policy and development committee meeting on …...nov 25, 2014 · steve earnshaw, david jack,...

POLICY AND DEVELOPMENT COMMITTEE MEETING

on

Tuesday 25 November 2014

Council Chamber Timaru District Council

King George Place Timaru

TIMARU DISTRICT COUNCIL

Notice is hereby given that a meeting of the Policy and Development Committee

will be held in the Council Chamber, District Council Building, 2 King George

Place, Timaru on Tuesday 25 November 2014, at the conclusion of the District

Services Committee meeting.

Committee Members: Clrs Tracy Tierney, (Chairperson), Anthony Brien (Deputy Chairperson), Peter Burt, Steve Earnshaw, David Jack, Richard Lyon, Pat Mulvey, Kerry Stevens, Steve Wills and the Mayor. LOCAL AUTHORITIES (MEMBERS’ INTERESTS) ACT 1968

Committee members are reminded that if you have a pecuniary interest in any item on

the agenda, then you must declare this interest and refrain from discussing or voting on

this item, and are advised to withdraw from the meeting table.

Peter Nixon CHIEF EXECUTIVE

Timaru District Council Policy and Development Committee # 858988 25 November 2014

POLICY AND DEVELOPMENT COMMITTEE

25 NOVEMBER 2014

AGENDA

Item No

Page No

1 Apologies

2 Identification of Items of Urgent Business

3 Identification of Matters of a Minor Nature

4 Chairperson’s Report

5 1 Confirmation of Minutes

6 7 Aoraki Development Business Tourism Quarterly Report to September 2014

Interview: 2.00pm

7 18 QV Presentation: 2.15pm

District Revaluation

8 19 Aoraki Development Business Tourism Annual General Meeting – Appointment of Proxy

9 20 Council Investments and Borrowing as at 30 September 2014

10 24 Timaru District Holdings Ltd Quarterly Report to September 2014

11 31 Shareholders Expectation Guide for Council Controlled Organisations

12 51 Long Term Plan 2015-2025 Draft Assumptions

13 Standing Committee Recommendations

14 Consideration of Urgent Business Items

15 Consideration of Minor Nature Matters

Timaru District Council Policy and Development Committee # 858988 1 25 November 2014


FOR THE MEETING OF 25 NOVEMBER 2014

Report for Agenda Item No 5 Prepared by Tina Rogers Group Manager Corporate Services Confirmation of Minutes

________________________________

Minutes of the Policy and Development Committee meeting. Recommendation That the minutes of the Policy and Development Committee meeting held on 14 October 2014, be confirmed as a true and correct record.


TIMARU DISTRICT COUNCIL MINUTES OF A MEETING OF THE POLICY AND DEVELOPMENT COMMITTEE HELD IN THE COUNCIL CHAMBER, DISTRICT COUNCIL BUILDING, 2 KING GEORGE PLACE, TIMARU ON TUESDAY 14 OCTOBER 2014 AT 11.40AM PRESENT Clrs Tracy Tierney (Chairperson), Peter Burt,

Steve Earnshaw, Dave Jack, Richard Lyon, Pat Mulvey, Kerry Stevens, Steve Wills and the Mayor

APOLOGIES Clr Tony Brien IN ATTENDANCE Helen Shorthouse – Chair Canterbury Digital Leaders

Forum, Canterbury Development Corporation (for item 7) Stuart Dillon-Roberts – The Digital Office (for item 7)

Lloyd McMillan – Temuka Community Board Neville Gould – Pleasant Point Community Board

Chief Executive (Peter Nixon), Group Manager Corporate Services (Tina Rogers), and Council Secretary (Joanne Brownie)

1 CHAIRPERSON’S REPORT

The Chairperson reported that she had attended the South Canterbury Strategy Workshop with ADBT.

2 CONFIRMATION OF MINUTES

Proposed Clr Wills Seconded Clr Stevens

“That the minutes of the Policy and Development Committee meeting held on 2 September 2014, be confirmed as a true and correct record.”

MOTION CARRIED 3 MID-SOUTH CANTERBURY ROADING COLLABORATION

The Committee considered a report by the Chief Executive seeking approval to enter into an updated Memorandum of Understanding for the South Canterbury Roading Collaboration.

Proposed Clr Tierney Seconded the Mayor

1 “That the report be received and noted. 2 That the signed revised Memorandum of Understanding as presented be

approved for execution.”

MOTION CARRIED


4 TIMARU DISTRICT HOLDINGS LTD ANNUAL REPORT FOR THE YEAR

ENDED 30 JUNE 2014 AND APPOINTMENT OF PROXY The Committee considered a report by the Group Manager Corporate Services presenting the TDHL Annual Report the year ended 30 June 2014 and seeking a proxy to be appointed for the TDHL Annual General Meeting.

Proposed Clr Jack Seconded Clr Wills

“That the TDHL Annual Report for the year ended 30 June 2014 be received and noted.”

MOTION CARRIED

Proposed Clr Tierney Seconded Clr Stevens

“That Clr Tierney be appointed proxy (and Clr Burt as alternative proxy) to represent the Council at TDHL’s Annual General Meeting on 6 November 2014.”

MOTION CARRIED 5 PROVISIONAL 2013/14 FINANCIAL RESULTS

The Committee considered the provisional financial results for the year ended 30 June 2014.

Proposed Clr Tierney Seconded Clr Lyon

“That the provisional financial results for the year ended 30 June 2014 be received and noted.”

MOTION CARRIED 6 2013/14 WORK TO BE COMPLETED

The Committee considered a report by the Group Manager Corporate Services outlining projects that were budgeted to be completed or commenced during the 2013/14 year but were not. The Committee agreed that in future it would be useful to have brief explanations as to why projects have been delayed.

Proposed Clr Jack Seconded Clr Stevens

a) “That the schedule of work to be completed from the 2013/14 year be

received and noted; and b) That the 2014/15 budget be amended to reflect the $3,430,600 of carried

forward expenditure.”

MOTION CARRIED


7 DRAFT CANTERBURY DIGITAL STRATEGY

Helen Shorthouse and Stuart Dillon-Roberts gave a presentation to the Committee on the development of the draft Canterbury Digital Strategy, and answered questions from the Committee. The presenters talked about the advantages to the District with the implementation of the strategy and referred to the successful implementation in the Otago area. It was suggested that the digital strategy’s connection to Gigatown be maximised. Helen Shorthouse acknowledged that there is a good opportunity for leverage off Gigatown. The strategy will be officially launched before the end of the year.

Proposed Clr Tierney Seconded Clr Jack

“That Council confirms its support of the Draft Canterbury Digital Strategy and the strategy be received and noted.”

MOTION CARRIED 8 LIABILITY MANAGEMENT POLICY

The Committee considered a report by the Group Manager Corporate Services recommending changes to the Liability Management Policy. It was suggested that a glossary of key terms would be helpful, and a representative of Bancorp to be invited to talk to the Committee at some future occasion.

Proposed Clr Burt Seconded Clr Stevens

“That the Liability Management Policy be approved, effective from 1 July 2015, subject to three alterations: under 4.2 Financial Covenants on Borrowings –

20% be changed to 15% of total revenue

175% be changed to 150% of total revenue, and under 4.5 Liquidity and Funding Risk Management -

50% be changed to 40% of its outstanding borrowings.”

MOTION CARRIED 9 INVESTMENT POLICY

The Committee considered a report by the Group Manager Corporate Services recommending changes to the Investment Policy.

Proposed Clr Tierney Seconded Clr Lyon

“That the Investment Policy be approved, effective from 1 July 2015.”

MOTION CARRIED


10 RATES REMISSION AND POSTPONEMENT POLICY

The Committee considered a report by the Group Manager Corporate Services recommending changes to the Rates Remission and Postponement Policy.

Proposed Clr Jack Seconded Clr Wills

“That the Draft Rates Remission and Postponement Policy be approved for consultation.”

MOTION CARRIED 11 RATES DISCOUNT POLICY

The Committee considered a report by the Group Manager Corporate Services recommending changes to the Rates Discount Policy.

Proposed Clr Tierney Seconded Clr Burt

“That the Statement of Proposal for the Draft Rates Discount Policy be adopted for public release and submissions be invited in accordance with sections 83 and 87 of the Local Government Act 2002.”

MOTION CARRIED 12 RATES POLICY

The Committee considered a report by the Group Manager Corporate Services recommending changes to the Rates Policy.

Proposed Clr Stevens Seconded Clr Wills

“That the Rates Policy be approved.”

MOTION CARRIED 13 CARBON POLICY REPORT AS AT 30 JUNE 2014

The Committee considered the carbon policy report as at 30 June 2014 as prepared by the Group Manager Corporate Services.

Proposed Clr Tierney Seconded Clr Mulvey

“That the report be received and noted and the Carbon Policy be approved.”

MOTION CARRIED 14 AMENDED RANGITATA HUTS POLICY

The Committee considered a further report on the Rangitata Huts Policy, advising that reference to the fire appliance has been removed, due to inferred responsibility of Council even though it was a requirement suggested by the Hut Holders and it is not Council equipment.

Proposed Clr Mulvey Seconded Clr Stevens

“That the Rangitata Huts Policy be approved.”

MOTION CARRIED


15 DEVELOPMENT CONTRIBUTIONS

The Committee considered a further report on development contributions, having requested further information on the options, at the September meeting.

Proposed Clr Stevens Seconded Clr Burt

1 “That the Timaru District Council development contributions policy be status

quo in that no development contributions be collected. 2 That the financial contributions policy, methods and rules as set out in the

District Plan be reviewed and strengthened in the forthcoming review of the District Plan.”

MOTION CARRIED

The meeting concluded at 2.00pm. Chairperson




Report for Agenda Item No 6

Prepared by Tina Rogers Group Manager Corporate Services Aoraki Development Business and Tourism Quarterly Report (File E3/11)

_______________________________

Purpose of Report To present the Aoraki Development Business and Tourism quarterly report for the period July to September 2014, (attached). Background Aoraki Development Business Tourism presents a quarterly report as stipulated in their Statement of Intent. Identification of Relevant Legislation, Council Policies and Plans The Council’s Community Plan (LTP). Assessment of Significance The matter is not deemed significant under the Council’s Significance Policy. Consultation Aoraki Development Business and Tourism, will be present to speak to the report. Other Considerations There are no other considerations. Recommendation That the Aoraki Development Business and Tourism quarterly report, be received and noted.




Report for Agenda Item No 7 Prepared by Tina Rogers Group Manager Corporate Services QV Presentation Regarding District Revaluation

_______________________________ Gail Smits and Brendon Bodger from QV will be presenting an overview of the rating values revaluation of the properties in the district. Recommendation That the presentation be received and noted.




Report for Agenda Item No 8 Prepared by Tina Rogers Group Manager Corporate Services Aoraki Development Business Tourism Annual General Meeting - Appointment of Proxy

_______________________________ Purpose of Report The Aoraki Development Business Tourism (ADBT) Annual General Meeting will be held on 1 December 2014. The Council is required to appoint a proxy to attend and vote at the meeting. An alternative proxy should also be appointed in case of illness etc. Identification of Relevant Legislation, Council Policy and Plans Aoraki Development Trust Constitution. Assessment of Significance This matter is not deemed significant under the Council’s Significance Policy. Other Considerations There are no other considerations relevant to this matter. Recommendation That a proxy (and alternative proxy) be appointed to represent the Council at ADBT’s Annual General Meeting on 1 December 2014.





Prepared by Tina Rogers Group Manager Corporate Services Council Investments and Borrowing as at 30 September 2014

_______________________________ Background Investments Timaru District Council General Funds $27,264,000 Special Funds $25,551,492 Total Investments as at 30 September 2014 $52,815,492 Based on market valuation the Portfolio increased by 1.73% over the September Quarter compared to the Benchmark Portfolio which increased by 1.97%. The duration of the Portfolio has remained within the 25% fluctuation band when compared with the Benchmark Portfolio's duration for this quarter. Portfolio Duration 2.07 years Benchmark Portfolio Duration 2.49 years There was a short term breach for general funds on 30 September where the amount invested with BNZ was $10,664,000 for the day when the limit for this issuer was $10.0m. This was due to the timing of the reimbursement of the rates collected on behalf of ECan. As part of the Special Funds, the Council continues to hold $19.6m invested in banks on a short term basis. The yields available for term deposits are still higher than those available for bonds of a similar term. The ANZ bond continues to be held as a policy exception as per previous Council approval. During the quarter $1.0m of Rotorua District Council bonds were repaid and replaced with bank deposits. Borrowing Timaru District Council Bank debt $ 0 Bonds issued $ 99,000,000 Total borrowing outstanding $ 99,000,000 During the quarter a new bond was issued directly to the market for $5m.


Interest rate swap hedges are in place fixing the interest rate for $24.9m, of these loans for between 1 and 15 years and $51m of bonds are for a fixed rate. A 4 year investor swap (fixed into floating rate) is also in place for $5m to offset the fixed rate bonds issued. The weighted average cost of funds excluding the margin was 4.47% compared to the benchmark rate of 4.38%. The following chart illustrates the debt and cover profile set against the Liability Policy Control bands.

Recommendation That this report be received and noted.


Institution Percentage Category Invested Maturity Rate

Nominal

amount Amount

Rated Local Authorities (Limit 70% of portfolio, $2m A- rating per issuer, $3m A+ rating per issuer, $5m AA or better rating per issuer)

Manakau City Council AA Stock 7/09/2010 29/09/2017 6.52 250,000 265,654

Manakau City Council AA Stock 5/11/2010 29/09/2017 6.27 250,000 265,654

Total Rated Local

Authorities 2.08% 500,000 531,308

Unrated Local

Authorities (Limit 70% of portfolio, $2m per issuer)

Total Unrated Local

Authorities 0.00% - -

Registered Banks (Limit 100% of portfolio, $5m A+ rating per issuer (Deposits $10m A1 or better rating))

ANZ BBB Stock 18/04/2013 18/04/2018 5.28 1,000,000 988,277

ANZ AA- Stock 16/02/2011 16/02/2016 6.32 500,000 525,319

ASB AA- Stock 8/06/2011 8/06/2017 6.04 1,000,000 1,035,284

BNZ AA- Stock 31/10/2008 27/05/2015 7.98 1,000,000 1,047,806

BNZ AA- Stock 20/12/2011 20/12/2018 6.10 750,000 776,960

Westpac AA- Special Funds 9/09/2014 7/01/2015 4.54 2,500,000 2,500,000

Westpac AA- Special Funds call 3.60 3,100,000 3,100,000

ASB AA- Special Funds 19/08/2014 17/03/2015 4.76 5,000,000 5,000,000



ANZ AA- Special Funds 15/09/2014 12/02/2015 4.63 1,000,000 1,000,000

ANZ AA- Special Funds 15/09/2014 13/01/2015 4.59 1,000,000 1,000,000

BNZ AA- Special Funds 10/07/2014 8/10/2014 4.70 2,000,000 2,000,000

Total Registered Banks 93.82% 23,850,000 23,973,646

SOE'S (Limit 70% of portfolio, $1 m BBB+ rating or better, $3m A+ rating or better per issuer)

Total SOEs 0.00% 0 -

Corporates (Limit 60% of portfolio, $1 m A- rating or better, $2m A+ rating or better per issuer, $3m AA or better per issuer)Auckland International

Airport A- Stock 11/08/2006 7/11/2015 7.000 1,000,000 1,046,538

Total Corporates 4.10% 1,000,000 1,046,538

Total Special Funds 100.00% 25,350,000 25,551,492

Totals

Stock 5,951,492

Special Funds 19,600,000

25,551,492

Special Funds Held as at 30 September 2014


Percentage Category Invested Maturity Rate Amount

Institution

Registered Banks 100% $10 million A1 or better

BNZ (A1+ short term) General Funds 30/06/2014 Call 3.50 10,664,000

Kiwibank (A1+ short term) General Funds 25/08/2014 20/11/2014 4.47 2,000,000

Kiwibank (A1+ short term) General Funds 25/09/2014 23/02/2015 4.60 2,000,000

ANZ (A1+ short term) General Funds 11/08/2014 12/01/2015 4.59 2,000,000

ANZ (A1+ short term) General Funds 15/09/2014 15/12/2014 4.57 1,000,000

ASB (A1 short term) General Funds 24/07/2014 22/10/2014 4.46 1,000,000



Westpac (A1+ short term) General Funds 30/09/2014 Call 3.60 2,500,000

Westpac (A1+ short term) General Funds 27/05/2014 24/10/2014 4.46 1,000,000

Total Registered Banks 100.00% 27,264,000

General Funds Held as at 30 September 2014





Prepared by Tina Rogers Group Manager Corporate Services Timaru District Holdings Ltd – Quarterly Report (File F1/38)

____________________________ The Timaru District Holdings Ltd quarterly report for the period July to September 2014 is attached for the information of the Committee. Recommendation That the report be received and noted.


TIMARU DISTRICT HOLDINGS LTD P O Box 522 TIMARU Tel (03) 687 7200 Fax (03) 687 7201 E-mail [email protected] Files F1/38 & F1/26/1 7 November 2014 Chief Executive Timaru District Council P O Box 522 Timaru 7940 Dear Peter TIMARU DISTRICT HOLDINGS LTD – REPORT TO COUNCIL FOR THE PERIOD JULY TO SEPTEMBER 2014 Timaru District Holdings Ltd (TDHL) is pleased to present this report for the period July to September June 2014. 1 Finance

1.1 Financial Statements The Timaru District Holdings Ltd financial statements for the period to 30 September 2014 are attached for information. The Annual Report for the year ended 30 June 2014 has been provided to the Council. 1.2 Dividend TDHL paid a dividend of $350,000.00 to the Council on 30 September 2014 in line with the Statement of Intent.

2 Governance

PrimePort Timaru Ltd PrimePort Timaru Ltd’s Annual General Meeting was held on 15 September, which was attended by TDHL and Port of Tauranga representatives. The business performed well with a net profit before tax of $2,235,000, and reflects strong support from breakbulk custom. PPT’s balance sheet is in a very strong position, which will allow for positive opportunities in the future. The changes made during the year represent a step change for the company, re-establishing PrimePort as a central hub for the South Island. PrimePort’s draft Statement of Corporate Intent for 2015 to 2017 was presented to TDHL. TDHL recommended some changes to the draft, particularly in regard to the changed structure since last year, with the joint venture.


A new PrimePort Chief Executive has been appointed – Phil Melhopt who is currently Chief Executive of the Central Otago District Council. Mr Melhopt will take up his position in December. Graeme Marshall is the Acting Chief Executive in the interim.

Alpine Energy Ltd Alpine Energy’s financial results are above the previous year and is close to budget. Over $3.7m of capital expenditure has been completed for the first 4 months of their financial year. Energy delivered across the network for the 4 months to 31 July 2014 was 0.9% above the previous financial year. Te Ana Whakairo A meeting involving representatives of all shareholders and the Rock Art Trust was held in September to look at the future direction and structure of the operation. Hunter Downs Irrigation Limited TDHL continues to receive regular updates from HDIL. Work is continuing on the technical and economic feasibility of the scheme.

3 Property

TDHL continues to work towards a property management structure for its investment properties at the port. This will involve consultation with the Port of Tauranga and PrimePort. In the interim property management is being conducted by the TDHL Board and supporting officers.

Yours sincerely

Tina Rogers Company Secretary


TIMARU DISTRICT HOLDINGS LIMITED

STATEMENT OF FINANCIAL PERFORMANCE

FOR THE PERIOD TO 30 SEPTEMBER 2014

Sept Sept 2014/15 2014/15 2013/14 Annual Forecast

Forecast Actual YTD Forecast YTD Actual YTD Actual Budget

OPERATING REVENUE

7,500 7,317 Interest 27,500 23,310 16,627 120,000 110,000

718,488 757,849 Dividends - Alpine 718,488 757,849 718,488 3,592,400 3,788,000

150,000 300,000 Dividends - PrimePort Timaru 150,000 300,000 0 150,000 300,000

78,600 91,153 Subvention (TDC Loan) 235,800 279,536 224,747 943,200 943,200

954,588 1,156,319 Total Holding Company Operations revenue 1,131,788 1,360,696 959,862 4,805,600 5,141,200

Property operations revenue

114,000 73,930 Leased property - Rents received 342,000 391,132 0 1,368,000 1,368,000

13,500 3,483 Leased property - expenses reimbursed 40,500 34,638 0 162,000 162,000

127,500 77,414 Total Property Operations renenue 382,500 425,770 0 1,530,000 1,530,000

1,082,088 1,233,733 Total Revenue 1,514,288 1,786,466 959,862 6,335,600 6,671,200

OPERATING EXPENDITURE

78,600 91,153 Interest - TDC 235,800 279,536 224,747 943,200 943,200

88,150 88,271 Interest - External 264,450 248,565 113,772 1,057,800 1,057,800

0 0 Interest - RPS 0 0 97,816 0 0

0 0 Loan establishment fees 0 0 0 0 0

8,925 8,334 Directors Fees 26,775 25,003 15,189 107,100 107,100

0 0 Insurance 0 0 0 7,000 7,000

3,750 4,851 TDC Administration 11,250 12,844 15,450 45,000 45,000

2,083 0 Professional Fees - Deductible 6,250 0 5,624 25,000 25,000

0 0 Professional Fees - Non Deductible 0 0 59,143 0 0

83 0 Printing & Stationary 250 0 0 1,000 1,000

33 0 Tolls & Postage 100 45 0 400 400

833 134 Travel & Entertaining Costs 2,500 314 5,805 10,000 10,000

17 11 Bank Fees 50 68 50 200 200

167 0 Advertising 500 0 0 2,000 2,000

150 65 General Expenses 450 65 353 1,800 1,800

250 0 Te Ana Whakario donation 750 0 3,000 3,000 3,000

0 712 Audit Fees 0 712 65 18,000 18,000

183,042 193,531 Total Holding Company Operations expenses 549,125 567,151 541,014 2,221,500 2,221,500

Property operations expenses

25,833 60,970 Leased property expenses - rates/water 62,500 64,221 0 220,000 250,000

2,667 2,425 Leased property expenses - Electricity 5,000 7,528 0 14,000 20,000

0 0 Leased property expenses - insurance 16,500 16,506 0 25,000 16,500

15,000 1,781 Leased property expenses - maintenance 25,000 30,057 0 60,000 100,000

10,500 16,672 Leased property expenses - management 27,500 35,816 0 102,000 110,000

54,000 81,849 136,500 154,127 0 421,000 496,500

237,042 275,379 685,625 721,279 541,014 2,642,500 2,718,000

845,046 958,354 OPERATING SURPLUS/(DEFICIT) 828,663 1,065,187 418,848 3,693,100 3,953,200

BEFORE TAXATION

0 0 Investment Property revaluations 0 0 0 0 0

(6,500) (27,800) TAXATION EXPENSE/(BENEFIT) (10,900) 2,100 (39,400) (13,800) (36,900)

851,546 986,154 NET SURPLUS/(DEFICIT) 839,563 1,063,087 458,248 3,706,900 3,990,100

STATEMENT OF MOVEMENTS IN EQUITY


2014/15 2014/15

YTD Actual Forecast

Equity at 1 July 48,250,341 48,250,341

Net Surplus/(Deficit) 1,063,087 3,990,100

Total recognised revenues and expenses for the period 1,063,087 3,990,100

Dividends to Owners (942,700) (2,092,700)

EQUITY AT 30 SEPTEMBER 48,370,728 50,147,741



STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER

2014/15

YTD Actual

EQUITY

Share Capital 1,000,186

Redeemable Preference Shares 0

Retained Earnings 47,370,542

TOTAL EQUITY 48,370,728

CURRENT ASSETS

Bank 438,410

General Investment 4,517,000

Intercompany Receivable 1,213,650

Accounts Receivable 100,975

Prepayments 5,263

Taxation Benefit 0

GST Refund/(Payable) 3,990

TOTAL CURRENT ASSETS 6,279,287

NON CURRENT ASSETS

Investments 0

Investment - PrimePort 19,610,750

Investment - Alpine 40,243,156

Investment - Te Ana 0

Investment - Hunter Downs 31,250

Future Tax Benefit 263,100

Fixed assets 22,503,200

TOTAL NON CURRENT ASSETS 82,651,456

TOTAL ASSETS 88,930,743

CURRENT LIABILITIES

Bank Overdraft 0

Accounts Payable 53,194

Accrued Interest - TDC 1,213,650

Accrued Interest - External 30,000

Revenue in advance 0

Provision for Dividend 0

Derivative Financial Instruments 13,029

Current Portion Term Loans 0

Intercompany Advance 0

TOTAL CURRENT LIABILITIES 1,309,873

NON CURRENT LIABILITIES

Timaru District Council 22,180,613

Redeemable Preference Shares 0

Derivative Financial Instruments 69,530

Bank Loan 17,000,000

TOTAL LIABILITIES 40,560,016

NET ASSETS 48,370,728



STATEMENT OF CASH FLOWS


2014/15

YTD Actual

CASH FLOWS FROM OPERATING ACTIVITIES

Cash was provided from:

Receipts from Customers

Subvention Receipt 0

Subvention Receipt Primeport 0

Rentals 530,579

RWT Refund 0

Dividends 2,494,724

Interest 27,631

3,052,935

Cash was disbursed to:

Interest TDC 0

Interest External 246,693

Interest RPS 0

Payments to Suppliers 341,227

587,920

NET CASH INFLOW/(OUTFLOW) OPERATING

ACTIVITIES 2,465,015

CASH FLOW FROM INVESTING ACTIVITIES


Proceeds Sale Fixed Assets 0

Proceeds Sale Investments 0

0


Purchase of Fixed Assets 32,500

Purchase of Investments 0

32,500

NET CASH INFLOW/(OUTFLOW) FROM

INVESTING ACTIVITIES (32,500)

CASH FLOWS FROM FINANCING ACTIVITIES


Loans Raised 0

Redeemable Preference Share Issue 0

Share Subscriptions 0

0


Dividends Paid 942,700

Redeemable Preference Shares Redeemed 0

Loans Repaid 0

942,700

NET CASH INFLOW/(OUTFLOW) FROM FINANCING

ACTIVITIES (942,700)

NET INCREASE/(DECREASE) IN CASH HELD 1,489,815

OPENING CASH BALANCE 1 JULY 3,465,595

CLOSING CASH BALANCE 30 SEPTEMBER 4,955,410

Consisting of : Bank 438,410

Term Deposits 4,517,000

4,955,410


29-Oct-14

CASHFLOW

General 31-Oct-14 30-Nov-14 31-Dec-14 31-Jan-15 28-Feb-15 31-Mar-15 30-Apr-15 31-May-15 30-Jun-15 31-Jul-15 31-Aug-15 30-Sep-15

Alpine Energy 0 0 757,749 0 0 757,749 0 0 0 1,515,453 0 757,749

Port of Timaru 0 0 0 0 0 0 0 0 0 0 0 200,000

Subvention Receipt 78,600 78,600 78,600 78,600 78,600 78,600 78,600 78,600 78,600 78,600 78,600 78,600

Interest 11,356 11,383 11,401 12,203 12,234 12,272 13,100 13,147 13,194 9,432 11,883 11,922

89,956 89,983 847,750 90,803 90,834 848,621 91,700 91,747 91,794 1,603,485 90,483 1,048,271

Property

Leased properties - rents 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000 114,000

Leased properties - exps reimbursed 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500 13,500

127,500 127,500 127,500 127,500 127,500 127,500 127,500 127,500 127,500 127,500 127,500 127,500

Total Revenue 217,456 217,483 975,250 218,303 218,334 976,121 219,200 219,247 219,294 1,730,985 217,983 1,175,771

General Expenses

Directors Fees (8,900) (8,900) (8,900) (8,900) (8,900) (8,900) (8,900) (8,900) (9,200) (8,900) (8,900) (8,900)

Insurance 0 0 0 0 0 0 0 0 0 0 (7,000) 0

TDC Administration (4,000) (4,000) (3,000) (3,000) (3,000) (4,000) (4,000) (4,000) (4,000) (4,000) (4,000) (4,000)

Professional fees (2,000) (2,000) (2,000) (1,000) (5,000) (1,000) (1,000) (1,000) (6,000) (1,000) (1,000) (2,000)

Printing & Stationary 0 0 (500) 0 0 0 0 0 (300) (20) (20) (20)

Tolls & Postage 0 0 0 0 0 0 0 0 (300) (20) (20) (20)

Travel Costs (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (800) (800) (800)

Bank Fees (15) (15) (15) (15) (15) (15) (15) (15) (15) (15) (15) (15)

Advertising 0 0 0 0 0 0 0 0 (2,000) 0 0 0

General Expenses (200) (200) (200) (200) (200) (200) (200) (200) (200) (100) (100) (100)

Audit Fees 0 0 0 0 0 0 0 0 (14,000) 0 0 0

Te Ana Donation (3,000) 0 0 0 0 0 0 0 0 0

Loan Facility 0 0 0 0 0 0 0 0 0 0 0 0

Interest (TDC) (78,600) (78,600) (78,600) (78,600) (78,600) (78,600) (78,600) (78,600) (78,600) (78,600) (78,600) (78,600)

Interest(RPS dividend) 0 0 0 0 0 0 0 0 0 0 0 0

Interest External (88,542) (88,542) (88,542) (88,542) (88,542) (88,542) (88,542) (88,542) (83,854) (83,854) (83,854) (83,854)

(186,257) (183,257) (182,757) (181,257) (185,257) (182,257) (182,257) (182,257) (199,469) (177,309) (184,309) (178,309)

Property expenses

Property - rates 0 0 (66,000) 0 0 (66,000) 0 0 (66,000) 0 0 (70,000)

Property - Electricity (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000)

Property - Insurance 0 0 0 0 0 0 0 0 0 (25,000) 0 0

Property - Maintenance (7,000) (7,000) (7,000) (7,000) (7,000) (7,000) (7,000) (7,000) (7,000) (7,000) (7,000) (7,000)

Property - Assessments (3,000) (10,000) (10,000) (7,000) 0 0 0 0 0 0 0 0

Property - Administration (7,500) (7,500) (7,500) (7,500) (7,500) (7,500) (7,500) (7,500) (19,500) (7,500) (7,500) (7,500)

(19,500) (26,500) (92,500) (23,500) (16,500) (82,500) (16,500) (16,500) (94,500) (41,500) (16,500) (86,500)

Total expenses (205,757) (209,757) (275,257) (204,757) (201,757) (264,757) (198,757) (198,757) (293,969) (218,809) (200,809) (264,809)

Nett 11,699 7,726 699,993 13,546 16,577 711,364 20,443 20,490 (74,675) 1,512,176 17,174 910,962

Dividend TDC 0 0 (350,000) 0 0 (350,000) 0 0 (670,000) (442,700) 0 (350,000)

Property sales/(purchases)

Investments

Principal Raised External

Principal Repaid External (900,000)

Opening Balance 4,955,410 4,967,109 4,974,836 5,324,829 5,338,375 5,354,952 5,716,316 5,736,759 5,757,249 4,115,842 5,185,317 5,202,491

Closing Balance 4,967,109 4,974,836 5,324,829 5,338,375 5,354,952 5,716,316 5,736,759 5,757,249 4,112,574 5,185,317 5,202,491 5,763,454




Report for Agenda Item No 11 Prepared by Tina Rogers Group Manager Corporate Services Shareholder Expectation Guide for Council Controlled Organisations

_______________________________ Purpose of Report The purpose of this report is to provide an update on the Shareholders Expectation Guide (SEG) for Council Controlled Organisations (CCO). Background The SEG was presented by Councillor Brien at the Policy and Development Committee on 29 July 2014. The Committee resolution was:

“That the Shareholder Expectation Guide as amended be adopted as a guide, subject to receiving a satisfactory legal overview.”

Legal advice has been obtained which has been incorporated into the attached policy. The legal advice also recommended consultation with the Council’s CCO’s. This has also occurred and the feedback from Aoraki Development and Tourism and Timaru District Holdings Limited is attached. Conclusion The SEG has been updated based on the legal advice received. Feedback from CCO’s has not been incorporated at this time. Recommendations 1. That the report be received.

2. That the Council considers the feedback received on the Shareholder

Expectation Guide and amends as necessary.


Timaru District Council

Shareholder Expectation Guide

for

Council Controlled Organisations (CCO’s)


CONTENT 1. Introduction 2. CCO Framework 3. Roles and Responsibilities 4. Expectations and Key Relationships 5. Financial Governance 6. Board Governance


Version Issue Date Amendments / Reviews Report Title / Committee

1 2 3 4 5


1 INTRODUCTION This guide applies to Timaru District Council’s Council Controlled Organisations(CCOs), but only where the Council has more than a 49% interest in the organisation. It outlines the shareholders expectations of the board of CCOs and is designed to help boards to operate efficiently in their roles and to clarify their responsibilities. The guide outlines the minimum requirements expected by the Timaru District Council for CCOs; the Statement of Intent (SOI) incorporates additional obligations. The guide is intended to complement the letters of expectation sent by the Mayor, on behalf of the Council, at the outset of the annual business planning round, which supports specific issues and expectations for the individual CCOs and SOI. The guide should be read in conjunction with relevant legislation including:

Companies Act 1993 (Companies Act)

Local Government Act 2002 (LGA 2002) Information documents such as the board performance framework and fee methodology are Incorporated into the guide. Other appropriate documents and templates such as the SOI are also appended. Documents such as the Director Appointment & Remuneration Policy are independent of this guide. The guide will be updated periodically through a managed version control process as processes, policies and shareholders expectations change. It is available on Timaru District Council’s website.


2 CCO FRAMEWORK A CCO is an organisation in which one or more Council controls 50 per cent or more of the votes or has the right to appoint 50 per cent (or more) of directors or trustees. The Timaru District Council has four CCOs:

Aoraki Development Business and Tourism

Timaru District Holdings Limited

Aorangi Stadium Trust

Canterbury Economic Development Company Limited (10% ownership). Canterbury Economic Development Company Limited will not be subject to these guidelines due to the minority shareholding in the company. The Council’s success depends significantly on the effectiveness of the CCOs and their ability to implement the Council’s vision and strategies. The Council and CCOs are developing relationships based on mutual understanding, goodwill, and a free flow of information. CCOs have the ability to provide a significant contribution to the well-being of the Timaru District. Their performance is important to the Council’s overall fiscal and balance sheet position and its capacity to meet the objectives for the District and its communities. CCO Governance Structure The Timaru District Council is the sole owner of three CCOs who perform an important role in helping the Council to achieve its strategic goals for the district. The Council has a collaborative and cooperative relationship with its CCOs, and views its CCOs as important to the delivery of the Council’s objectives and priorities for the Timaru District. The Council holds the decision-making responsibilities of the Timaru District Council. The committee related to CCO Governance is the Policy and Development Committee. Relevant legislation for both the Committee and Subcommittee includes, but is not limited to, the:

LGA 2002

Resource Management Act 1991

Local Government Official Information and Meetings Act 1987. CCO Purpose The Council has the ability to define and clarify the purpose of each CCO if it considers this necessary. The Council will work with the Chairman of each CCO to develop a Statement of Core Purpose. Any significant changes could require a review of the constitution of a CCO. The shareholder has the power to undertake such a review. Council owned entities are normally established to fulfil one of the following purposes:

Maximise returns – these entities generally operate in a competitive or a regulated environment, receiving their revenue from the sale of goods and services. Their objectives are fully commercial, to maximise financial returns over time for their shareholder. The rationale for public ownership is to gain leverage, to provide oversight of a monopoly, or to protect an interest/asset for the long-term benefit of the public. Their principal objective is to be a successful business, as efficient and profitable as possible.


Promote strategic policy – these entities are established to achieve strategic goals. They are likely to have a mix of commercial and public good objectives and may receive their revenue from a variety of sources. The rationale for public ownership is strategic, with entities expected to perform a catalyst role where there is some form of market failure.

Efficient service delivery – these entities generally deliver services funded by rates, special purpose levies or compulsory charges. They have a strong imperative to deliver services efficiently while meeting a range of public policy objectives. Most do not operate in a competitive environment, or face limited competition for aspects of their operations. The rationale for public ownership is that they deliver core services that would not be provided, or would be underprovided by the public sector. The commercial structure achieves focus, efficiency, and the application of commercial acumen to the delivery of public sector services.

Principles of a Good Governance Relationship The following six principles are required for a strong governance relationship between the Governing Body of Council and its CCOs. A. Leadership – The Council is responsible for setting strategic direction and communicating this via the letter of expectation and other mechanisms, for example input into the development of the SOI. While CCOs should show leadership in their areas of expertise this must be consistent with shareholder expectations. B. Empowerment – CCO directors must be empowered to fulfil their statutory, constitutional and SOI responsibilities. If they are unnecessarily constrained, they cannot fulfil their obligations and are unable to ‘add value’. C. Accountability – Accountability must accompany empowerment. In addition to audit and annual report requirements, every three years elected members are held to account by the public for their use of ratepayer money and for their stewardship of Council owned assets. This accountability needs to be ‘transferred’ to the CCOs. D. Transparency – Accountability for public funds also requires a high level of transparency. This is particularly important for CCOs undertaking a mix of commercial and publicly funded activities. Transparency requires visibility of funding to ensure that it has been used for intended public good outcomes rather than private benefit. E. Public service ethos – CCO directors must ensure they behave in a manner that is consistent with the spirit of public service, openness and fairness and require the same from their executives. This requires them to exercise judgement and caution in decision-making distinct from what may be required in a commercial environment. F. Trust - Productive CCO relationships also require a culture of cooperation and trust. The ‘no surprises’ policy (refer Appendix A) is a critical part of this, and ensures that CCOs and the Council keep each other informed before matters are in the public arena.


3 ROLES AND RESPONSIBILITIES The Role of the Governing Body The role of the Council as shareholder is to set expectations and monitor the performance of its CCOs under the relevant legislation. Performance is monitored against the SOI and Long term plan (LTP) performance measures and targets. The tension between the Council and its CCOs is most likely to arise when the Council attempts to go beyond this role in monitoring or decision-making. However, the Council has further obligations to ensure the wise and transparent use of public money and the protection of public assets managed and owned by CCOs. The Council also has a role in ensuring that CCOs do not make decisions that could have significant future funding implications for the Council. These obligations can require a level of scrutiny beyond a relatively high-level SOI and retrospective performance monitoring. Council’s Responsibilities In practice, the Council’s responsibilities include:

Appointing and removing CCO directors (including chairs and deputy chairs)

Developing the short-term annual priorities through the Mayor’s letter of expectation (LOE). The Mayor will draft the LOE after discussion with the CCO for approval by the appropriate Council Committee.

Setting the CCOs’ medium to long-term strategic direction

Commenting on the content of draft SOIs

Agreeing to and, if necessary, modifying SOIs

Receiving quarterly, annual and half-year reports

Monitoring board performance and taking remedial steps when necessary

Developing and communicating the Council’s strategies and plans

Consulting with CCO boards as issues arise

Making decisions as shareholder (for example, approving a major transaction, or other transactions if such approval is required)

Ensuring collaborative and transparent working relationships with CCOs. Support Functions The CEO of the Timaru District Council (CEO – TDC) The Council receives advice on CCOs from two main sources: CEO-TDC and other TDC Managers. This advice may be supplemented by input from other departments when necessary. All TDC Managers are required to develop and maintain a detailed knowledge of each CCO’s operation to enable them to assess whether individual CCOs are meeting Council’s expectations. CEO - TDC focuses on:

CCOs’ commercial opportunities and risks

The environment in which the CCOs operate

Protecting and enhancing shareholder value

Performance against financial and non-financial objectives. Other TDC Managers focus on:

Analysing business cases presented by CCOs where they are required to consult with, or seek the approval of, Council.

Advice relating to CCO financial performance and on whether CCOs are making an appropriate return on investment if appropriate.

Each TDC Manager brings a different perspective to the monitoring role.


Other advisors also contribute advice on general policy that affects CCOs in consultation with other Council departments, as appropriate. This advice is provided to the relevant Council committee that has the responsibility to make decisions. Decision Making Guidelines Clear allocation of responsibility for decision-making is critical. Thus, some high-level guidance is appropriate in accordance with the following table. Type of Decision Shareholder or CCO board Setting strategic direction for the Timaru District

Shareholder decisions - CCO provides advice and input

Determining the CCOs contribution to Council’s strategic outcomes Major transactions by a CCO requiring shareholder approval Level of funding provided to each CCO New projects by a CCO Board initiates but requires shareholder

approval after consideration of investment proposal if exceeding thresholds in the SOI

Re-allocation of funding Board decision but must act consistently with specified plans and strategies of the Council, and must keep Council informed under a ‘no surprises policy’

Business structure decisions (e.g. appointments to subsidiaries)

Council decision

Organisational and implementation strategy (giving effect to Council strategy)

Board/management decision.

Risk management strategy Board/management decision. Operational decisions including detailed business plans for capital projects, and implementation of funded programmes

Board/management decision – keep Council and community boards (where appropriate)informed under ‘no surprises policy’

Business decisions of CCOs can affect Council policy, or have political implications for the Council. Good communication, and a culture of trust, should minimise issues arising with these types of decisions. CCO SOIs contain a set of criteria to guide boards as to the types of decisions that may require shareholder approval. The criteria are based on the Council’s Policy on Significance. The intent is to ensure that decisions that would be considered ‘significant’ by the Council, potentially requiring public consultation, cannot be made by a CCO with a lesser degree of rigour. However, these criteria more properly define decisions requiring shareholder engagement, not necessarily shareholder approval. For all decisions, as always, the 2-way no surprises policy applies. CCO’s KPI’s must link the Council’s KPI It is critical that CCO’s develop their strategic plans from those in the Council’s LTP, that is, the CCO is there for the purpose of assisting the Council to achieve the LTP. Along with the above, the CCO must continue to demonstrate how it provides value to the Council, presently and in the future.


The Role of the Board Under the LGA 2002, the role of a director of a CCO is to assist the organisation to meet its objectives and any other requirements in its SOI. The principle objectives of a CCO are also specified in the Act. These are to achieve the objectives of its shareholders as specified in the SOI, to be a good employer, and to exhibit a sense of social and environmental responsibility. CCOs that are also Council controlled trading organisations (CCTOs) must also conduct their affairs in accordance with sound business practices. In practice, CCO Board’s responsibilities include:

Providing the Council with a draft SOI by 01 March and the final SOI by 30 June each year

Providing the unaudited first, third and fourth quarter reports within six weeks after the end of each quarter

Providing a half-yearly report to the Council within two months of the first half of the financial year

Providing the Annual Report to the Council within three months after the end of the financial year

Ensuring the Annual Report is made available to the public (preference is for the Annual Report to be publicly available on the CCO’s or Council’s website, with a hard copy available to any member of the public upon request)

Acting in accordance with the CCO’s constitution

Complying with the Companies Act obligations including acting with honesty, good faith and in the best interests of the company, and exercising care, diligence and skill

Managing risk

Provide rigorous, independent analysis and expert advice when presenting any business cases to Council

Accountability for delivery of CCO obligations, and

Ensuring Council is provided with all necessary information in a timely manner to ensure Council planning processes can be completed. Trustees of CCOs that are charitable trusts must perform the duties that are contained in the trust deed and legislation relating to trusts (i.e. Trustee Act 1956, Charitable Trusts Act 1957 and Charities Act 2005). The primary duties of a trustee are to comply with the terms of the trust deed that created the trust, act honestly and loyally and act in the best interests of the trust. In the case of a corporate trustee these obligations rest with the company. The directors should be aware of these additional responsibilities when making such decisions.

Disclosure of Interests The Board members are required to disclose the nature and extent of all interest they have or are likely to have, in matters relating to the CCO. Interests should be disclosed at the commencement of each CCO meeting where appropriate.


A “matter” is defined as: …….. performance of its functions or exercise of its powers; or An arrangement, agreement, or contract made or entered into, or proposed to be entered into, by…………… A matter requiring disclosure arises when:

A person is interested in a matter if he or she: a. May derive a financial benefit from the matter; or b. Is the spouse, civil union or de facto partner, child, or parent of a person who may

derive a financial benefit from the matter; or c. May have a financial interest in a person to whom the matter relates; or d. Is a partner, director, officer, board member, or trustee of a person who may have

a financial interest in a person to whom the matter relates; or e. May be interested in the matter because the entity’s Act so provides; or f. Is otherwise directly or indirectly interested in the matter. However a person is not interested in a matter:

a. Only because he or she is a member of a wholly-owned subsidiary of the entity or of a subsidiary that is owned by the entity together with another company or companies/entity or entities; or

b. Because he or she receives an indemnity, insurance cover, remuneration, or other benefits authorised under relevant legislation; or

c. If his or her interest is so remote or insignificant that it cannot reasonably be regarded as likely to influence him or her in carrying out his or her responsibilities under the relevant legislation ; or

d. If an entity’s Act provides that he or she is not interested.


4 EXPECTATIONS AND KEY RELATIONSHIPS Effective CCO governance requires that the shareholder and CCOs have a mutual understanding of the expectations of each CCO. Details of the expectations include the Council’s Treaty of Waitangi responsibilities, communication protocols, procurement, financial/reporting obligations, consultation requirements, and criteria for engagement, submissions and key relationships. Treaty of Waitangi CCOs should also make note of Council responsibilities with regard to Section 4 of the Local Government Act referring to the Treaty of Waitangi. CCOs will act in accordance with relevant statutory provisions referring to the Treaty of Waitangi. Communication Protocols It is expected that CCO boards will be sensitive to Council interests. Boards must be mindful that Council is accountable to a wider audience and the affairs of the CCOs, positive and negative, can impact on the Council. It is expected that the CCOs will keep Council advised of any issues that may generate public interest, this is referred to as the ‘no surprises policy’. A failure to keep Council informed on significant issues at appropriate times can create situations that may divert attention from the day-to-day business of the Council and the CCO. Council expects CCO boards to:

Present a unified front on issues that affect both Council and the board

Understand wider Council policy issues as part of their decision-making

Be aware that the Council has interests that are wider than those of individual CCOs

Be aware of the potential implications of CCO-specific issues on the Council and/or its balance sheet

Be sensitive to the demand for accountability and transparency placed on Councillors from residents and ratepayers of the Timaru District.

Council expects CCO’s and the Board to:

Provide advance copies of Media Releases and where appropriate ensure that the CEO of the TDC has the opportunity to provide input into such to ensure the ‘united front on issues’ as stated above.

All correspondence to the CCO, excluding routine operational matters, is to be approved by the appropriate Committee. Any Councillors wishing to raise matters with the CCO are to discuss the matter with the Chair of the appropriate TDC committee and then prepare an appropriate report for the Committee to consider. The informal behaviours are very important. It is proposed that rather than an ad hoc approach to the informal relationship, there should be regular meetings as appropriate for each CCO.

Procurement expectations The CCO will join in the Council’s procurement arrangements and implement the Council’s procurement policies, including any local preference policies, unless there are significant advantages to not doing so. Financial reporting / obligations CCOs will recognise their obligations as part of the Council group, including providing to Timaru District Council such financial and other information as required by Timaru District Council to fulfil its reporting obligations under the Local Government Act, and any other legislation or regulation.


Criteria for engagement with the shareholder The Council will conduct workshops with the CCOs, as appropriate, to discuss and agree how the CCOs can contribute to the wider goals and good of the Timaru District. These should ensure that the CCOs are better aligned to the Council’s expectations as well as providing ‘buy in’ by the CCOs of the Council’s objectives. These should be followed by collective conversations between the Council and its CCO ‘family’. The following criteria are provided as indicators for CCOs to guide what type of decisions require shareholder engagement: Type of decisions

Decisions which have a history of generating wide public interest

Decisions which will affect the CCO’s ability to meet any statutory responsibility

Decisions which will impact on any intended service levels for a CCO activity (except if the impact is minor or has been agreed by the Council through the SOI process)

Decisions which will commit the Council to future provision of funding which has not already been agreed.

Submission on areas of interest The Council is frequently called upon to make written submissions in response to discussion papers, proposals for legislative change or policy reviews released by external agencies. The TDC will include CCO staff in the submission development where that submission deals with a matter of relevance to the remits of one or more CCOs. The CCOs must discuss with Council any submission they intend to make. Council can then determine whether the submission relates to an issue that it has an interest in, and if necessary, a joint submission can then be formulated. As a CCO is owned by the Council, and strategic planning, policies and operational matters of Council are within the remit of Council; CCO’s should not publicly submit on Council’s long-term plans. Any matters the CCO wishes to raise in relation to these is better discussed directly between the CCO and the Council.

Key Relationships Community Board Engagement Engagement with local Community Boards means more than regular reporting – it means two-way dialogue and a commitment to considering Community Board priorities and objectives, and responding promptly and appropriately on issues raised by Community Boards where appropriate. Central Government CCOs should inform the shareholder of all particular activities they will be undertaking that will require engagement with central government. International Relationships The Council is committed to strengthening its existing Sister Cities relationships.


5 FINANCIAL GOVERNANCE CCOs are accountable to the Council for the financial governance of their operation in accordance with legislative requirements, SOIs, the broader governance and monitoring requirements outlined in this guide, and the specific principles detailed below. In the case of any doubt regarding the interpretation of these principles, CCOs should consult with the Council. Value for money CCOs must be able to demonstrate efficiency and value for money in their service delivery and must develop and report against performance measures and targets in support of this. Managing risks CCO directors are responsible for managing risks and are required to establish processes and practices within the CCO in support of this. CCOs must keep Council informed of significant risks and strategies for managing these. Tax planning CCOs must work with the Council to optimise tax arrangements for the Council group (within applicable legislation). Optimal capital structure CCOs must work with the Council to maintain an optimal structure taking into account economic efficiency, the fiduciary responsibilities of the directors / trustees, and the broader public benefit objectives of the Council. Borrowing CCOs are required to coordinate their borrowing through the Council to deliver the lowest cost of borrowing to each CCO and the Council group. All treasury activities are centralised to reduce costs and minimise risk across the Council group. CCO funding principles There are three high-level funding principles: 1. As a general principle, funding provided for a specific purpose must be applied to

that purpose 2. The role of the Council is to specify the overall mix and level of services, prioritise

funding across the Council group, and to hold CCOs accountable for the use of funding from all sources

3. Boards must be empowered with sufficient flexibility to determine the best use and allocation of funding to meet required levels of service.

To address the inherent tension between principles 2 & 3, the Council has adopted an activity based funding model. However, the second principle must prevail where there is conflict. Activity based funding Unless otherwise specified, CCOs are funded at an activity level as set out in the group’s long-term plan and annual plans. In general, this funding will be provided on a net basis (that is, cost of delivery less any external or third party revenue or budgeted surpluses from other activities). The total budgeted funding for a CCO will generally be net of any budgeted surpluses from any specific activity the CCO may deliver.


CCOs generally have the flexibility to reallocate funding within activities provided they act consistently with the following:

1. requirements for shareholder engagement and/or approval for certain decisions (see below)

2. agreed service levels (i.e. CCOs cannot unilaterally decide to change service levels)

3. restrictions associated with specific funding sources (e.g. development contributions, targeted rates, capital funding, operational funding)

4. public funds are not to be used to subsidise commercial activities 5. funding for projects specifically identified and funded as Council priorities cannot

be reprioritised without Council approval 6. the ability to operate within overall funding envelopes for current and future years. Funding related decisions requiring shareholder engagement or approval include (but are not limited to) decisions:

1. that trigger the Council’s policy on significance, such as decisions likely to generate high levels of public or political interest

2. involving the Council’s legal or future ownership of assets (including the vesting of assets that impose funding obligations on the Council)

3. regarding the funding of new projects (see below) 4. regarding the use of commercial revenue to fund public good outcomes. Any reprioritisation must be transparent and reported to the Council through quarterly reporting including any implications from the change. In addition, CCOs must report to Community Boards on any material changes that will affect their areas. Funding of new projects All new projects that not included in the CCO’s approved Statement of Intent and require additional funding, must be approved by the Council. Treatment of surpluses All surpluses, above agreed levels outlined in the CCO’s approved SOI, including surpluses from commercial activities and asset sale proceeds, must be returned to Council unless otherwise agreed or prevented due to legal requirements. The Council may decide to reinvest part or all of the surplus into the CCO if the CCO establishes a compelling investment proposal. In determining funds that are ‘surplus’, the Council will consider the operating result against budget including the accounting surplus, the underlying cash surplus, and surpluses generated from particular activities.


6 BOARD GOVERNANCE Provision of official information CCOs are subject to parts 1 to 6 of the Local Government Official Information and Meetings Act 1987 (LGOIMA). In handling requests made under this Act, CCOs are expected to respect the underlying principles of, and comply fully with the Act in terms of making information available to the public within the stated deadlines unless there is good reason for withholding information under provisions of the LGOIMA. Public meetings Meeting of the CCO’s must be conducted in accordance with LGOIMA, in particular Section 7. Board Professional Development Training CCO boards are to provide their directors with appropriate professional development training. The training should incorporate governance skills for new directors without this experience and refresher courses for more experienced directors. Board Induction Process CCOs are to provide a Board Induction Process for new directors which will incorporate a shareholder led component. Board Performance Review Council approved approach Board performance reviews should be undertaken on an annual basis prior to the appointment of directors/trustees at the AGM. Board-led reviews are to be undertaken by the Chairman, with results reported to the Mayor and should include:

Board performance

Board skills and competencies

Board effectiveness and dynamics. This approach does not constrain either the Council or boards from undertaking additional reviews. The Council may decide to include individual director performance in the shareholder-led review if it considers this necessary for the purposes of director re/appointments. Board Consent for appointments All applicants are required to complete a consent form as part of the Board appointment process. Board Remuneration Methodology Remuneration will be determined by the Council in terms of the Director Appointment and Remuneration Policy. Other Obligations Local Government Act 2002 Part 5, Sections 55 to 74, of the LGA 2002 outline the requirements of Council controlled organisations and Council organisations. The sections include establishment, directors, SOIs, monitoring and reporting, transfer of undertakings and official information.


Companies Act 1993 Where applicable, CCOs should adhere to the duties and obligations of the board under the Companies Act (e.g. the duty to act in good faith). Good Employer objectives Under Section 59 of the LGA 2002, the principal objectives of CCOs outlined as below require CCOs to

be a good employer; and

exhibit a sense of social and environmental responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so.


Appendix A – No Surprises Policy Objectives These protocols and processes are designed to ensure a common understanding and way of operating between the Timaru District Council and its CCOs in regards to external and internal communications. This will decrease the risk of miscommunication and enable more efficient and consistent responses to media queries. The aim is to provide clarity around:

Which organisation talks publicly about which topics

Where media go to get their questions answered

Forecasting of possible communications issues

The purposes of the ‘No Surprises Policy’ are:

To ensure that media queries are handled by the right person to get the highest likelihood that it is satisfied at the first inquiry.

To ensure that the right issue is escalated to the Timaru District Council for the right purpose and vice versa to CCOs.

Organisations involved The Timaru District Council organisations covered in this policy are:

Aoraki Development Business and Tourism Limited

Timaru District Holdings Limited

Aorangi Stadium Trust All CCOs should have appointed communication spokespersons. Processes The Timaru District Council management has primary responsibility for the relationship with CCOs senior staff. This is a two-way, ‘no surprises’ relationship. While the SOI is the formal reporting schedule for Council’s organisations, this process is not frequent or fast enough to work within media deadlines. Therefore, the day-to-day relationship must be between the staff of the respective organisations. Protocols The Mayor and Councillors are elected representatives freely available for media contact. For operational efficiency however some division of media tasks is appropriate, while still maintaining the principle of ‘no surprises’. All public messages of all CCOs should reflect a united strategic direction with the Council, while allowing for appropriate internal debate between CCOs and Council.


14 November 2014 The Chief Executive, Mayor & Councillors Timaru District Council 2 King George Place TIMARU

CCO: SHAREHOLDER EXPECTATION GUIDE The ADBT Board has discussed the proposed Shareholder Expectation Guide, following receipt of your letter of 30 September 2014. We comment as follows:

The Board acknowledges and accepts that it is accountable to, and needs to report regularly and appropriately to, its Shareholder, Timaru District Council.

We fully accept the principle of the “no surprises policy” in respect to many of the Board’s activities, consistent with the over-riding requirement that the Board/ADBT is performing its role consistently with, and not in competition or conflict with, its Shareholders’ expectations; as with any Company/commercial enterprise:

There needs to be recognition of and respect for, the clear and separate roles of delineation and responsibility regarding Governance/Director obligations and responsibilities; and Shareholder/Management “control”, or intervention.

The ADBT Board consists of independent, commercial Directors, appointed by the Company’s Shareholder - Timaru District Council. As such, the Board operates within and pursuant to its statutory and regulatory obligations and requirements - under the Companies Act and associated regulations and by-laws; and pursuant to its Constitution.

ADBT regularly reports to its Shareholder (TDC) pursuant to and consistent with the (mutually agreed) Statement of Intent. We believe the system currently works well for both parties, consistent with approved/agreed lines of communication.

The draft Shareholder Expectation Guide appears, we believe, to extend well beyond the scope and purpose of what may be required, and indeed appears to be framed and based on far larger CCO’s elsewhere in the country.

To ensure that ADBT, as a CCO, continues to operate in line with Shareholder expectations, it would be more appropriate to mutually negotiate and adopt a more concise, strategically targeted Memorandum of Understanding.

We believe a meeting would be appropriate, to discuss these issues further. K McKenzie Chairman; ADBT Board


TIMARU DISTRICT HOLDINGS LTD

P O Box 522 Timaru 7940

ph 03 687 7227 Email [email protected]

7 November 2014 Chief Executive Timaru District Council PO Box 522 Timaru 7940 Dear Peter SHAREHOLDER EXPECTATION GUIDE Thank you for the opportunity to review the proposed Shareholder Expectation Guide for Council Controlled Organisations. Timaru District Holdings Limited has concerns around the document, particularly that aspects are inconsistent with the company’s current constitution or not appropriate for a company such as TDHL which is operating to achieve a commercial return. TDHL is legally bound by both its Constitution and the Companies Act. It is acknowledged that the Shareholder Expectation document is a guide rather than a policy and TDHL agrees with the overall intent of the document, but considers it unnecessary. TDHL would prefer that the Council prepares an annual letter of expectation to each CCO prior to the Statement of Intent being prepared so that requirements of the shareholder can be incorporated through the existing SOI process. This would allow the letters for each CCO to be appropriately tailored to the individual circumstances. We look forward to continuing the discussions on how best to achieve Council’s intention of closer reporting and communication with its CCO’s. Yours sincerely

Damon Odey Chairperson





Prepared by Tina Rogers Mark Low Group Manager Corporate Services Corporate Planning Manager Long Term Plan 2015-2025: Draft Assumptions

_______________________________ Purpose of Report The purpose of this report is to confirm proposed assumptions to apply to the Long Term Plan (LTP) 2015-25, based on information received to date. Background Under the Local Government Act (the Act), a LTP is built on assumptions. These assumptions can be defined “as something your local authority accepts as the best estimate available, for the purposes of future actions, decisions and preparing prospective financial statements”1. Assumptions should be realistic, evidence based, and applied consistently across the LTP process. The Act requires the Council to include significant forecasting assumptions in its LTP:

“Significant forecasting assumptions A long-term plan must clearly identify— a)all the significant forecasting assumptions and risks underlying the financial

estimates: b)without limiting the generality of paragraph (a), the following assumptions on

which the financial estimates are based: i.the assumptions of the local authority concerning the life cycle of

significant assets; and ii.the assumptions of the local authority concerning sources of funds for

the future replacement of significant assets: c) in any case where significant forecasting assumptions involve a high level of

uncertainty,— i.the fact of that uncertainty; and ii.an estimate of the potential effects of that uncertainty on the financial

estimates provided”2 Forecasting assumptions should be realistic, evidence-based, consistent with each other and consistently applied. Corporate assumptions apply across the entire Council organisation (e.g. population change), but some assumptions may apply only to individual activities.

1 SOLGM Guide: More Dollars and Sense: Financials and the Long Term Plan, September 2014

2 Local Government Act: Schedule 10: Clause 17


Significant forecasting assumptions may be those that have a material effect on the Council’s:

overall revenue or expenditure

ability to finance and fund the future operating and capital expenditure

assets, particularly strategic assets

overall ability to deliver intended levels of service3 The audit of the LTP must specifically report on “the quality of the information and assumptions underlying the forecast information provided in the plan.”4 Discussion The attached table includes the assumptions determined to date and associated information, as outlined below:

General Assumptions Financial Assumptions

Population Change Inflation

Household Change Interest rates on borrowings

Useful Life of Significant Assets Return on investments

Demographic Changes Funding Sources

Joint Venture or Shared Service Arrangements/Council Controlled Organisations

Credit availability

Legislative Demands on Council Costs

Climate Change Currency and Oil Price fluctuations

Resource Consents NZ Transport Agency Financial Assistance

Service Levels Emissions Trading Scheme

Demand Asset Depreciation rates

Availability of Contractors and Materials

Revaluation of significant assets

Natural Hazards/Local natural disaster

Rating base

Strategic Assets

Council Political Structure

Some comment relating to some assumptions is included below: General Wording of all of the assumptions has been updated or revised to reflect current information or improve clarity. New assumptions have been added on demand, strategic assets, Council political structure and rating base. Inflation Assumptions for inflation have been included based on the Local Government Cost Index (LGCI) prepared by BERL economics for local government. This index better reflects the specific cost pressures faced by local government in the provision of services, and differs from the standard CPI reported through the media and compiled by Statistics NZ.

3 SOLGM Guide: More Dollars and Sense: Financials and the Long Term Plan, September 2014

4 Local Government Act: Section 94: 1b


Population/Household Change The Council commissioned revised population and household5 projections from Professor Natalie Jackson from Waikato University6. These are based on the most recent Estimated Resident Population (ERP) data based on the 2013 census released in August 2014. The ERP represents the final revision of census night counts and includes adjustments for births, deaths and migration occurring between census night and 30 June 2013, adjustments for people temporarily overseas on census night and census night undercount. Projections are not forecasts but indicate what the future population size and structure might be if the underlying assumptions on births, deaths and migration prevail. Key points from the projections (under the recommended medium scenario) are:

Timaru District population is projected to increase to around 48,853 (+7.6 per cent) in 2033, peaking around 2038 at 49,041 persons and declining very slightly over the remaining projection period to 48,660 in 2063.

Virtually all growth in future years will be in age groups 65+, with the proportion of 65+ increasing from 20.1% in 2013 to 31% in 2033.

Timaru District will see the population shifting from natural increase (more than deaths) to natural decline from 2023

Trends indicate the impact of structural ageing, with the shift to zero natural increase projected for 32 of NZ’s TAs by 2031

Total household/dwelling numbers increase from 18,660 in 2013 to 21,105 in 2033 (+13.1 per cent), peaking in 2043 at 21,451 households, then declining slightly to 21,355 by 2063 (+14.4 per cent over 2013).

Family- and one-person households account for both the majority of household types (69 and 28 per cent respectively in 2013) and the majority of change

The increase in family households is for primarily couples without children (i.e. couples who do not yet have children, couples who do not/will not have children, couples whose children have left home).

One-person households will increase, reflecting the structural ageing of the population

The above household changes will drive demand for certain types of dwellings

5 Household means “One person usually living alone, or two or more people usually living together and sharing

facilities (e.g. eating facilities, cooking facilities, bathroom and toilet facilities, a living area), in a private dwelling 6 Jackson, N.O. (2014). Timaru District Council – Population and Household projections 2013-2063.

Report Commissioned by Timaru District Council. August 2014. . Natalie Jackson Demographics Ltd as a sub-contract to the National Institute of Demographic and Economic Analysis (NIDEA), University of Waikato.


The graphs below summarise the population and household projections:

39,513

45,400

48,853

48,660

59,829

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2006 2013* 2018* 2023* 2028* 2033* 2038 2043 2048 2053 2058 2063

Nu

mb

er

LOW MEDIUM HIGH

SNZ Low SNZ medium SNZ High

Projected Population of the Timaru District 2013-2063 and Comparison with Statistics New Zealand Projections (2006-2031), by Projection Scenario

25,805

21,105

21,355 18,660

17,684

-

5,000

10,000

15,000

20,000

25,000

30,000

2013 2018 2023 2028 2033 2038 2043 2048 2053 2058 2063

Nu

mb

er

High Medium Low

Projected Number of Households by Projection Variant, 2013-2063, Timaru District


Options Significant Forecasting Assumptions are a requirement of the LTP. The attached table has been distributed to officers to assist in the preparation of Activity Management Plans. At this stage in the process, they are provided for Council comment and confirmation. A further review will be conducted later in the LTP process, with the assumptions finally adopted for inclusion in the LTP. Identification of Relevant Legislation, Council Policy and Plans Local Government Act 2002. Assessment of Significance This matter is not deemed significant under the Council’s Significance Policy. Consultation The LTP will be consulted on under the Special Consultative Procedure in March/April 2015. Other Considerations There are no other considerations relevant to this matter. Funding Implications There are no additional budget implications relevant to this matter. Conclusion Assumptions are an essential building block for developing the Long Term Plan and signal to the community the basis for decision-making under the Plan. Assumptions are based on the best information available. Recommendation That the Committee receive and note the report and make any comment for further work required.

Timaru District Council Policy and Development Committee #858988 56 25 November 2014

Summary of Assumptions The following general and financial assumptions are assumed for the life of this Long Term Plan (2015-25) Assumption Confidence Level Risk Consequence General Assumptions 1 Population Change Medium Low Minor 2 Household Change Medium Low Minor 3 Useful Life of Significant Assets Medium Low Medium 4 Demographic Changes High Low Minor 5 Joint Venture or Shared Service

Arrangements/Council Controlled Organisations (CCOs)

High Low Minor

6 Legislative Demands on Council High High Medium 7 Climate Change Medium Medium Minor 8 Resource Consents High Low Medium 9 Service Levels Medium Medium Minor 10 Demand Medium Low Medium 11 Availability of Contractors and Materials Medium Medium Medium 12 Natural Hazards/Local natural disaster Medium Medium Major 13 Strategic Assets High Low Medium 14 Council Political Structure High Low Medium Financial Assumptions 1 Inflation Low Medium Medium 2 Interest Rates on Borrowing Medium Medium Medium 3 Return on Investments High Medium Medium 4 Funding Sources Medium Medium Minor 5 Credit Availability High Medium Major 6 Costs Low Medium Medium 7 Currency and Oil Price fluctuations Medium Low Medium 8 NZ Transport Agency Financial Assistance Medium Medium Medium 9 Emissions Trading Scheme Medium Low Minor 10 Asset Depreciation Rates High Low Minor 11 Revaluation of significant assets High Low Minor 12 Rating Base High Low Minor


Significant Long Term Plan 2015 General Assumptions

Assumption Confidence Level (High, Medium, Low)

Risk Risk Level (High,

Medium, Low)

Consequence of variation to assumption

Approach to mitigation of risk

H M L H M L

1. Population Change Assumption: The District’s Population is projected to

increase to 48,853 (+7.6%) by 2033, peaking in 2038 at 49,091, and declining slightly over the remaining period to 48,660 in 2063. This represents the medium scenario. The population is expected to increase to 48,293 (+6.4%) by 2028 which includes the 2015 LTP period. Comment: Population projections do not represent forecasts, but indicate what the future size and structure will be if the underlying assumptions regarding births, deaths and migration prevail. Projections use the 2013 Census based Estimated Resident Population as a base and were prepared by Natalie Jackson Demographics Limited and Waikato University.

Population change across the district occurs at a higher or lower rate than expected

A significant and consistent decline in population may adversely affect the ability of the Council to set rates at a level that is affordable to the community. A significant and consistent rise in population may adversely affect the ability of Council to deliver some services to existing service levels.

Council will continue to monitor population change in the District. Generally, small increases in population can be managed within the existing level of service. Declines in population will not necessarily reflect in lower number of ratepayers as the number of people per household is declining. Where growth requires additional infrastructure (e.g. subdivisions), Council can require financial contributions for this work. Costs over this amount may result in additional Council expenditure which is likely to be funded out of debt.

2. Household Change Assumption: The District’s households are projected to grow to 21,105 in 2033 (+13.1%), peaking in 2043 at 21,451 households, and declining slightly to 21,355 by 2063. This represents the medium scenario. Households are expected to increase to 20,680 (+10.8%) by 2028 which includes the 2015 LTP period. Comment: Timaru District household change has historically been characterised by steady growth of households, with pockets of stronger growth in some locations and communities. Household size is declining over time as the population ages. Household projections do not represent forecasts, but indicate what future households will be if the underlying assumptions prevail. Projections use the 2013 Census based Estimated Resident Population as a base and were prepared by Natalie Jackson Demographics Limited and Waikato University.

Household change across the district occurs at a higher or lower rate than expected

A slower rate of household growth may mean some activities have overinvested in infrastructure (i.e. have too much capacity too soon).

Council will continue to monitor household change in the District. Existing infrastructure is being managed to address specific growth factors associated with an activity (e.g. traffic demand) which may be generated from an increase in households. Where growth requires additional infrastructure (e.g. subdivisions), Council can require financial contributions for this work.




Medium, Low)



H M L H M L

3. Useful Life of Significant Assets Assumption: It is assumed that asset information is reliable and reflects the condition and performance of the assets. It is assumed that no significant assets will fail before the end of their useful lives as determined by the depreciation rates included in the accounting policies. Comment: Useful lives are detailed for significant assets in Asset/Activity Management Plans. These provide information to support replacement and renewal plans. Useful lives used in the calculation of depreciation are stated in the Council’s Accounting Policies under Depreciation.

Significant assets fail sooner or later than estimated

A significant change in the useful life of a major asset may have significant financial repercussions.

Asset life is based on the estimates of engineers and valuers. These are regularly reviewed through asset monitoring and testing. In the event of assets wearing out earlier than anticipated, capital projects could be brought forward. This may affect borrowing and depreciation expenses. Negative impacts are likely to be at least partially offset by some assets lasting longer than estimated. Mitigation may also involve reprioritisation of the capital expenditure programme.

4. Demographic Changes Assumption: The District’s Population is expected to age significantly into the future. Comment: The most notable change is a projected ageing

population with an anticipated 31.% (or over 15,000 people) of the Timaru District population above the age of 65 by 2033 (2013 Census: 20.5% or 9,003 people). Population increase is expected to mainly in age groups above 65. All other age groups are expected to decline. Gender-wise, the population will see a slowly increasing proportion of female to male over time. Ethnically, the population is expected to remain largely NZ European/New Zealander with a slowly increasing Maori population. This represents the medium scenario. Projections do not represent forecasts, but indicate what the future size and structure will be if the underlying assumptions regarding births, deaths and migration prevail. Projections use the 2013 Census based Estimated Resident Population as a base and were prepared by Natalie Jackson Demographics Limited and Waikato University.

Demographic changes across the district occur at a higher or lower rate than expected

Changes to projected demographics may place pressure on some Council services due to increased demand over time, leading to provision of a lower level of service.

Forecast demographic changes for a rapidly ageing population have been projected for western world economies for a number of years. Due to the makeup of the Timaru District population, it will feel these potential effects more acutely. Council will continue to monitor demographic change in the District and adapt or redirect activity provision to meet needs where possible within reasonable costs.




Medium, Low)



H M L H M L

5. Joint Venture or Shared Service Arrangements/Council Controlled Organisations (CCOs)

Assumption: Existing joint venture or shared service arrangements or Council Controlled Organisations (CCOs) are expected to remain over the life of this plan.

New arrangements are proposed due to circumstances beyond the Council’s control or existing arrangements are no longer tenable.

Additional costs may be created as the result of the failure of an existing arrangement.

Joint venture or shared service arrangements or CCO creation are undertaken following analysis of the potential benefits and costs and any proposed changes are subject to robust analysis. Where government legislation is involved, this will be monitored for any impacts on joint venture arrangements. In addition, the Local Government Act 2002 Amendment Act 2014 introduced a requirement for Councils to review all such arrangements every six years. A programme of review and associated process will be developed to meet these requirements.

6. Legislative demands on Council Assumption: Government legislation relating to some

activities that Councils are involved in will change over the period of the Long Term Plan. Comment: In the next three years, legislative impacts are

expected in the following areas of Council operations - Resource Management, Environmental Health, Local Government Planning and Reporting, Water Supply, Building and Transport. Some legislative changes have been signalled by government, but are not yet through the parliamentary cycle.

The impact of government legislation is more or less than expected. New legislation is introduced that alters the nature and scope of one or more Council activities.

Unrealised impacts of legislation may create greater impacts on Council operations, including operating budgets, workloads, time and resource availability. These may lead to additional costs for the resident or ratepayer.

Council will regularly monitor existing and potential legislative change across its activities as it moves through the parliamentary cycle. The Council will submit on legislation where appropriate to encourage reduced or improved impacts on Council operations and value for money for ratepayers. Where legislation requires review of Council processes or staffing, the Council will seek to achieve the most efficient and cost effective way forward. Where legislation requires Councils to provide additional services or increased levels of service, this may require cost recovery through increases to rates or user fees.




Medium, Low)



H M L H M L

7. Climate Change Assumption: Climate change will impact on the Council’s operations and will require an appropriate response to adapt and prepare for potential impacts. Comment: Climate change effects on Timaru District may include an increase in temperature, stronger winds, sea level rise, longer dry periods and more intense rainfall events. These may impact directly on several Council services, such as stormwater, water supply and emergency management.

The effects of climate changes are more or less severe than expected.

Unrealised effects of climate change are likely to create additional costs to mitigate their impacts, such as improving protection of critical infrastructure. More severe weather events resulting from climate change may increase damage to infrastructure and place pressure on Council finances.

Council activities will build appropriate mitigation responses into infrastructure development. The Council will continue to monitor climate change science and the response of central government and adapt its response where required.

8. Resource Consents Assumption: Resource consents will be obtained with reasonable conditions and expiring resource consents will be renewed with similar conditions during the period of the Long Term Plan. Comment: Resource consents due for renewal can be found within the relevant Activity Management Plan for individual activities. There are no major resource consent renewals during the period of this Long Term Plan.

A resource consent is not obtained or renewed or conditions imposed are unacceptable.

The non-granting or non-renewal of a major resource consent for a Council activity would have significant impacts on costs and the ability to provide that activity. A major non-renewal may mean an entirely new approach to the activity would be required. Non-granting of resource consents may delay project benefits.

Appropriate planning for resource consent applications/renewals should ensure that they are obtained. Existing monitoring of compliance with existing resource consent conditions will provide a record of compliance for future processes. The renewal of consents is dependent upon the legislative and environmental standards and expectations that exist at that time.

9. Service Levels Assumption: Levels of service do not significantly change. Comment: Where there are increased community expectations or demand or a need to vary level of service across the district, there may be changes to levels of service. Government legislation may also impose significant new service levels on the Council.

Significantly enhanced service levels are demanded by the community or imposed by the government on local authorities in one or more area of activity

Increased or improved service levels inevitably require additional cost and/or resources to provide them.

The Council regularly monitors existing service provision within its operation on a day to day basis and through activity management planning Minor changes may be made to service levels where budget, contracts and resources allow. These will generally occur within existing budgets. Major changes in service levels will be confirmed with the community via consultation. These will generally require increases to fees or rates, depending on the service involved is funded.




Medium, Low)



H M L H M L

10. Demand Assumption: Actual demand will be within projected levels.

Changes in demand are significantly higher or lower than expected

Significant and consistent variation from projected levels may adversely affect TDC’s ability to meet levels of service at an affordable cost.

Council will continue to monitor growth and development changes and adapt or redirect activity provision to meet needs within reasonable costs

11. Availability of Contractors and Materials Assumption: Contractors and materials will be available to

undertake the work required to agreed standards, deadlines and cost.

Projects could be delayed if there is a shortage of contractors or materials or contractors will not deliver to agreed standards, cost and timeframes

Might increase cost and/or delay projects

Spread projects as much as possible. Continue to engage with contractors. Ensure robust contracts are in place. Look at alternative resources such as concrete roads

12. Natural Hazards/Local natural disaster Assumption: There are no significant local disasters during the term of this Long Term Plan. Comment: The district is at risk from natural hazards such as flooding, earthquakes, storms, tsunami and wildfire, These events can strike without warning.

Natural disasters occur that have a significant impact on the district and Council services

A disaster event can potentially cause significant unbudgeted costs, beyond the capacity of the Council to cope.

Council is a member of the Local Authority Protection Programme Disaster Fund Trust (LAPP) and has a variety of insurance cover which would cover some emergency works. Council also has a Disaster Relief Fund for the replacement of infrastructural assets excluding roading in the event of a natural disaster. Central government has a role in disaster recovery after a natural disaster.

13. Strategic Assets Assumption: Council will remain involved in all activities involving strategic assets and continue to own and control all strategic assets.

Changes in control or ownership of strategic assets are required

Changes in control or ownership of strategic assets will likely affect the level of service provided to the community.

Changes in control or ownership of strategic assets must occur as part of an LTP development or amendment, with a full Special Consultative Procedure process required.

14. Council Political Structure Assumption: There will be no changes to the Council political structure.

Changes in the Council political structure are made

Changes in the political structure could either be minor or major depending on the nature of the changes. For example, an amalgamation will have a significant impact on the delivery of Council services.

Any changes in political structure will occur through either representation review processes or formal processes driven either by the community, Council or central government.


Significant Long Term Plan 2015 Financial Assumptions


Risk Risk Level (High, Medium, Low)


Mitigation Approach

H M L H M L

1. Inflation Assumption: The LTP is prepared on the inflation rates assumed in the table below for periods beyond 2015/16which is based on Local Government Cost Index (LGCI) prepared by Berl Economics: 2016/17 2.45% 2017/18 2.53% 2018/19 2.61% 2019/20 2.75% 2020/21 2.90% 2021/22 3.04% 2022/23 3.19% 2023/24 3.36% 2024/25 3.53%

The rate of inflation differs from that assumed

A significant change in inflation will result in changed revenue and expenditure. This could be significant and may adversely affect the ability of the Council to set rates at a level that is affordable to the community.

The Council will review its budget annually through the LTP/Annual Plan process and may adjust work programmes/budgets where necessary.

2. Interest Rates on borrowing Assumption: Interest on borrowing is assumed to be between 6.5 – 8.0%% (to be reviewed again before LTP finalised).

Forecast interest rates on borrowing are higher or lower than forecast

Council costs could increase or decrease as interest rates fluctuate up and down. Based on Council’s projected debt levels, interest cost would increase/decrease by $(tba) and (tba) per year for each 1% movement in effective interest rate.

Council hedges interest rate exposures as per the Liability Management Policy.

3. Return on investments Assumptions: Bank deposits and bond portfolio assumed return is 3.5% to 5%. Timaru District Holdings Limited assumed return is $2.04 dividend per share annually. Forestry assumed return is $0 over the 10 years.

Forecast returns are higher or lower than forecast

Council income could increase or decrease as investment returns fluctuate up and down. A 1% decrease in dividend will reduce Council’s income by up to $20,400 per annum.

Council maintains a long term investment portfolio with fixed interest rates which minimises fluctuations. Investments are also managed using the Investment Policy to minimise risks. Changes in investment returns are generally partially offset by a change in borrowing costs.





Mitigation Approach

H M L H M L

4. Funding Sources Assumption: Funding sources (including external funding

sources) do not change over the three year life of this plan. Comment: Funding sources are specified in the Revenue and Financing Policy and Financial Strategy. This applies to user fees, charges and external funding towards projects and assets. It is assumed that the policy of not collecting Development Contributions will continue.

Projected revenue from user charges or financial assistance is not achieved. Levels and sources of funding differ from those forecast

Revenue could reduce without the ability to reduce expenditure proportionately. In this event, the account would run in deficit, with charges reviewed for the next financial year. Project and asset funding could result in projects being revised or alternative funding sources used.

Levels of revenue from user charges have been set at realistic levels in accordance with the ratios outlined in the Revenue and Financing Policy. There is a concentration of risk associated with a small number of industrial consumers for some revenue streams (e.g. extraordinary water charges and trade waste charges). Regular liaison is maintained with these consumers. Funding for projects and assets is considered before the commencement of each project or asset. A significant impact from changes in funding or funding sources may result in a revised capital work programmes, or changes in the level of user fees and charges, borrowing or rating requirements.

5. Credit availability Assumption: Credit can be obtained from financial markets

on competitive terms and conditions.

Required credit cannot be obtained from financial institutions

Funding would need to be obtained from alternative sources or work programmes adjusted.

Prudent debt levels are maintained to mitigate risk for financial institutions. Relationships are maintained with various financial institutions and Council regularly monitors credit markets.

6. Costs Assumption: Costs will remain stable over the period of the Long Term Plan (refer also to inflation assumption). Comment: Maintenance expenditure has been based on historical trends.

Costs are higher or lower than anticipated

Variability of prices, such as for oil, could cause variability in costs.

The Council and management will review its budget annually through the LTP/Annual Planning process and may adjust work programmes/budgets where necessary.





Mitigation Approach

H M L H M L

7. Currency and oil price fluctuations Assumptions:

Currency fluctuations are not forecast to cause significant variability in Council costs. Exchange rates are forecast to remain unchanged from current rates. Oil prices will continue to fluctuate due to international influences and exchange rate movement.

Exchange rates fluctuate more than expected. Oil prices fluctuations are greater than expected

Variability of prices from international suppliers could cause variability in Council costs. This may impact on the ability of Council to complete programmed work within budget

Council purchases goods predominantly from New Zealand suppliers with contracts in New Zealand dollars. Currency exchange rates and oil prices will be continually monitored. Work programmes may need adjustment depending on the scale of any changes.

8. NZ Transport Agency Financial Assistance

Assumption: There will be no further changes to the financial assistance approach for transport funding administered by the New Zealand Transport Agency (NZTA), including funding criteria and NZTA funding. Comment: Financial assistance rates are currently between

53% and 63% depending on the nature of the project.

Changes in NZTA Subsidy rates or to criteria for roading and footpath projects have a positive or negative effect on Council’s transport budget

Funding would need to be obtained from alternative sources or work programmes adjusted. Levels of Service may need to be adjusted. If sufficient funding is not available, it may mean that projects are delayed or scrapped.

The Council and management will review the budget annually through the LTP/Annual Plan process and may adjust work programmes/budgets where necessary. NZTA Financial Assistance Rates have been set at 56% for 2015/16, 55% for 2016/17 and 54% for 2017/18. It will continue to reduce 1% annually to a final rate of 52%. These rates apply to all work.

9. Emissions Trading Scheme Assumption: Emissions Trading Scheme is retained in its present form. Comments:

Some NZU’s will be surrendered over the term of the LTP for deforestation. It will cost $5.75 per tonne of waste based on a price of $5 per NZU and using the default emissions factor for landfill emissions.

Changes could be made to the scheme by the government that have an adverse impact on TDC or the carbon price could be higher or lower than expected.

Council could hold more or less NZU’s for forestry assets. Landfill costs could vary resulting in changing landfill user charges.

Forestry assets are maintained with a long term view but programmes are reviewed annually. Any sale of forestry land will compensate for the loss of NZUs and associated benefits. Landfill costs and waste volumes are monitored continuously. Carbon credits (NZU’s) are held for a portion of future obligations to mitigate NZU price changes.

10. Asset depreciation rates Assumption: Asset depreciation rates will not change as

shown in the Accounting Policies.

Further work on planned capital works may alter the depreciation expense

Increased depreciation costs would result from assets that have shorter useful lives.

Asset life is based on the estimates of engineers and valuers. These are regularly reviewed through asset monitoring and testing. Negative impacts are likely to be at least partially offset by some assets lasting longer than estimated.





Mitigation Approach

H M L H M L

11. Revaluation of significant assets Assumption: The Council have adopted deemed cost as its

approach to revaluation. Comment: This has been applied from 1 July 2005 for most assets. Investment properties and forest assets will be revalued annually in terms of their respective accounting policies.

Minimal risks as asset revaluations will not occur in the future for property, plant and equipment

Revaluation affects the carrying value of fixed and infrastructural assets and the depreciation charge in the years subsequent to the revaluation. Annual revaluations are undertaken for investment properties and forestry assets.

12. Rating Base Assumption: The number of rating units will not change

significantly over the 10 years in the LTP.

Rating units could grow at an increased rate or could contract.

An increased in the overall rating base could result in a decrease in rates for rating units as the total rates are spread across a larger base. If the rating base was to reduce, there could be an increase in rates.

The rating base is reviewed annually when determining the rates for the year.