inaction of thatgroup contributes to the need for the project.

4.3 Grants and subsidiesAppropriate (in general) only for funding the costs of providing a particular asset that the grant orsubsidy was intended for.

4.4 Fees and chargesAppropriate where the benefits provided by an asset are primarily private in nature.

4.5 Proceeds from asset salesIt is generally appropriate to use the proceeds of selling an asset to fund the cost of providinganother asset.

4.6 BorrowingBorrowing is recognised as an effective method of achieving equity between differentgenerations of ratepayers (intergenerational equity). Where there are targeted rates that do notcover the operating costs of the activity in any one year then the council uses internal borrowingto fund the deficit. The interest rate charged is set based on the rates set as part of council’sFinancial Strategy.

All borrowings are subject to Waikato Regional Council’s Liability Management Policy and theguiding principle of optimal capital usage.

5 Rating policyIn calculating the liability for rates, council will consider the following principles:

The rating system will be simple and transparent

Targeted rates may be applied to fund specific programmes / projects in specific areas

Differential rates may be applied where it is determined that one ratepayer sector isderiving a greater / lesser benefit than other ratepayer sectors

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The system of rating used (Land value, Capital value, Land area, per rating unit) will bethe one that most closely aligns to the benefits received by ratepayer sectors.

Individual ability to pay issues will be addressed through specific mechanisms such asrebates, remissions and postponements.

Prior to any rating requirement being calculated, the council will first identify the extent to whichcosts can be recovered through third parties (for example government or industry contributionsand grants) or through direct charging mechanisms where a direct benefit can be directlyattributed to individual users of a service.

General ratesIn meeting its general revenue requirements, council will set the following rates:

A differential general rate in accordance with s13 of the Local Government (Rating) Act2002. The general rate will be set on the basis of differential capital value.

A uniform annual general charge in accordance with s15 of the Local Government(Rating) Act 2002

A differential is applied to the general rate to recognise the different revaluation cycles of theterritorial authorities within the region.

Council will consider the following criteria when determining whether an activity should be fundedvia the uniform annual general charge:

Where the expenditure does not directly change the condition or economic value of aproperty or resource.

Where the expenditure is a ‘public good’ to which every ratepayer has equal access.

Where the expenditure is related to ‘people’ rather than property.

Targeted ratesS16 of the Local Government (Rating) Act 2002 authorises the Council to set targeted rates andfixed targeted rates to fund functions that are identified in its Long Term Plan or Annual Plan.

The following targeted rates are currently assessed by council:

Catchment management rates

Biosecurity rate

Public transport rate

Permitted activity monitoring rate

Stock truck effluent rate

Civil defence and emergency management rate

Natural heritage rate

Protecting Lake Taupo rate

Regional services rate

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6 Funding analysis of group activities

6.1 Group of activities: Community and services

6.1.1 GovernanceThis activity supports the councillors in their roles and ensures council processes such astriennial elections and meetings are run correctly and decision making processes are robustand transparent. This includes working in partnerships and collaboratively by providing for iwi,community and key stakeholder representation on the council’s standing subcommittees andcouncillor representation on other local government, key stakeholder and community groups.Maintaining the integrity of the council’s processes is also supported by the provision ofcorporate legal advisory services and timely and appropriate responses to official informationrequests and Ombudsmen’s office enquiries.

Activity Primary community outcome

Governance Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

The entire regional community benefits from robust and democraticlocal government that enables democratic local decision making andaction by and on behalf of communities, and promotes the social,economic, environmental and cultural well-being of communities nowand in the future.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

UAGC

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6.1.2 Organisational planning and reportingThis activity involves development of statutory plans and reports to improve transparency andaccountability to our residents and ratepayers. These include long term plans, annual plansand annual reports. Financial and service performance is reported to the council quarterly andreported to the public annually via an annual report.

Activity Primary community outcome

Organisational

planning and

reporting

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost /

benefit of

funding

separately

Low Med Low Low

The entire regional community benefits from robust and democraticlocal government that enables democratic local decision making andaction by and on behalf of communities, and promotes the social,economic, environmental and cultural well-being of communities nowand in the future.

The statutory plans and reports prepared under this activity constitutekey consultation and accountability documents for the council whichunderpin these democratic processes.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

UAGC

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6.1.3 Iwi partnershipsThis activity encompasses work with iwi and hapū to ensure the traditional role of tangatawhenua as kaitiaki is respected and reflected in community processes and to ensure there areavenues available for tangata whenua and Māori communities to contribute to the council’sdecision making. The council is building its capacity to deliver on co-management obligationsarising from Treaty of Waitangi settlements.

Activity Primary community outcome

Iwi

partnerships

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Low Low Low

Working in partnership with iwi is integrated with the council’sgovernance and management arrangements.

This activity provides benefits at a national, regional and local level:

At a national level, the activity implements the Crownobligations under the Treaty of Waitangi that have beendelegated to local government. While this work is relevant tothe community as a whole, recovery of costs should be soughtfrom the government for processes required to implement newlegislation.

All sectors of the community will benefit from improvements tothe environment as a result of settlement initiatives.

Maori will benefit through increased capacity and opportunity tobe involved in, and contribute to, council's decision makingprocesses.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

UAGC

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6.1.4 Community partnershipsThis activity provides support and advice within council and externally through specificprogrammes, to build awareness, involvement, engagement and education to help achievethe council’s vision and mission. It also includes the Regional Services Fund which providesfinancial support to voluntary emergency service organisations operating in the Waikatoregion.

Activity Primary community outcome

Community

partnerships

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

This programme supports and advises staff and works alongside localauthorities, schools and the other stakeholders. Businesses,community groups, schools and individuals from across the region allbenefit from the programme.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

General rate;UAGC;

Regionalservices rate;Government

grants

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6.2 Group of activities: Emergency management

6.2.1 Waikato Civil Defence and Emergency Management GroupUnder the Civil Defence Emergency Management Act 2002, CDEM is a function andresponsibility of regional, district and city councils. Consequently, all local authoritiesthroughout New Zealand have joined together on a regional basis to form CDEM groups.These groups, in partnership with emergency services and other organisations, areresponsible for emergency management locally.

The Waikato CDEM Group comprises the Waikato Regional Council and 10 territorialauthorities, in conjunction with emergency services, welfare agencies and utility providers. Ithas four emergency operating areas – South Waikato, Taupo, Waikato Valley and ThamesValley. The Waikato CDEM Group works closely with research institutions, utility operatorsand central government, who have vested interests and responsibilities to reduce risks andimprove community resilience.

The Waikato CDEM Group is responsible for delivering on the 4 Rs (readiness, response,reduction and recovery) outlined in the CDEM Group Plan. This involves operational planningto ensure that CDEM organisations and the community have the capacity and a capability torespond to an emergency.

The Waikato Regional Council performs the role of administering authority on behalf of theWaikato CDEM Group Joint Committee and the Coordinating Executive Group (CEG).

Activity Primary community outcome

Waikato

CDEMG

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Low Low Med

The Waikato Civil Defence and Emergency Management Group worksacross all territorial authorities and key agencies in the region. Itenables co-ordinated planning and response to regional civil defenceemergencies, which can occur at any location at any time.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

A separate targeted rate is appliedto fund this activity as the regionalcouncil administers this work onbehalf of the territorial authorities inthe region. By separating thefunding mechanism, it is clear toratepayers how much they arecontributing for this activity.

Civil defencerate

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6.2.2 WRC Emergency managementThis activity includes the provision of facilities, staff, resources and information in support ofthe Waikato CDEM Group.

The council also collates information on hazardous substances and responds to emergenciesinvolving the accidental release of hazardous substances. We also provide round the clockmonitoring and provision of flood event information to the community as required.

The council plans for and responds to certain marine oil spills within the region. Tier 1(industry) and tier 2 (regional) marine oil spill contingency plans are kept updated andapproved by the Waikato Regional Council and Maritime New Zealand respectively. Regional(tier 2) marine oil spill exercises with relevant agencies are also undertaken annually.

Activity Primary community outcome

WRC

emergency

management

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

The council’s emergency management activity provides proactiveinformation and advice in relation to flood warnings, marine oil spills,hazardous substances management and support for the Waikato CivilDefence Emergency Management Group. These activities providebenefit to the regional community as a whole.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

UAGC

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6.2.3 Resilient developmentThis activity includes the collection and provision of information and advice to district councils,the Waikato CDEM Group and landowners on a range of hazards on behalf of the regionalcommunity and stakeholders. This information is used to help identify what areas of the regionare most at risk from hazard events, and to minimise risk and damage to people, homes,businesses and infrastructure. This ensures that the risks from hazards is reduced over timeand that sound decision making results in respect to the future development of hazard proneareas (advocacy).

The council pulls together and analyses a wide range of information to identify where homesand businesses are most at risk from floods, erosion and other natural hazards as well asbuilding and maintaining infrastructure to reduce identified risks. This work includescollaborating with district councils to ensure people avoid building in hazardous areas into thefuture.

Activity Primary community outcome

Resilient

development

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

Council’s Civil Defence planning and response functions work acrossall territorial authorities and key agencies in the region. They enableco-ordinated planning and response to regional civil defenceemergencies, which can occur at any location at any time.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

UAGC

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6.3 Group of activities: Flood protection and

control works

6.3.1 Flood protectionThe Waikato Regional Council provides communities with an agreed level of protection fromfloods. The council is the primary agency responsible for flood protection and assets includestopbanks, floodgates, pump stations, channel/streams and pumps. The flood protectionservices are focused on those specific geographic areas where schemes have been agreedwith communities. The services are closely connected to hazard, risk and land usemanagement.

This activity also includes the Lake Taupo Foreshore Erosion and Flood Strategy andassociated work programme. The strategy was developed jointly with Taupo District Council tomanage foreshore erosion around Lake Taupo. It is implemented in conjunction with TaupoDistrict Council, Tuwharetoa Māori Trust Board, hydro power generators and property owners.

Activity Primary community outcome

Flood

protection

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

High Med Med Med

Private benefits accrue to individual landowners and occupiers who areenabled to use the land for economic gain. Local benefits occurbecause a range of public facilities, infrastructure and services receivesecurity from flooding.

The wide range of benefits provided to different groups and individualssuggest that a mix of funding tools is appropriate to meet the costs ofthis activity.

Detailed zone funding policies set out the analysis of exacerbators andcontributors in relation to this activity, and include how capital workswill also be funded.

Economic benefit assessment Funding targets

Private Public Private Public

85% 15% 85% 15%

Funding

mechanism

The wide range of benefits providedto different groups and individualssuggest that a mix of funding toolsis appropriate to meet the costs ofthis activity.

Targetedcatchmentrates; fees andcharges

General rate

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6.3.2 Land drainageThe Waikato Regional Council manages a multi-million dollar system of natural and builtinfrastructure to keep productive pastoral land draining freely. There are over 70 individualland drainage schemes with a further 22 schemes proposed to be transferred from WaikatoDistrict Council on 1 July 2012. This follows the transfer of 21 land drainage areas on 1 July2011. Each scheme is fully funded under its own targeted rating.

Activity Primary community outcome

Drainage Strong economy

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

High Med High High

Land drainage works are undertaken in response to the location of theland, and the desire to maintain the productive capacity of that land.This work is undertaken for the benefit of the land owners.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

Targeteddrainage rates

114

6.3.3 River managementThis activity involves the management of rivers and streams to reduce the effects of bankerosion, channel instability and blockages on communities through flooding. Programmes arebased on priority and the level of risk to people and property.

Activity Primary community outcome

River

management

Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Med Med Med High

Private benefits accrue to individual landowners and occupiers whoare enabled to use the land for economic gain. Local benefits occurbecause a range of public facilities, infrastructure and services receivesecurity from flooding.

Regional benefit is realized through maintaining the economicproductivity of the land.

The wide range of benefits provided to different groups and individualssuggest that a mix of funding tools is appropriate to meet the costs ofthis activity.

Detailed zone funding policies set out the analysis of exacerbators andcontributors in relation to this activity.

Economic benefit assessment Funding targets

Private Public Private Public

87% 13% 87% 13%

Funding

mechanism

Targetedcatchmentrates

General rate

115

Doc # 3900786 Page 23

6.4 Group of activities: Integrated catchment

management

6.4.1 BiosecurityThis activity is achieved through direct and biological control of animal and plant pests,working with people on community based initiatives, providing information and advice on plantand animal pest control, monitoring of animal and plant pests throughout the region, as wellas developing strategy and rules for the protection and enhancement of the environment.

Activity Primary community outcome

Biosecurity Strong economy

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Low Low Low

The Biosecurity activity provides a mix of national, regional andindividual / landowner benefits. The activity involves the control ofspecific plant and animal pests throughout the region or a sub-regionwhere it is economically efficient to contain their spread and ultimatelyreduced their presence to a minimal level. These pests may be threatsto community values such as biodiversity or to private interests such asfarming.

Landowners obtain a private benefit through having the threats to theirproduction removed.

National benefits arise from the prevention of the spread of pests toother regions.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

Biosecurityrate

116

6.4.2 BiodiversityThe biodiversity activity focuses on protecting and promoting the natural environment itself,restoring air, water and soil quality through ecological balance. Key areas of work arepreservation of access to waterways and the coast, and protection of heritage sites andlandscapes of significance to whanau, hapu and iwi and the community at large.

Activity Primary community outcome

Biodiversity Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

The work is mainly of benefit to the wider region by ensuring thatrepresentative examples of the region’s indigenous biodiversity andthose areas that give the region its character are preserved.

Landowners may obtain some benefit in that this protection mayenhance the market value of their property to a small degree.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

UAGC;Natural

heritage rate

117

Doc # 3900786 Page 25

6.4.3 Farming systemsThe focus of this activity is on working with the rural sector to identify and implement actionsthat will result in improving agricultural environmental performance.

Activity Primary community outcome

Farming

systems

Strong economy

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Med Low

Work programmes in this activity are primarily focussed on workingwith and supporting the rural sector, in anticipation of changes to theregulatory environment within which they operate.

Ensuring that the rural sector is operating effectively and in a mannerthat minimises the impacts on the environment has a positive benefitfor the wider regional community in terms of both economic prosperityas well as protection of the environment.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

External revenue from the HondaTree Fund contributes to this activity

General rate(95%)

Other income(5%)

118

6.4.4 Catchment planning and managementThis activity includes both maintenance of existing soil conservation schemes and new worksprojects according to the priorities established within each zone. New works projects includeerosion protection, fencing and planting, weed control, lake and wetland protection,enhancement and restoration, bush fragment protection and animal pest control.

Within this activity, the council takes advantage of opportunities for biodiversity and localisedwater quality gains on land owned and managed by the council (principally grazing lease landthat is part of our various flood control and drainage schemes).

This activity also includes shallow lake management. Shallow lakes are lakes with a depth of10 metres or less and are usually surrounded by a wetland margin. The council aims to workwith landowners, iwi and other stakeholders in managing and enhancing the region’s shallowlakes through mechanisms such as the Waipa Peat Lakes and Wetlands Accord, the WaikatoDistrict Freshwater Lakes and Wetlands Memorandum of Agreement and the implementationof a regional shallow lake management plan. Key partners include iwi, Department ofConservation, Fish and Game, and Waipa and Waikato district councils.

This activity also includes harbour catchment management. Council plans and undertakesroutine works, usually involving alleviation of flooding due to stream mouth blockage as wellas erosion and wetland protection around estuaries, and vegetation management in harbours.It also prepares resource consents for more significant works and undertakes associatedworks.

Harbour catchment management also includes the development of integrated harbour andcatchment plans for each key harbour, and estuary and catchment on the CoromandelPeninsula.

Activity Primary community outcome

Catchment

planning and

management

Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Med Med

Private benefits from this activity accrue to individual landowners andoccupiers who are enabled to use the land for economic gain. Localbenefits occur because a range of public facilities, infrastructure andservices receive security from flooding. Regional benefits arisebecause productive land in the catchment areas provides economicbenefits to the wider region.

Cumulative benefits from the ongoing nature of this work programmehave the potential to provide benefits for future generations.

Detailed zone funding policies set out the analysis of exacerbators andcontributors in relation to this activity.

Economic benefit assessment Funding targets

Private Public Private Public

55% 45% 55% 45%

Funding

mechanism

Targetedcatchmentrates

General rate

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Doc # 3900786 Page 27

6.5 Group of activities: Public transport

6.5.1 Public transportWaikato Regional Council provides public transport services within the Hamilton urban areaand to key rural centres around the region. It also provides other services in the region toserve local needs, and seasonal services to meet strong summer demand. In addition, thecouncil provides Total Mobility services in three urban areas in the region.

Activity Primary community outcome

Public

transport

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Med Low Low Med

The provision of public transport services provides a mix of national,regional, local and individual benefits:

National and regional benefits arise because public transportservices allow all people who do not have access to privatetransport (both residents and visitors) to move from place toplace

Local benefits arise for those who live in close proximity toservices

Private benefits accrue to those using public transport services, withthese benefits being reflected in the fares charged to use the service

Economic benefit assessment Funding targets

Private Public Private Public

33% 67% 33% 67%

Funding

mechanism

The targeted public transport rateassessed to fund this activityapplies to properties in Hamilton cityonly.

Fees andcharges (farerevenue)

Governmentgrants;

targeted publictransport rate

120

6.6 Group of activities: Resource use

6.6.1 Consent processing and compliance monitoringConsent processing involves processing Resource Management Act (RMA) and Building Actconsents. Compliance involves the monitoring of consented sites and permitted activities aswell as complaint response.

Activity Primary community outcome

Consent

processing

and

compliance

monitoring

Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

High Low Low Med

The consenting activity provides a mix of private and public benefits.Private benefits accrue to consent holders who hold a legal right toundertake an activity.Public benefits accrue at a regional level. They result from thesustainable management of natural resources through the consentingprocess.

Economic benefit assessment Funding targets

Private Public Private Public

65% 35% 65% 35%

Funding

mechanism

Fees andcharges

General rate;permitted

activitymonitoring

rate

121

Doc # 3900786 Page 29

6.6.2 Investigations and incident responseThe council takes action on all sites found to be significantly non-compliant to address thenon-compliance observed. This applies to both consented and permitted activities. Actionsmay be punitive, directive, or both. Punitive actions available to the council include issuingformal warnings, infringement notices, or prosecution to the district court. Directive actionsinclude letters of direction, abatement notices, or applying for an enforcement order from theEnvironment Court.

Activity Primary community outcome

Investigations

and incident

response

Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Low Med Low

Enforcement is a critical element of implementing an effectiveregulatory regime. As such, benefits are spread across the regionalcommunity.

The impact of the actions / inactions of individuals may be addressedthrough fines imposed through the Court.

Economic benefit assessment Funding targets

Private Public Private Public

15% 85% 15% 85%

Funding

mechanism

Fees andcharges(Fines)

General rate

122

6.6.3 Maritime services

This activity implements the council’s responsibilities for ensuring the region’s waterways aresafe and navigable. It is split into three primary workstreams, namely policy and procedures,compliance and education, and operations. Operations include compliance activities, debrisremoval, and inspecting and maintaining the region’s network of navigation aids.

Activity Primary community outcome

Maritime

services

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Low Low Low

This activity provides local and individual benefits because navigationaids help commercial and recreational vessels to avoid accidents andthe associated financial and personal costs.

Oversight of activities on the region’s waterways results in a saferecreational environment for all users of these areas.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

The activity has no correlation toproperty values, so the UAGC isconsidered the most appropriatefunding mechanism

UAGC

123

Doc # 3900786 Page 31

6.7 Group of activities: Science and strategy

6.7.1 Environmental monitoringThis activity focuses on the collection, storage, management and analysis of quality-assureddata on the current state of air, water, land, coastal resources, ecosystems, the communityand the economy in the Waikato region. Both spatial and non-spatial data are gathered fromother agencies, the council’s networks or sites that provide cost-effective, scientificallydefensible and fit-for-purpose data. These complex data are then translated into easy-to-understand key measures (indicators) that are accessible via the web and shared with othercouncils and the public, and are used for state of the environment reporting, communityoutcomes reporting and trend analysis.

Activity Primary community outcome

Environmental

monitoring

Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost /

benefit of

funding

separately

Med Low Low Low

Consent holders who hold consents to discharge contaminants orextract resources are exacerbators. They also benefit from regionalknowledge about the state or quality of resources. Other landownerswho undertake permitted activities that have an effect on theenvironment are also exacerbators.

Section 36 of the RMA provides for the recovery of a portion of thecosts of this activity. The balance of costs after user charges is met bythe general rate in recognition of the regional benefit of the knowledgegained about the state or quality of resources.

Economic benefit assessment Funding targets

Private Public Private Public

35% 65% 35% 65%

Funding

mechanism

The council recovers a portion ofthe costs of this activity throughstate of the environment monitoringcharges on consented resourceusers.

Fees andcharges

General rate

124

6.7.2 Environmental informationThe environmental information activity supports evidence based planning and decision makingthrough gathering, analysing and documenting environmental, social, cultural and economicinformation. The information is used to:

advise the development, implementation and review of council policies

assess resource consents

monitor the state and trends of the environment

track progress towards the council’s strategic direction

meet the council’s legislated responsibilities.

The environmental information activity includes scientific investigations that assess andpredict how natural resources respond to past, present and future pressures, and how tomanage or mitigate existing and potential impacts. Gaining a better understanding of naturalprocesses is integral to strategy and policy development and monitoring, consent processes,restoration work and co-management programmes. The information assists us tocommunicate to our community if there are improvements, or decline, in the state of ournatural and physical resources, and why this is happening.

Waikato Regional Council has a statutory obligation to monitor contaminated land andmaintain a regional database of contaminated land sites. Monitoring and investigation ofcontaminated sites is included in this activity.

Activity Primary community outcome

Environmental

information

Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost /

benefit of

funding

separately

Med Med Low Med

Consent holders who hold consents to discharge contaminants orextract resources are exacerbators. They also benefit from regionalknowledge about the state or quality of resources. Other landownerswho undertake permitted activities that have an effect on theenvironment are also exacerbators.

Section 36 of the RMA provides for the recovery of a portion of thecosts of this activity. The balance of costs after user charges is met bythe general rate in recognition of the regional benefit of the knowledgegained about the state or quality of resources.

Economic benefit assessment Funding targets

Private Public Private Public

20% 80% 20% 80%

Funding

mechanism

The council recovers a portion ofthe costs of this activity throughstate of the environment monitoringcharges on consented resourceusers.

Fees andcharges

General rate

125

Doc # 3900786 Page 33

6.7.3 Social and economic informationThis activity gathers, analyses and reports on social and economic data and information andconnects this to environmental knowledge to support the council’s policy and decision making.Community research, robust stakeholder processes and models enable informed debatetowards achieving the council’s outcomes and strategic goals. Economic statistics and modelsenable informed debate towards achieving the council’s outcomes and strategic goals.

Activity Primary community outcome

Social and

economic

information

Vibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Low Low Low

This activity provides information that helps to inform development ofkey strategy and policies, and as such provides benefit across theregion.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

General rate;UAGC

126

6.7.4 Regional strategy and developmentThis activity involves working with others to lead the Waikato region towards becoming morestrategic and forward thinking. The Waikato Regional Council determines its role and prioritiesin the region via the council’s strategic direction and undertakes strategic thinking with keyregional stakeholders including scanning and research, development of non-statutory regionalstrategies and plans, economic and spatial plans and collaborative management of regionaland inter-regional issues.

The activity is also about building relationships with, and understanding of, other agenciesincluding iwi, local and central government, and the private sector involved in strategicplanning in the region and in neighbouring regions. Strategic advice is provided to informsector strategies, inter-regional strategies and national policy.

Activity Primary community outcome

Regional

strategy and

development

Strong economy

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

The regional strategy and development activity provides benefitsacross the region by seeking to take a strategic view of the region’sfuture, and the identification of methods to achieve council’s strategicdirection.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

The regional development fundreceives its funding from returnsfrom the investment fund. Thisrecognises the regional benefitsexpected to accrue as a result ofthe fund over time.

General rate;UAGC;

Investmentincome

127

Doc # 3900786 Page 35

6.7.5 Regional Integration and infrastructureThis activity is responsible for the Regional Policy Statement (RPS). The RPS providespolicies and a range of methods to achieve integrated management of natural and physicalresources across resources, jurisdictional boundaries and agency functions. The RPS alsoguides the development of regional and district plans and the consideration of resourceconsents.

This activity also involves the provision of policy information and advice to externalstakeholders to ensure policies, work programmes and service delivery are aligned. Thecouncil also assists in the development of joint strategies and reviews of other organisations’statutory and non-statutory plans and submits on consent applications.

To support the Land Transport Management Act 2003’s purpose of achieving an affordable,integrated, safe, responsive and sustainable land transport system, the Waikato RegionalCouncil produces the:

regional land transport strategy (RLTS) currently every six years, enabling the council toprovide guidance on the land transport outcomes sought by the region over a 30 yearperiod and set a policy framework for long term development of the transport system inthe Waikato region

regional land transport programme currently every three years, and providesrecommendations on the funding of regional land transport activities that contribute tothe outcomes identified in the RLTS and the objectives sought in the Government PolicyStatement for Land Transport Funding.

Waikato Regional Council also produces the regional public transport plan, prepared underthe Public Transport Management Act 2008 which implements the strategic direction set bythe RLTS in respect to public transport.

The council also facilitates the strategic transport priorities for protecting key corridors,improving road safety and providing for alternative transport modes such as cycling, walking,rail and buses.

Activity Primary community outcome

Regional

integration

and

infrastructure

Strong economyVibrant communities

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

The regional integration activity provides benefits across the region byseeking to co-ordinate the management of the region’s naturalresources.

Transport policy also provides benefit to the regional community as awhole.

Resource users can be regarded as exacerbators as statutory policy isnot necessary where land, water, air, geothermal and coastalresources are not utilised or have any potential use. However resourceusers change over time, and all residents within the region cangenerally be regarded as resource users. It is therefore more efficientfor council to carry out statutory policy across the region and over

128

present and future resource users.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

The council’s transport policyactivities attract central governmentsubsidy through NZ TransportAgency.

Governmentgrants (20%);General rate

(80%)

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Doc # 3900786 Page 37

6.7.6 Resource management policyWaikato Regional Council is required to maintain and review the effectiveness of the regionalplan and regional coastal plan.

The Waikato Regional Council, in collaboration with multiple agencies, develops growthstrategies to optimise outcomes from future growth without the procedural constraints of theResource Management Act 1991 and Local Government Act 2002. These strategies areinformed by the work of the strategic development activity, and strategically inform thepreparation of regional and district statutory plans.

Activity Primary community outcome

Resource

management

policy

Healthy environment

Funding principles

Distribution

of benefits

(user pays)

Period of benefits

(intergenerational

equity)

Extent of

action /

inactions

(exacerbator

pays)

Cost / benefit

of funding

separately

Low Med Low Low

This activity provides benefit to the regional community as a wholethrough the delivery of integrated plans, policies and strategies thatguide the management of our natural and physical resources.

Sectors of the community who interact with the natural environmentmost directly may receive a greater benefit from the work deliveredthrough this activity, but equally the activities they wish to undertakemay be restricted as a result of plans and strategies developed by thecouncil.

Economic benefit assessment Funding targets

Private Public Private Public

100% 100%

Funding

mechanism

General rate

130

7 Overall impact on the community

Section 103(3)(b) of the Local Government Act requires the Revenue and Financing Policy todemonstrate that the Council has considered “the overall impact of any allocation of liability forrevenue needs on the community.”

In considering its Revenue and Financing Policy, the council has taken into account thosematters set out in the Local Government Act:

The distribution of benefits across the community

The period in, or over which those benefits are expected to accrue

The extent to which the actions or inactions of particular individuals or a group contributeto the need to undertake an activity

In setting its overall budget, the council has also been mindful of its overall costs, and hassought to identify savings wherever possible. This focus on cost efficiency assists withensuring that the rates requirement remains affordable for the regional community.

The council has reconsidered the application of the Uniform Annual General Charge to fundthe activities it undertakes, and believes is has struck an appropriate balance between equityand affordability.

The council continues to use a range of targeted rates in order to match the costs of the workit undertakes with the identification of beneficiaries and exacerbators.

Overall, the council believes that the revenue needs in this plan can be supported by theregional economy without undue effects on community-well being. Considerable benefits willresult from this plan, across environmental, social, cultural and economic outcomes.

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Doc # 10092656

Report to Strategy and Policy March 2017 – DecisionRequired

File No: 08 11 55M

Date: 10 March 2017

To: Chief Executive Officer

From: Chief Financial Officer

Subject:Statement of Investment Policy and Objectives (SIPO) Review Approach andTimelines

Section: (A) Committee has delegation authority

1 Purpose

To outline the proposed process for the review of the Statement of Investment Policy and Objectives(SIPO).

Recommendation:

1. That the report Statement of Investment Policy and Objectives (SIPO) Review Approach andTimelines (Doc #10092656 dated 10 March 2017) be received for information, and

2. That the Strategy and Policy Committee endorse the recommended approach to the review ofthe Statement of Investment Policy and Objectives.

2 Background

2.1 The council is required by the Local Government Act 2002 (LGA) to have an investment policy.

2.2 The council meets this requirement through its Treasury Risk Management Policy which includes aLiability and Investment Policy. This policy specifies the objectives of the externally managed Equityand Fixed Income Fund (the Investment Fund) will be set out in a Statement of Investment Policy andObjectives.

2.3 The SIPO covers the Investment Goals, Performance Objectives Policy, Strategic Asset Allocationand Distribution and Reserves Policy for the Investment Fund.

2.4 A comprehensive review of the SIPO was undertaken as part of the 2015-2025 Long Term Plan withthe approved changes taking effect from 1 July 2015. It is intended there is a comprehensive reviewevery three years as part of the Long Term Plan process and the ongoing annual review is anupdate/refresh.

2.5 The SIPO was then reviewed in 2016 with amendments to the benchmarks for individual assetclasses recommended by Mercer, our strategic fund advisors, and was approved by Council at the 25August 2016 meeting. A copy of the current SIPO is attached to this report.

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Doc # 10092656 Page 2

3 History of Investment Fund

3.1 The investment fund was created following the sale of shares in the Port of Tauranga and Ports ofAuckland. Port shares were vested with Waikato Regional Council at the time of local governmentamalgamation in 1989.

3.2 The net proceeds realised from the sale of these shares was:Port of Tauranga $7,987,200 (realised in 1991/92)Ports of Auckland $60,332,500 (realised in 1993/94)Total share sale proceeds $68,319,700

3.3 The funds realised from the port share sales were fully invested during the 1994/95 financial year.

3.4 Over the course of its life, the investment fund has undergone numerous reviews, which have seenchanges made to strategic asset allocations, investment fund advisors and managers, approaches tothe underlying fund value, use of the fund for internal borrowing, and as a “banking” facility for surplusrates cash received at the beginning of each financial year. Such decisions are dependent on theposition of the council of the day with respect to risk tolerance, and how fund returns should beutilised.

3.5 In addition to the fund being used for internal borrowing purposes, the capital of the fund was alsoused to meet settlement costs associated with the ECNZ rating valuation challenge, where the councilwas required to refund overpaid rates covering a seven year period. The total capital withdrawals fromthe fund to settle this case totalled $2,857,583 over the period from 2004 to 2006.

3.6 When the fund was first established, one of the key principles was to ensure that its value wasprotected for future generations. This resulted in approximately 2.5 per cent of the fund’s value beingreinvested each year, and contributed to the growing value of the fund over the period to 30 June2000.

3.7 In 2001, the council decided to discontinue the inflation proofing, and instead an amount equal tothe inflation proofing was made available to fund environmental enhancement projects that had along-term intergenerational benefit to the region. Key projects funded in this way included the CleanStreams and Environmental Initiatives programmes.

3.8 Since 1 July 2010, the council has reverted back to inflation proofing the fund.

3.9 The current SIPO asset allocation of the fund is currently 40% to growth assets (equities) and 60%to income assets.

3.10 With these allocations the current split between asset classes is:

Asset Class Weight (%) Range (%)

New Zealand Equities 9 7 - 11Global Equities (50% hedged after tax) 20 17 - 23Real Assets 11 8 – 14Growth Assets 40 30 - 45NZ Fixed Interest 16 13 – 19Global Fixed Interest (100% hedged) 24 21 - 27Cash 20 17 - 25Income Assets 60 55 - 70

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Doc # 10092656 Page 3

3.11 The current fund distribution policy is:

Annual returns will be distributed as follows: An amount equal to that required to increase the Real Capital Base by the New Zealand

Consumer Price Index (“CPI”) for the year will be credited to the Preservation Reserve; The amount required to meet rate subsidy requirements for that year. This is expected to be

approximately $2.3m for 2014/15 decreasing thereafter to approximately 50% of this amountover the next five years inflation adjusted;

Excess returns will be distributed first to a Regional and Economic Development Reserve*,such that the Rate Subsidy and Regional and Economic Development Funding is no more than4% of the Real Capital Base, and thereafter to;

The Income Equalisation Reserve to provide a source of income in years when the investmentincome is insufficient to meet the distribution requirements.

* At the 7 February 2017 meeting, Council resolved “that the Statement of Investment Policy and Objectives isupdated to recognise funding for the implementation of Waikato Means Business as part of the rates subsidy forthe 2017/18 year.

3.12 As at 31 December 2016, the value of the fund was $92.546 million:

YTD($000)

Allocation(%)

Range(%)

WithinRange

Trans-Tasman Equities 8,804 9.5% 7-11

Harbour Asset Management 8,804 9.5%Global Equities * 18,400 19.9% 17-23

Stewart Investors 9,611 10.4%AMP Passive - Hedged 8,789 9.5%

Real Assets 10,877 11.8% 8-14 Fisher Direct NZ Property 5,638 6.1%First State Infrastructure 5,239 5.7%

NZ Fixed Interest 14,287 15.4% 13-19 AMP Capital 8,306 9.0%Internal loan 5,981 6.5%

Global Fixed Interest 21,704 23.5% 21-27 PIMCO 7,875 8.5%Wellington 7,847 8.5%Internal loan 5,981 6.5%

NZ Cash 18,474 20.0% 17-25 AMP Capital 9,254 10.0%In house managed cash 9,220 10.0%

Overall Fund 92,546 100.0% 100.0

3.13 Since inception (1995) the fund has produced a 7.9% return (gross of fees) compared tobenchmark of 7.1%.

3.14 Under the current SIPO the fund’s long term investment return objective is 4% after inflation andfees. Over 10 years the investment return (after inflation and estimated fees) is 4.2%, ahead of thelong term objective.

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Doc # 10092656 Page 4

4 Review Approach

Mercer have provided the following outline of the proposed approach and timetable for theSIPO/Investment Strategy review:

Stage 1

15 March Mercer to prepare initial paper and draft survey for you by 15 March forpresentation at the Strategy and Policy Committee meeting, 29 March.

Week beg. 3 April The survey will be distributed to the Council in the 1st week of April with closedate circa 14 April.

26 April Mercer will prepare a paper summarising the survey results with the aim ofsettling on key policy objectives.

8-10 May The Council will set aside half a day to workshop the survey results with theaim of settling on key policy objectives.

Stage 2

24 May Mercer will prepare a paper taking the views and positions identified in theprevious workshop and considering different asset allocation mixes and keypolicies by circa 24 May.

Week beg. 5 June The Council will workshop possible asset allocation mixes and the risk/returnoutcomes, alongside key policies as set out in the Mercer paper.

Tbc Mercer will prepare a paper recommending key SIPO amendments as agreedat the workshop for presentation to the Strategy and Policy Committee – dateto be determined.

Attached is a copy of the proposed survey to be circulated to Councillors as an input into the firstworkshop.

Mike GarrettChief Financial Officer

AttachmentsStatement of Investment Policy and Objectives (SIPO) (Doc #9060585)Waikato Regional Council Mercer Investment Strategy Questions (Doc #10127515)

135

STATEMENT OF INVESTMENT POLICYAND OBJECTIVESWAIKATO REGIONAL COUNCILJULY 2016

136

SIPO WAIKATO REGIONAL COUNCIL

MERCER

CONTENTS

1. Executive Summary ................................................................................................... I

2. Introduction ..............................................................................................................IV

3. Objectives .................................................................................................................V

4. Allocation of Responsibilities ....................................................................................VI

5. Investment Policy ...................................................................................................VIII

6. Investment Strategy ..................................................................................................X

7. Investment Performance Monitoring...................................................................... XIV

8. Distributions and Reserves.................................................................................... XVI

Appendix A: Risk Management Policies............................................................. XVIII

Appendix B: Investment Manager Mandates......................................................... XX

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1

Executive Summary

Introduction

Waikato Regional Council investment fund (“Fund’) arose as a consequence of the sale of Port of

Tauranga and Port of Auckland shares in the mid 1990’s. Investment returns from the Fund have

been used to fund special projects, finance internal borrowings and reduce the overall level of rates.

Council

The Council is responsible for the following:

Reviewing this SIPO, including the instructions given to Investment Managers and the

Investment Consultant, annually;

Monitoring the performance of the Fund and its Investment Managers against their investment

performance objectives;

Ensuring appropriate policies and procedures are in place to allow the Finance Committee and

management to effect their roles; and

Appointing Fund Managers as appropriate, after receiving the advice of the Finance Committee

and the Investment Consultant.

Investment Goals

The broad investment goals of the Council are:

To ensure the assets of the Fund are invested prudently and consistent with the Council’s

mission, vision and rules; and

To provide a Rates Subsidy and set aside funds for regional and economic development.

Performance Objectives

Medium term (5 -10 years): A real return of at least 4% per annum over a 10 year period.

Capital Base

In terms of the assets of the Fund, the Capital Base was set at $73m as at 30 September 2009.

Policy

In taking decisions on investment strategy, the Council will have regard to the overall

circumstances of the Fund and will comply with all applicable legislative requirements.

The Fund’s investments will be managed with a view to ensuring that the Fund will have

sufficient liquidity to meet expected cash flow requirements.

An appropriate level of diversification across securities, sectors, asset classes and countries

must be maintained.

Investments in assets other than those contemplated by this policy statement are not permitted.

The Fund will accept risks in a prudent manner and investment risk will be minimised for the

expected level of return.

The Council, in its fiduciary duty to the Fund, is conscious of its obligations as an asset owner

and the growing awareness of the importance of investing in a sustainable fashion with a focus

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on the long-term. The Council, where appropriate, will endeavour to develop its investment

practices consistent with evolving thinking regarding the significance of environment, social and

governance factors within the decision-making process.

Strategic Asset Allocation

The Council has determined a Benchmark Portfolio that, in its view, best meets its objectives for the

next 5 – 10 years, as follows:

Asset Class Weight (%) Range (%)

New Zealand Equities 9 7 - 11

Global Equities (50% hedged after tax) 20 17 - 23

Real Assets 11 8 – 14

Growth Assets 40 30 - 45

NZ Fixed Interest 16 13 – 19

Global Fixed Interest (100% hedged) 24 21 - 27

Cash 20 17 - 25

Income Assets 60 55 - 70

Investment Managers

The Council’s policy is that external investment professionals will be appointed to manage the Fund

with the exception of a maximum of 10% of the portfolio, which can be managed internally as 50%

of the Cash Portfolio.

Distribution and Reserves Policy

Annual returns will be distributed as follows:

An amount equal to that required to increase the Real Capital Base by the New Zealand

Consumer Price Index (“CPI”) for the year will be credited to the Preservation Reserve;

The amount required to meet rate subsidy requirements for that year. This is expected to be

approximately $2.3m for 2014/15 decreasing thereafter to approximately 50% of this amount

over the next five years inflation adjusted;

Excess returns will be distributed first to a Regional and Economic Development Reserve, such

that the Rate Subsidy and Regional and Economic Development Funding is no more than 4%

of the Real Capital Base, and thereafter to;

The Income Equalisation Reserve to provide a source of income in years when the investment

income is insufficient to meet the distribution requirements.

Taxation

The Fund is exempt from taxation on both capital gains and income. Ongoing investment

management of the Fund is to be carried out in a manner consistent with the Fund’s tax-exempt

status.

Effective Date

This Statement of Investment Policy and Objectives (‘SIPO’) takes effect from 1 July 2016.

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Review Dates

The date of the next SIPO review is July 2017 or sooner if either market conditions warrant or the

investment structure is altered.

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2

Introduction

Purpose

This document establishes the framework set by the Council for the governance and investment of

the Council’s investment assets (“Fund”) by providing a clear statement of the investment policies

and objectives that must be adhered to when investing the Fund.

Background

The Fund arose as a consequence of the sale of Port of Tauranga and Port of Auckland shares in

the mid 1990’s.

Effective Date

This Statement of Investment Policy and Objectives (‘SIPO’) takes effect from 1 July 2016.

Review Dates

The date of the next SIPO review is July 2017 or sooner if either market conditions warrant or the

investment structure is altered.

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3

Objectives

Investment Goals

The broad investment goals of the Council are:

To ensure the assets of the Fund are invested prudently and consistent with the Council’s

mission, vision and rules; and

To provide a Rates Subsidy and set aside funds for regional and economic development.

Investment Objectives

The investment objectives of the Fund are to:

Maintain the real value of the capital of the Fund, including recovering from investment losses

incurred in prior periods; and

Without unduly compromising the above objective, to generate returns consistent with

maintaining distributions at current levels (inflation adjusted).

It is expected these objectives will be reviewed once the Fund has recovered.

Performance Objectives

Medium term (5 -10 years): A real return of at least 4% per annum over a 10 year period.

The focus is on total return, which includes income (by way of dividends and coupon interest) and

capital (price) appreciation.

Risk Profile

The risk profile of the investment strategy of the Council is as follows:

The objective of a real return of at least 4.0% per annum will be achieved with a probability of

68%1 over a 10 year period.

In any one year, the return will fall between -1% and +13%, and a loss can be expected 1 in

every 10 years on the basis that diversification benefits hold in the short term. Should this not be

the case and all assets experience a simultaneous 1 in 20 year downside crisis, the return could

be -16%.

1 This probability is based on expected market returns as at the last strategic asset allocation review in October 2014.

Returns from active management are expected to increase the confidence of meeting this objective.

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4

Allocation of Responsibilities

Council

The Council is responsible for the following:

Reviewing this SIPO, including the instructions given to Investment Managers and the

Investment Consultant, annually;

Monitoring the performance of the Fund and its Investment Managers against their investment

performance objectives;

Ensuring appropriate policies and procedures are in place to allow the Finance Committee and

management to effect their roles; and

Appointing Fund Managers as appropriate, after receiving the advice of the Finance Committee

and the Investment Consultant.

Finance and Audit Committee

The responsibility for the implementation of the Council’s investment policies shall be that of theFinance Committee, assisted by the General Manager, Finance, and the Investment Consultant.

The Finance Committee’s role includes:

Assisting with the implementation of the Council’s investment policies;

Liaison with the Council’s Investment Consultant;

Advising the Council of changes or issues regarding the Fund’s assets;

Reporting to the Council on the performance of the Fund’s assets on a basis agreed with the

Council; and

Approving rebalancing of the Fund’s investments.

Investment Consultant

The Council believes that an Investment Consultant can assist the Council develop its investment

strategy and policies, to advise on investment manager selection, to help evaluate the performance

of the Council’s investments and its Investment Managers, and to provide strategic research and

market information.

The Investment Consultant is responsible for the following:

Assisting the Council in the review and development of the Council’s investment policies;

Advising the Council about events and changes that may affect the manner in which the Fund’s

assets should be invested;

Evaluating the appropriateness over time of the strategic asset allocation policy (Benchmark

Portfolio) based on an annual review of capital market assumptions. Advise on the need for a

formal review of the Benchmark Portfolio, if warranted;

Monitoring each Investment Manager's performance and the Fund's total performance relative

to the Fund’s adopted Investment Performance Objectives;

Recommending changes to any of the Investment Managers engaged by the Council or the

appointment of any additional Investment Managers;

Meeting with the Council and Finance Committee (as appropriate) to present investment

monitoring reports and to discuss topical investment issues;

Monitoring the split of assets between the Investment Managers on a monthly basis and

advising the Council whenever the Fund’s assets lie outside the specified ranges;

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Participating with the Council in the annual review of this SIPO.

Investment Managers

The Council’s policy is that external investment professionals (“Investment Managers”) will be

appointed to manage the Fund, with the exception of a maximum of 10% of the portfolio, which can

be managed internally as 50% of the Cash Portfolio.

Investment Managers are appointed by the Council, on the advice of management and the

Investment Consultant, after assessing the universe of appropriately skilled managers available for

the asset class in question. The Council may change Investment Managers from time to time as it

sees fit at its sole discretion.

Each Investment Manager will be responsible for the following:

Managing the Fund’s assets in accordance with the investment management agreements

and/or product disclosure documents.

Selecting securities within each asset class, subject to the constraints imposed in this

document, or constraints described in either the product disclosure documents or by the policies

advised to the Council and any applicable legislation.

Where the Investment Manager’s portion of the Fund’s assets consists partly or wholly of a

portfolio of individual securities, the Investment Manager’s investment management agreement

with the Council shall include explicit reference to the constraints or guidelines given in Waikato

Regional Council’s Treasury Risk Management Policy as these relate to the Investment

Manager. Where the Investment Manager’s portion of the Council’s assets consists wholly of

units in a pooled fund or funds, the Investment Manager shall undertake to advise the Council of

any variations that may arise from time to time between the operation of such pooled fund(s)

and the constraints or guidelines in the Treasury Risk Management Policy as these relate to the

Investment Manager.

Supplying the Council with reports of investment performance results in advance of regular

meetings and at the Council’s request, participating in those meetings to review the written

reports. The reports shall contain such information and be in such format as agreed with the

Council, but must contain sufficient information to enable the annual accounts and any

necessary tax calculations to be produced.

Managing the investments of the Fund’s assets in a manner which is consistent with its tax

exempt status.

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5

Investment Policy

General

In taking decisions on investment strategy, the Council will have regard to the overall

circumstances of the Fund and will comply with all applicable legislative requirements.

The Fund’s investments will be managed with a view to ensuring that the Fund will have

sufficient liquidity to meet expected cash flow requirements.

The Fund’s investments will be managed in accordance with the relevant provisions of the

Treasury Risk Management Policy.

An appropriate level of diversification across securities, sectors, asset classes and countries

must be maintained.

Investments in assets other than those contemplated by this policy statement are not permitted.

The Fund will accept risks in a prudent manner and investment risk will be minimised for the

expected level of return.

The Council, in its fiduciary duty to the Fund, is conscious of its obligations as an asset owner

and the growing awareness of the importance of investing in a sustainable fashion with a focus

on the long-term. The Council, where appropriate, will endeavour to develop its investment

practices consistent with evolving thinking regarding the significance of environment, social and

governance factors within the decision-making process.

Risk Management

It is noted that the Council’s assets are exposed to different investment risks that will lead to

variations between the actual and expected returns. To reduce the potential negative effects of

these risks on the Council’s liabilities and distribution policies, the Council has management

policies and principles.

Key risks and mitigating factors are set out in the Treasury Risk Management Policy.

In addition, the following applies:

a) The Finance Committee meets regularly and investment performance and outlook is a

specific agenda item;

b) A comprehensive investment reporting process applies;

c) An independent investment consultant is used;

d) Professional investment managers are to be used (for the most part);

e) The investment policies are subject to an annual review; and

f) The movement of money requires two authorised signatures.

The risk management policies will be reviewed each year in light of the Council’s overall

strategies to confirm their ongoing appropriateness.

Taxation

The Fund is exempt from taxation on both capital gains and income. Ongoing investment

management of the Fund is to be carried out in a manner consistent with the Fund’s tax-exempt

status. It is noted that on certain overseas assets it may not be possible to claim back

withholding tax paid to overseas authorities.

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The Fund does not need to use PIE vehicles, but where the Fund does elect to invest into a PIE

vehicle a 0% PIR will be elected in accordance with the Fund’s tax exempt status.

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6

Investment StrategyInvestments can generally be divided into broad asset classes within which investments share

common characteristics. The performance of the various asset classes tends to differ from each

other. Broad diversification among asset classes is the cornerstone of modern portfolio

management. The differing characteristic of the varying asset classes provides risk-reducing

benefits from diversification when they are aggregated into a total portfolio.

Asset Classes

The Fund can be invested in the following general asset classes:

Global equities, focusing on large capitalisation stocks from developed markets, with

constrained exposure to emerging markets and small capitalisation equities;

New Zealand equities, incorporating a constrained allocation to Australian equities (recognising

the close economic relationship with Australia);

Real Assets, which can be sub-categorised into property, infrastructure and natural resources,

both in New Zealand and globally;

New Zealand fixed interest, which can be sub-categorised into sovereign and credit;

Global fixed interest, which can be sub-categorised into sovereign and credit; and

Cash.

Internal Borrowing

The Council has determined to include long-term Internal Borrowing as part of its investment

strategy. Waikato Regional Council is an entity that, in part, facilitates the infrastructure of various

regional ‘catchments’ around the Waikato region. The cash in-flows from rates are relatively stable

for each catchment, reflecting the amortisation of large, but sporadic, cash out-flows arising from

infrastructure projects undertaken. While Waikato Regional Council is a debt free entity, the

catchments are at different stages of the development cycle and as a result, there is cross lending

between the catchments, somewhat akin to an infrastructure banking arrangement. As a result,

long-term internal borrowing fulfils a useful role to ratepayers, as the margin retained by an

intermediary (bank) in providing finance is retained within Waikato Regional Council. Internal

borrowing is also available to fund Natural Heritage projects and has been used to fund the grant to

the Home of Cycling Trust. With respect to long term internal borrowing:

The maximum long term borrowing is set at 20% of the portfolio (being half of the fund fixed

interest allocation).

Infrastructure funding related borrowings are backed by rates and involve the return of lending

and payment of interest over the next five to 20 years.

Interest rates are variable and are set every three years by Waikato Regional Council according

to expected long-run fixed interest (as appropriate) returns as advised by Mercer. The level of

returns is less than that expected from equity investments.

Interest will be repaid every six months.

The borrowings are illiquid, i.e. the holdings can not be traded in full or in part.

Property related borrowingIn addition to long term borrowing, the Council has borrowed from the Fund for the purposes of

securing office accommodation. With respect to this borrowing:

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Property related borrowings are backed by Waikato Regional Council and involve the payment

of interest and the repayment of capital on disposal (likely date is pending a decision of

Council’s future accommodation requirements).

Interest rates are variable depending on underlying lease arrangements.

Interest will be repaid every six months.

The borrowings are illiquid, i.e. the holdings can not be traded in full or in part.

Short term borrowingThe Fund’s strategy includes a material allocation to Cash in the expectation that, from time to time,

the Council might also (in addition to long term borrowing) require short-term ‘bridging finance’

between rates cycles. With respect to short-term borrowing, the following apply:

Short-term loans will not exceed 90 days

Short-term loans will not exceed 10% of the Fund’s total value

Interest is charged at the earnings rate generated by external cash investments

Interest is paid at the point the loan is repaid.

Strategic Asset Allocation

After seeking advice from its Investment Consultant, the Council has determined a Strategic Asset

Allocation (“SAA”) or Benchmark Portfolio that, in its view, best meets its objectives for the next 5

– 10 years, as follows:

Asset Class Weight (%) Range (%)

New Zealand Equities 9 7 - 11

Global Equities (50% hedged after tax) 20 17 - 23

Real Assets 11 8 – 14

Growth Assets 40 30 - 45

NZ Fixed Interest2 16 13 – 19

Global Fixed Interest (100% hedged)2 24 21 - 27

Cash 20 17 - 25

Income Assets 60 55 - 70

The selection of assets within an asset class is typically delegated to external investment

managers. This is subject to investment guidelines that control risk, and otherwise determine the

nature of potential investments for each mandate.

Currency Exposure

After seeking advice from its Investment Consultant, the Council has determined that a benchmark

foreign exchange position as follows:

Asset Class Weight (%) Range (%)

Foreign Currency (as a percentage of theglobal equity exposure).

Fo

50 45-55

2 Internal Loans are currently allocated evenly across both Fixed Interest sectors totalling around 33% of the total Fixed

Interest allocation.

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If either the minimum or maximum asset allocation position is exceeded as a result of market

depreciation or appreciation, or due to significant cash flows, the Manager must, unless Waikato

Regional Council otherwise agrees in writing, within 5 business days of being aware of the range

being exceeded, reweight the hedging to be as near as practical to the weights of the Benchmark

position.

Currency hedging within the New Zealand Equity allocation (where the manager has the discretion

to invest in Australian shares) is at the discretion of the Investment Manager. Any foreign currency

exposure within the Real Assets and Global Fixed Interest allocations is to be fully hedged.

Rebalancing

The Strategic Asset Allocation provides for ranges around the target Benchmark Portfolio, which

allow for the impact of market movements on asset values.

The exposures to the various asset classes will be monitored monthly by the Investment

Consultant. The Investment Consultant will note any positions that sit outside the specified

asset allocation ranges.

The Council intends for the Fund to be regularly rebalanced back to target weights. The Fund

will be rebalanced back to target weights when any asset class position is outside the applicable

range, but may also be rebalanced even if the range has not been breached.

In approving a rebalancing, the Council can take into account transaction costs, recent volatility

and the likelihood that market movements may result in the position moving back within the

specified ranges.

The regular cashflow requirements of the Council provide an opportunity to assist in rebalancing

the Fund towards target weights, by directing the outflows to the overweight asset class(es) and

any inflows to underweight asset class(es).

Rebalancing can also be undertaken by selling overweight asset classes to fund underweight

asset classes.

Liquidity Policy

The Council requires liquidity to meet payment obligations that include:

Rates subsidy

Investment commitments, such as forward foreign exchange cover, and calls on committed

capital.

The Council requires a high degree of confidence that during any periods of extreme market

volatility, liquidity demands can be met. The Fund’s primary source of liquidity is its Cash

investment. In principle, at least around two years-worth of rates subsidy should be held in Cash.

Cash investments also play a role in the Fund’s investment strategy, providing a stable return with

low volatility. The Fund’s investment strategy supports its liquidity requirements by predominantly

investing in listed securities.

Illiquid Investments

However, as a genuine long-term investor, the Fund is in a position to benefit from the illiquidity

premium, that is, the return premium derived from the Council’s willingness to commit to an

investment for a fixed period.

Illiquid investments can take many forms, including direct property, private equity, unlisted funds

(such as infrastructure) and timber. In addition to offering a (possible) return premium, these assets

149

possess different risks to liquid or listed investments, typically have higher fees, present valuation

challenges and require more intensive governance.

As a result, the Fund’s exposure to illiquid investments is restricted, in the first instance, to its

allocation to Real Assets, being 11%.

In principle, the Fund expects to hold up to half this allocation in illiquid investments, although from

time to time (as opportunities arise), it may elect to hold either nothing, or the whole amount, in

illiquid investments.

Sustainable Investments

Consistent with its policy commitment to “endeavour to develop its investment practices consistent

with evolving thinking regarding the significance of environment, social and governance factors

within the decision-making process”, the Council has elected to invest 50% of its global equity

exposure in a sustainability strategy and will assess the success of this step over time with a view

to additional steps as appropriate.

Review

The appropriateness of the Benchmark Portfolio will be formally reviewed at least once a year and

kept under constant monitoring to reflect any fundamental changes in the investment environment

and changes to the Council’s investment policy.

Full reviews are expected at least every three years, or more often if recommended by the

Investment Consultant.

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7

Investment Performance MonitoringThe principal goals of performance monitoring are to:

Assess the extent to which Council's investment objectives are being achieved;

Compare the performance of Council’s appointed Investment Managers against benchmark

indices and the performance of other relevant investment managers;

Ascertain the existence of any particular weaknesses in the Investment Manager or the

Investment Managers’ product(s) utilised; and

Allow the Council to continually assess the ability of the Investment Managers to successfully

meet Fund’s objectives.

Fund Performance

Returns on the Fund will be monitored by the Council in relation to the Benchmark Portfolio. The

Benchmark Portfolio is a performance monitoring tool intended to reflect the Council’s adopted

SAA.

Benchmarks

Benchmarks are a tool against which to measure the effectiveness of investment strategy either at

a whole of Fund level, at an asset class or at the manager level. The general principle of

benchmarks at an asset class or manager level is they should be replicable – that is, it should be

possible to create a portfolio of securities which mirrors (or at least very closely resembles) that

used within the benchmark.

At the asset class level, benchmarks provide an effective way of measuring the skill with which the

manager selects securities within the portfolio being managed.

The risk and return characteristics of the benchmarks used for the Fund as a whole and for

individual asset classes must be broadly consistent with those considered in the analysis used to

construct the SAA.

The benchmarks for individual asset classes are as follows:

Asset Class Index

New Zealand Equities S&P/NZX 50 Index (without Imputation Credits)

Global Equities MSCI All Countries World Index with net dividendsreinvested (50% Hedged, after tax, to NZD)

Real Assets 50% IPD Property Index Total Return and 50% FTSEGlobal Core Listed Infrastructure Capped 50/50 Index(100% hedged to NZD)

New Zealand Fixed Interest S&P/NZX NZ Government Bond index

Global Fixed Interest Barclays Capital Global Aggregate Index (100% Hedgedto NZD)

Cash S&P/NZX Bank Bills 90-Day Index

MSCI = Morgan Stanley Capital International

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Investment Manager Performance

Returns achieved by the appointed Investment Managers will be evaluated by the Council in

relation to both the Manager’s objectives and the Fund’s objectives. Investment Manager

returns will also be compared with those of a suitable peer group, such as a group of other

investment fund managers.

Each Investment Manager will report at least quarterly in accordance with a format agreed with

the Council.

Investment Manager performance will be monitored quarterly, with a view to a continuing

evaluation on the basis of rolling three year results.

Investment Managers’ roles will be reviewed by the Council on a regular basis. Matters to be

taken into account in these reviews will include investment style, resources, organisational

strength, investment performance relative to objectives, and any other factors considered

relevant to the Investment Managers’ continuing ability to meet the applicable investment

objective.

Performance (before tax and fees) for individual asset classes will be measured against the

benchmarks above or similar indices.

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8

Distributions and Reserves

Volatility of Returns

The Council recognises that its investment strategy contemplates an asset allocation which is likely

to generate returns that demonstrate volatility over the short term. In contrast, the Council is

committed to maintaining the real value of the capital base, providing a consistent rate subsidy and

setting aside funds for regional and economic development.

Fluctuations in investment returns directly impact the level of income available for distribution, and

also on the capital base and the ability to grow distributions over time. Investment risk is, therefore,

borne by the future recipients.

The Fund’s investments have been structured so that a reliance on income (by way of dividends,

coupon interest, etc) should not be required. A feature of the structure is the relative liquidity of the

underlying assets allowing for distribution to be sourced from both income streams and capital.

Capital Base

In terms of the assets of the Fund, the Capital Base was set at $73m as at 30 September 2009.

Distribution Policy

The Council is committed to maintaining its Capital Base in real terms (inflation proofing).

It also requires funds for distribution from time to time to support operations. The policy is to

maintain distributions at a level of 4.0% of the capital base (adjusted for inflation) over the next 5 –

10 years.

The policy is for these distributions to be split between a Rates Subsidy and Regional and

Economic Development Funding. The Rates Subsidy will commence at current levels

(approximately $2.3m for 2014/15) and gradually decrease over five years to half this amount

inflation adjusted, with the balance of the 4% set aside for Regional Development Funding.

Specifically, the annual returns in any year will be distributed as follows:

1. An amount equal to that required to increase the Real Capital Base by the New Zealand

Consumer Price Index (“CPI”) for the year will be credited to the Preservation Reserve;

2. The amount required to meet rate subsidy requirements for that year. This is expected to be

approximately $2.3m for 2014/15 decreasing thereafter to approximately 50% of this amount

over the next five years, inflation adjusted;

3. Returns in excess of those required to preserve the Capital Base and subsidise rates (as

above), will be distributed first to a Regional and Economic Development Reserve , such that

the Rate Subsidy and Regional and Economic Development Funding is no more than 4% of the

Real Capital Base, and thereafter to;

4. The Income Equalisation Reserve to provide a source of income in years when the investment

income is insufficient to meet the distribution requirements.

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In the event that investment income in any one year is not sufficient to meet inflation proofing and

Rate Subsidy distributions the amounts required for these distributions will be funded from the

Income Equalisation Reserve.

While distribution from the Income Equalisation Reserve is not desirable, such a distribution is

permissible, but is also a signal to the Council that it may be appropriate (but it is not necessary) to

review the investment objectives or the distribution policy (or both). The use of an Income

Equalisation Reserve effectively allows the Council to reduce net investment assets below the value

of the Capital Base.

Reserves Policy

The Council will establish the following Reserves to facilitate the achievement of its Distribution

Policy:

Preservation ReserveEach year the Preservation Reserve shall be adjusted by the increase in the real Capital Base

based on the annual change in the CPI. This ensures the Fund retains its purchasing power over

time. If there are insufficient returns available to make this adjustment, the Income Equalisation

Reserve should be adjusted accordingly.

Regional and Economic Development ReserveThe Regional and Economic Development Reserve has been established to provide funding for

future year(s) projects throughout the jurisdiction of the Waikato Regional Council. A distribution to

this reserve may be deemed appropriate by the Council when investment income is in excess of the

inflation proofing and annual rate subsidy requirements, such that the rate subsidy and regional and

economic development funding distribution does not exceed 4.0% of the Real Capital Base.

Any transfers to this Reserve will be treated as an effective draw-down from the Fund and any

funds held in the reserve will attract interest in accordance with Council’s reserve interest policy.

Income Equalisation ReserveThe Income Equalisation Reserve has been established to set aside excess investment income in

any one year (where investment income exceeds 4% plus inflation of the Real Capital Base) for

distribution in future years where there is insufficient investment income.

An Income Equalisation Reserve that exceeds (for more than two consecutive quarters) four year’s

annual Rate Subsidy is a signal to the Council that it may be appropriate (but it is not necessary) to

transfer excess funds to the Regional and Economic Development Reserve.

The Income Equalisation Reserve can also be used to meet inflation proofing and Rate Subsidy

distributions in the event of insufficient investment income in any one year. As a result, it is

contemplated that the Income Equalisation Reserve may be negative, that is, where the value of

investment assets is below the value of the Real Capital Base.

A negative Income Equalisation Reserve that exceeds (for more than two consecutive quarters)

three year’s annual rate subsidy is a signal to the Council that it may be appropriate (but it is not

necessary) to review its Distribution Policy.

ReviewThe current Distribution and Reserve Policy is expected to be reviewed in (or around) 2020.

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Appendix A:

Risk Management Policies

Risk Description Risk Management

Credit Risk Credit risk (or counterparty risk)

is the risk of default by, or credit

ratings downgrade of, the

counterparty to a particular

transaction.

• The Council acknowledges that where

pooled products are used, security

exposure is determined by the

governing documents of the

investment product.

• Exposure to global fixed interest

investments is generally limited to the

benchmark.

• The Council expects no more than

10% will be invested outside the

benchmark and limited to a credit

rating of B- (rated by S&P or

equivalent) and above.

• Exposure to NZ fixed interest

investments is expected to be limited

to BBB- (rated by S&P or equivalent)

and above.

• Investments are diversified over a

range of companies, industries and

maturities.

• Exposure to any one issuer is

expected to be limited.

Liquidity

Risk

Liquidity risk has two

components: market liquidity risk

(the risk of entering into

positions that cannot be sold or

hedged as required) and

cashflow risk (the risk that the

Fund will not be able to meet its

obligations as required).

• The Council requires a high degree of

confidence that during any periods of

extreme market volatility liquidity

demands can be met.

• The Council’s primary source of

liquidity is its Cash investment. Cash

investments also play a role in the

Council’s investment strategy,

providing a stable return with low

volatility.

• The Council’s investment strategy

supports its liquidity requirements by

predominantly investing in listed

securities via pooled products (that

also provide liquidity), preferably with

daily unit pricing.

• The Fund investment structure is

relatively liquid, avoiding illiquid asset

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classes such as direct direct property

and timber.

Operational

Risk

Operational risk is the risk of

loss from inadequate or failed

internal processes, people or

systems, or from external

factors.

• Professional investment managers are

used.

• The Council requires regular reporting

from both Investment Managers and

the Investment Consultant.

• Two signatures are required for any

cashflow transactions.

Currency

RiskCurrency risk is the risk that

foreign currency denominated

assets will lose value due to the

effect of an adverse exchange

rate movement.

• Global equity investments are 50%

hedged, following advice from the

Council’s Investment Consultant.

• Global bond and real asset

investments are fully hedged.

• Hedging of any Australian dollar

exposure within the New Zealand

equity allocation is at the discretion of

the manager.

Market Risk Market risk is the risk of adverse

movements in an asset market

(including asset prices, volatility,

changes in the yield curve or

other market-related variables)

for the underlying asset.

• Investments are spread across asset

classes, countries, industries and

companies.

• The investment agreement and/or,

where appropriate, the investment

fund governing documents, shall

include guidelines setting out eligible

investments, performance measures,

constraints and exposure limits,

derivative limits, monitoring and

reporting requirements.

• The Reserves Policy helps minimise

the impact of market volatility on

distributions.

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Appendix B:

Investment Manager Mandates

Asset Class Manager Allocation(%)

Outperformance(% p.a.)*

Trans-Tasman Equities Harbour AssetManagement

100 2.0

Global Equities (unhedged)

Global Equities (100% hedged)

First State StewartWorldwide

Sustainability Fund

AMP CapitalInvestors

50

50

2.0

0.0

Real Assets

Global Listed Infrastructure(100% hedged to AUD)

First StateInvestments New

Zealand

50 2.0

Property Fisher Funds 50 1.0

Global Fixed Interest (hedged) PIMCo via FisherFunds

35 1.0

Wellington viaFisher Funds

Internal Loan

35

30

1.0

NA

NZ Fixed Interest AMP CapitalInvestors

Internal Loan

60

40

0.75

NA

Cash AMP CapitalInvestors

Internal

50

50

0.25

0.50

* over rolling 3 year periods

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Mercer (N.Z.) Limited113-119 The Terrace Wellington 6011PO Box 2897 Wellington 6140NEW ZEALAND+64 4 819 2600Fax +64 4 914 0434www.mercer.co.nz

To: Mike Garrett, Finance Manager, Waikato Regional CouncilDATE: 15 March 2017FROM: Russell Garrett, Simon CoxSUBJECT: Strategy Development Questions

Dear Mike

As part of the review of the investment strategy and portfolio scheduled in 2017, we list below aseries of survey questions for your consideration.

We have based the questions on those used in 2014, but have added a section on InvestmentBeliefs, including a number of questions around sustainability. We have recommended this issomething the Council tackle. This has made the survey somewhat longer. An alternative is toaddress Investment Beliefs at a later date.

We propose using Survey Monkey to run the survey. We estimate about 20 minutes to completethe survey, although Councillors can answer some questions and then come back later tocomplete the process. There are no right or wrong answers and it’s OK to not answer a question.If you ‘don’t know”, then just move on to the next question.

In addition to agreeing content, and please note specific reference to Fund values and spending(questions 25, 31 and 32), we need to agree a deadline for responses.

Investment Governance1. What should be the purpose of the Investment Fund?

(rank responses from 1 – most appropriate, to 5 – least appropriate):

a. To subsidise rates now and into the future ☐

b. To provide a pool of funds for regional development projects ☐

c. A provide for a combination of rates’ subsidies and regional development funding ☐

d. Other – please describe .………………………………………………………………..…

…………………………………………………………………………………………………….

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Investment governance StronglyAgree

MildlyAgree

MildlyDisagree

StronglyDisagree

2 I have a clear understanding of my role in theinvestment process

☐ ☐ ☐ ☐

3 The Council is primarily accountable for theinvestment result, assuming a reasonabletimeframe (not just the Finance Committee)

☐ ☐ ☐ ☐

4 I understand why we hold the investments we do☐ ☐ ☐ ☐

5 The Council’s strategic investment capabilitiesand limitations are clearly defined

☐ ☐ ☐ ☐

6 We have the skills and expertise to hire and firefund managers

☐ ☐ ☐ ☐

7 Appropriate mechanisms are in place to monitoroutsourced functions (e.g. Consultants,Investment Managers)

☐ ☐ ☐ ☐

Investment Beliefs

This section provides a number of “belief” statements. Please indicate (tick) whether or not youagree with the statement.

StronglyAgree

MildlyAgree

MildlyDisagree

StronglyDisagree

8 The asset sectors selected (e.g. shares, bonds,property) drive investment returns more than theindividual assets within those sectors.

☐ ☐ ☐ ☐

9 Local (NZ) investments should be favoured overoffshore / global investments.

☐ ☐ ☐ ☐

10 Returns can be enhanced and risk reduced bytaking active positions (or “tilts”) away frombenchmark asset allocations where sectors arebelieved to be over or under-valued.

☐ ☐ ☐ ☐

11 In order to generate higher returns from acombination of investments, it is necessary to addriskier investments.

☐ ☐ ☐ ☐

12 Good investment governance requires anunderstanding of strengths and weaknesses.

☐ ☐ ☐ ☐

13 I believe that a talented fund manager canconsistently outperform the market after fees.

☐ ☐ ☐ ☐

14 If you don’t understand a financial product orstrategy, you shouldn’t invest in it.

☐ ☐ ☐ ☐

Investment beliefs are a critical ingredient of successful investment programmes. They provide acoherent foundation on which the investment strategy can be built and implemented.

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StronglyAgree

MildlyAgree

MildlyDisagree

StronglyDisagree

15 Illiquid assets (e.g. direct property, directinfrastructure, private equity) can play a valuablerole in a long-term portfolio.

☐ ☐ ☐ ☐

16 It is important for our investment activities to alignwith our values.

☐ ☐ ☐ ☐

17 Our sole focus is to maximise returns, regardlessof any other considerations.

☐ ☐ ☐ ☐

18 Environmental, Social and Governance (ESG)factors can materially impact long terminvestment returns and should be consideredwhen choosing investment solutions for the Fund.

☐ ☐ ☐ ☐

19 We aspire to be leaders when it comes toinvesting sustainably.

☐ ☐ ☐ ☐

20 Investing in the ‘wrong’ thing can result inreputation risk to the Council.

☐ ☐ ☐ ☐

21 It is important to engage with companies weinvest in and to express ownership rights,including voting rights, with regards to goodstandards of corporate governance, includingBoard structure, independence and executiveremuneration.

☐ ☐ ☐ ☐

22 Divesting from stocks (or excluding them from theFund) should only be used in exceptional cases.

☐ ☐ ☐ ☐

20 I can accept a minimal reduction in returns if thisis what is required to invest sustainably.

☐ ☐ ☐ ☐

21 We should follow what other Councils are doing inthe area of sustainable investment.

☐ ☐ ☐ ☐

23When thinking about the Council stakeholders, including rate payers, I believe our stakeholderswould not expect us to invest in (please indicate whether or not you agree with each):

a Armaments / munitions / weapons ☐ ☐ ☐ ☐

b Nuclear-related activities ☐ ☐ ☐ ☐

c Tobacco ☐ ☐ ☐ ☐

d Gambling ☐ ☐ ☐ ☐

e Pornography ☐ ☐ ☐ ☐

f Alcohol ☐ ☐ ☐ ☐

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24Are there any other assets that you believe the Fund’s stakeholders would not expect us toinvest in?

SpendingWhen thinking about spending (the amount drawn down to subsidise rates and/or otherspending) …

25. When we refer to ‘capital base’ for the purpose of setting spending budgets or preservingcapital, we mean (select one of the following):

a. Core capital (reset at $73m in June 2015)

b. Real capital (now $79m), being Core capital plus the Preservation (inflation)Reserve

c. Actual asset value (now $92m)

d. Another amount, please describe $

e. Don’t know

Spending StronglyAgree

MildlyAgree

MildlyDisagree

StronglyDisagree

26 It is important to maintain capital to ensurebenefits can be shared with future generations.

☐ ☐ ☐ ☐

27 I am comfortable with the commitment to keepspending even in the event of insufficient returns

☐ ☐ ☐ ☐

28 I would be comfortable varying spending (year onyear), including lowering spending in some years,if over the long run this resulted in higherspending

☐ ☐ ☐ ☐

29 I prefer to maintain spending at a stable level(year on year) even if this means spending lessover the long term

☐ ☐ ☐ ☐

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30. The most appropriate way to set spending is to (select one of the following):

a. Maintain spending at the same dollar amount each year ☐

b. Adjust spending each year by inflation so as to maintain real spending power ☐

c. Vary spending according to need, regardless of investment returns ☐

d. Vary spending according to investment returns, i.e. spend more following goodreturns and less following a poor year

☐

e. Other – please describe ….………

31. What level of spending would you like to maintain on average per annum? (select one of thefollowing):

a. The current level (3% of Real Capital) or $2.4m ☐

b. The same as the investment objective (4% of Real Capital) or $3.2m ☐

c. Another $ level – please specify $

d. Another % of assets level – please specify %

32. Is there a level of capital you would like to see maintained over the long term?(select one of the following):

a. Core capital (reset at $73m in June 2015) ☐

b. Real capital, being Core capital plus increases to allow for inflation (now $79m) ☐

c. Actual asset value (now $92m) ☐

d. None – I’d be happy to spend it all ☐

e. Another amount, please specify $

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Risk and Return

Mercer believes risk and return are related: if the expected return on an asset exceeds that on asimilar second asset, there is likely to be an additional risk associated with holding the formerasset.

This section explores your expectations about return and appetite for risk. It will help indetermining the right investment strategy for you. To assist we have included a risk/return matrixin the Appendix. The matrix illustrates the links between various investment strategies, expectedreturns and risk metrics.

Risk and Return StronglyAgree

MildlyAgree

MildlyDisagree

StronglyDisagree

33 I would be comfortable investing more in riskiergrowth assets in order to target higher spending

☐ ☐ ☐ ☐

34 I would be happy if our Fund underperforms othersimilar funds providing it meets its objectives

☐ ☐ ☐ ☐

35 Achieving the Fund’s target return in the long-termis preferable to preserving capital in the short-term

☐ ☐ ☐ ☐

36 I would be comfortable with limiting risk in theFund even if it means it will also limit returns

☐ ☐ ☐ ☐

37. What should be the core objective of the investment strategy and the investment process?(rank responses from 1 – most appropriate, to 5 – least appropriate):

a. To avoid any losses in the Fund’s capital

b. To generate the highest returns possible

c. To ensure assets are managed to smooth expected future spending

d. To outperform broad market indices

e. To generate returns in excess of that of peers

38. The current target allocation to growth assets (e.g. shares, property, infrastructure) of 40% is(select one of the following):

a. About right ☐

b. Too high ☐

c. Too low ☐

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39. What is the biggest risk that the Fund needs to manage from an investment perspective?(rank responses from 1 – most appropriate, to 5 – least appropriate):

a. Probability of negative investment returns ☐

b. Being associated with a bad or negative headline in the media ☐

c. Underperforming other similar Funds ☐

d. Earning insufficient income over time to maintain spending ☐

e. Reducing the value of the Fund’s capital ☐

40. Assuming the desired level of annual spending could be maintained over the long-term, Iwould be comfortable with an annual loss (a negative investment return) of (select one of thefollowing):

a. One year in ten ☐

b. One year in seven ☐

c. One year in five ☐

d. More frequently ☐

41. Again assuming the desired level of annual spending could be maintained over the long-term, in terms of an annual loss, I would be uncomfortable with a return of (select the pointat which you would be uncomfortable):

a. Between 0% and -5% ☐

b. Between -5% and -10% ☐

c. Between -10% and -20% ☐

d. Less than -20% ☐

42. What is the most appropriate time horizon for setting the investment strategy (i.e.determining success of investment objectives)? (select one of the following):

☐ 1 year☐ 3 years☐ 5 years☐ 10 years☐ 20 years

Other, please specify …………………………………………………………….

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General Comments

Please let us know if you have any comments about the sections above or other areas notcovered.

Sincerely,

Russell GarrettPrincipal

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DISCLAIMER

© 2017, Mercer (N.Z.) Ltd

This document contains confidential and proprietary information of Mercer and is intended forthe exclusive use of the named recipient. The document, and any opinions it contains, may not bemodified, sold or otherwise provided, in whole or in part, to any other person or entity withoutMercer’s prior written permission.

All services provided in this report are delivered strictly on the basis of advice to a wholesaleclient in terms of the Financial Advisers Act 2008.

Information on organisations contained herein has been obtained from the organisationsthemselves and other sources. While this information is believed to be reliable, norepresentations or warranties are made as to the accuracy of the information presented, and noresponsibility or liability, including for consequential or incidental damages, can be accepted forany error, omission or inaccuracy in this report or related materials.

Opinions contained herein are not intended to convey any guarantees as to future performance.The value of any investments can go down as well as up and you may not get back the amountyou have invested. In addition, past performance cannot be relied on as a guide to futureperformance.

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