Agenda of Ordinary Council Meeting

7 Declaration of Conflicts of Interest

Nil

8 Deputations, Presentations, Petitions

9 Recommendations from Other Committees

10.1 Governance Structure, Joint Committee appointments and Standing Orders

10 Business

Staff Coral Hair, Manager: Democracy Services

The report was taken as read.

Key Points

· Two further amendments to Standing Orders had been requested:

- Time limits for members speaking to motions, rights of reply and discussing motions be revoked (Standing Order 21.2). As the Commission was only four people, the more formal approach did not apply. The Commission wanted to have as much open discussion as possible.

- Amend the public forum speaking time to up to 5 minutes in total per person or group (Standing Order 15.1 and 16.1) to enable more people to be able to speak at a meeting. This could be reviewed again if the timing did not work.

In response to questions

· Proposed commissioner appointments for the City Plan Hearings Committee were expected to be reported back to the council for consideration and approval in May 2021.

Resolution CO1/21/1

Moved: Commissioner Stephen Selwood

Seconded: Commissioner Shadrach Rolleston

That the Council:

(a) Receives the report “Governance Structure, Joint Committee appointments and Standing Orders”.

(b) Discharges the following Standing Committees:

· Finance, Audit and Risk Committee

· Policy Committee

· Projects, Services and Operations Committee

· Urban Form and Transport Development Committee

· Regulatory Committee

· Chief Executive’s Performance Committee

(c) Confirms the following Standing and Special Committees continue with the same Terms of Reference but with a change in membership as follows:

Committee	Membership (Tauranga City Council)
Tangata Whenua/Tauranga City Council Committee	The Tauranga City Council elected members are discharged, and the following persons are appointed in their stead: - Commission Chair Anne Tolley - Commissioner Shadrach Rolleston - Commissioner Stephen Selwood - Commissioner Bill Wasley The following existing members are confirmed: - Independent Chairperson Huikakahu Kawe - Ms Matire Duncan - Mr Puhirake Ihaka - Mr Whitiora McLeod - Mr Buddy Mikaere - Mrs Irene Walker Mr Hayden Henry is discharged and replaced with Mr Nathan James
City Plan Hearings Committee	The Tauranga City Council elected members are discharged. Commissioner Bill Wasley is appointed as Chairperson. The other members (yet to be appointed) will be external independent hearing commissioners accredited under the Resource Management Act 1991.
Wastewater Management Review Committee	The Tauranga City Council elected members are discharged, and the following persons are appointed in their stead: - Commissioner Stephen Selwood - Commissioner Bill Wasley The following existing members are confirmed: - Ms Matire Duncan – Nga Potiki (Deputy Chairperson) - Mr Whitiora McLeod - Ngai Te Rangi - Mr Carlton Bidois - Ngati Ranginui - Vacant – Nga Potiki (TBC)

(d) Confirms the District Licensing Committee continues without any changes to its Terms of Reference or membership.

(e) Confirms the following Joint Committees continue with the same Terms of Reference but with a change in the appointment of the Tauranga City Council representatives as set out below:

The Tauranga City Council elected members who were appointed to these Joint Committees are discharged and the following persons appointed in their stead:

Committee	Membership (Tauranga City Council)
Smartgrowth Leadership Group	Commission Chair Anne Tolley Commissioner Stephen Selwood Commissioner Bill Wasley Alternate: Commissioner Shadrach Rolleston
Bay of Plenty Civil Defence Emergency Management Group	Commission Chair Anne Tolley Alternate: Commissioner Bill Wasley
Te Maru o Kaituna (Kaituna River Authority)	Commissioner Shadrach Rolleston Alternate: Commissioner Bill Wasley
Regional Transport Committee	Commission Chair Anne Tolley Alternate: Commissioner Stephen Selwood
Public Transport Committee (Bay of Plenty Regional Council Committee)	Commissioner Stephen Selwood Commissioner Bill Wasley

(f) Appoints the following persons as the Tauranga City Council representatives/members to these advisory groups, external organisations and internal working groups in the stead of the Tauranga City Council elected members who are discharged from these groups/organisations:

Group/organisation	Membership on behalf of Tauranga City Council
Tauranga Moana Advisory Group	Commissioner Shadrach Rolleston Commissioner Bill Wasley
Waiāri Kaitiaki Advisory Group	Commissioner Shadrach Rolleston Commissioner Bill Wasley
Ngā Poutiriao ō Mauao	Commissioner Shadrach Rolleston Commissioner Bill Wasley
Mount Air Quality Working Party	Commissioner Shadrach Rolleston Commissioner Bill Wasley Existing TCC appointee, Ms Emily Gudsell, is reconfirmed.
Dive Crescent Governance Group	To be decided
Omanawa Project Governance Group Meeting	To be decided
Event Funding Panel	To be decided
Community Development Match Fund Panel	To be decided
Creative Communities Tauranga Funding Panel	To be decided
Tauranga Western Bay Safer Communities	To be decided

(g) In respect of the advisory groups, external organisations and internal working groups where Tauranga City Council representatives are yet to be decided, delegates to the Chief Executive and/or his sub-delegate(s) the authority to attend meetings of these groups/organisations on behalf of Tauranga City Council, until those appointments are decided and confirmed.

(h) Confirms and adopts the Terms of Reference and delegations for the above Committees and Governance Groups as set out in Attachment 1.

(i) Confirms the next meeting of the Council (Commission) will be held on Monday, 8 March 2021 commencing at 9:00 am in the Council Chamber, 91 Willow Street, Tauranga.

(j) Adopts the current Standing Orders in Attachment 2 with the following changes:

(i) Casting vote provision is retained (Standing Order 19.3 and Appendix 8: Powers of a Chairperson).

(ii) Option C for motions and amendments (Standing Order 22.4) and Appendix 5.

(iii) Remove references to Code of Conduct.

(iv) Amend the public forum time set aside at the beginning of each meeting to state this is at the discretion of the Chairperson; and amend the time speakers on behalf of an organisation or topic can speak to up to 5 minutes in total, unless the Chairperson (at their discretion) otherwise agrees (Standing Order 15.1 and 16.1).

(v) For the term of the Commission, where the Standing Orders refer to the Mayor, this will be taken to refer to the Commission Chair, and where it refers to the elected members, this will be taken to refer to the Commissioners.

(vi) Time limits for members speaking to motions, rights of reply and discussing motions be revoked (Standing Order 21.2).

Carried

10.2 Executive Report

Staff Paul Davidson, General Manager: Corporate Services

Barbara Dempsey, General Manager: Regulatory & Compliance

Susan Jamieson, General Manager: People & Engagement

Nic Johansson, General Manager: Infrastructure

Christine Jones, General Manager: Strategy & Growth

Gareth Wallis, General Manager: Community Services

Key points

· Growth and Strategy

Highlighted work currently underway on changes to the Tauranga City Plan; in particular Plan Change 26 – Housing Choice, and Plan Change 27 – Flooding from intense rainfall.

· Infrastructure

Highlighted the Waters Reform and the Water Services Bill. Tauranga City Council’s (TCC) draft submission to the Bill would be considered later in the meeting.

· Community Services

- The uncertainty of COVID-19 was still providing some challenges for Baycourt but one of the unintended upsides was that more local product was touring the country.

- The Cricket Women’s World Cup had also been affected by COVID-19 and would now take place in 2022. Although Tauranga had lost hosting a semi-final, it had picked up an extra match and was now hosting the first match of the whole tournament with an estimated viewing audience of 1.2 billion.

- Positive feedback had been received for the Trail Rider project. The trail rider was a wheeled apparatus manned by four people which enabled a person with accessibility issues to get to the top of Mauao. The trail rider was available to be booked from the Mount Holiday Park and was proving to be incredibly popular.

- The replacement mobile library bus was about a month away.

- The Wharf Street streetscape project was fundamentally complete, with a few cultural elements still to do. The project would come in under budget.

· People and Engagement

- TCC had been one of four councils selected last year to be audited by the Ombudsman. The audit report was received in February. Good feedback had been received with no formal recommendations made, but a number of suggestions to improve TCC’s transparency with the community. Many of the opportunities for improvement were well underway.

- During rates month, members of the customer services team were stationed at the libraries to provide a mobile rates payments service and to take enquiries.

· Regulatory and Compliance

- The Building and Environmental Planning teams had increasing workloads and it was a challenge to recruit suitably qualified people.

- The downwards trend in acts of aggression by dogs was noted and the work of the Animal Services team in this area acknowledged.

- COVID-19 had set the programme of inspections of food premises back. The Environmental Health and Licencing team was aiming to have caught up by the end of the financial year.

· Corporate Services

- It was noted that the Finance and Legal and Risk services of this group were reported separately.

- External reporting had been carried out on TCC’s digital security last year and a programme was currently being developed to lift TCC’s security maturity for the future.

- The airport was going very well at the moment despite all the implications of COVID-19. The Tauranga airport was one of the few that were close to 100% of schedule and load factors were strong at present.

- The Mount Holiday Park was also enjoying the impact of local tourism and had produced its best result ever.

- The Marine Precinct continued to grow and the lifts were now gaining a lot of profile.

In response to questions

· Strategy and Growth

- City Plan changes

o Hearings for submissions to the City Plan changes would be in this calendar year. A report was expected to be presented back to council in around May 2021 on the nature of submissions and a proposed timeline for hearings.

o Some submissions had stated that City Plan 26 did not go far enough, predominately related to height in the Te Papa Peninsula. Some submitters were not aware of existing sightlines (cultural view shafts) to Mauao. The geographical land form, view shafts and transport corridors would need to be fully considered and understood before a decision could be made on whether there was room for further density than what was proposed in the initial plan change.

o Frequent newsletters were being sent out to people who had registered an interest in the plan changes or had engaged with TCC in any way. Following submissions being publicly notified for further submissions, the next stage of the community engagement plan would be developed for each of the streams, which included clearly identifying what was and was not in scope. Those whose submissions fell outside of scope would be given alternative avenues for their concerns to be raised.

o Plan Change 27 in particular had been of concern to the public, and this had been exacerbated by the distribution of inaccurate information by other parties. Drop-in information sessions and one to one meetings with staff had been able to address and respond to a lot of concerns. Staff were currently working on how to best communicate with those who had not taken up the opportunity to meet with staff and still had concerns.

· Infrastructure

- The findings of the three waters multi-regional initiative was expected to be presented to council within the next two months with a proposal for how the future may look.

- Engagement with affected stakeholders for the No.1 Road pipeline project had happened since the beginning of the project around 18 months ago. The disruption to residents and stakeholders was being mitigated by regular information updates on how the project was progressing, timelines and next steps.

- The Totara St cycleway project was a temporary solution which was not ideal long-term but provided a safer cycling facility in the meantime. There was a parallel initiative as part of the Transport System Plan (TSP) business case looking at the whole Hull, Hewletts and Totara roads area.

- Cameron Road:

o The final design for Cameron Rd would be presented to council for approval around late March.

o Any review or changes to the project scope could compromise the deadlines in place with the funding partner. There were some significant constraints in the corridor and there would be compromises. The compromises, along with the pros and cons, would form part of the final design report. The Cameron Road project scope limitations would be circulated to the commissioners.

o Information on tangata whenua involvement in the urban design for Cameron Rd would also be provided to the commissioners.

o The communication component around the bigger picture (outcome) for this project was difficult. The City Vision, the 2021-2031 Long-term Plan (LTP) and the TSP would help to provide a better understanding to the community of what the city could look like. It was noted that some projects happened in the absence of understanding and acceptance of mode shift, but once the project was completed, the community tended to embrace the project outcome e.g. the Maunganui Road project.

· Community Services

- Commissioners would be informed of applicants being recommended for the Art Gallery Trust, along with the reasons for the recommendations for those appointments.

- The Elizabeth St streetscape project and funding had been approved by council. Regular operational updates on how the project was progressing would be provided to the commissioners. The project was going well as this point.

- The next steps planned for the Kulim Park upgrade would be provided to the commissioners.

· People and Engagement

- The Communications and Engagement Team acted as an advisory function for the organisation to help teams and projects set their communications and engagement plans, and provided advice on how they might reach their stakeholders and what mechanisms and channels could be used. Ultimately, the ownership of communication and engagement plans sat with the project owner or the business unit owner.

· Regulatory and Compliance

- There were currently four vacancies in the Environmental Planning team and 12 vacancies in the Building team. Filling these particular types of roles was not just a TCC issue but a broader issue across the country.

- The Building function was around 80% self-funded. The component of the activity that was not 100% funded was general enquiries, enforcement and following up with people.

· Corporate Services

- The first phase of the Procurement Policy review was a tidy up of the policy and looked at limits and bringing in local and sustainability practices. The second phase was a much bigger piece of work which would be more strategic. Phase two work would begin later this year.

- There was currently a good depth of response to tenders going to market but the sector was heating up and it was becoming more difficult. The long-term procurement plan would help TCC become an attractive partner for the design and delivery sector.

- There had been a change to the late February timeframe for presenting the SmartGrowth report on regional funding options to the Chief Executives of the SmartGrowth partnership. The new timeframe had yet to be confirmed.

Resolution CO1/21/2

Moved: Commissioner Bill Wasley

Seconded: Commissioner Stephen Selwood

That the Council receives the Executive Report.

Carried

Staff Action

The following information to be circulated to Commissioners:

· Cameron Road project scope limitations.

· Information on tangata whenua involvement in the urban design for Cameron Rd.

· The next steps for the Kulim Park upgrade.

10.3 2021-2031 Long-term Plan Timeline

Staff Christine Jones, General Manager Strategy and Growth

Key points

· The 30 June 2021 timeframe for adoption of the 2021-2031 Long-term Plan (LTP) was not achievable and it was recommended to move the timeline to the end of July 2021.

· It was noted that timelines would still be very tight, even with the deadline extended beyond the statutory deadline.

· The Local Government Act 2002 provided the ability for amendments to the LTP at any point in time, subject to public consultation.

· If the LTP timeline was extended beyond the statutory deadline, it was suggested that the Commission write to formally advise the Minister for Local Government to ensure transparency of the decision and clear communication of the extension.

In response to questions

· A LTP amendment process could begin at any point in time after the LTP had been adopted. Changes could be either discrete or substantive across the entire plan. A new plan would be produced but the focus for community consultation would be on what was being amended.

Resolution CO1/21/3

Moved: Commission Chair Anne Tolley

Seconded: Commissioner Bill Wasley

That the Council:

(a) Receives the 2021-2031 Long-term Plan Timeline report.

(b) Endorses option two to extend the timeframe to allow for late adoption of the 2021-2031 Long-term Plan in the week beginning 26 July 2021.

Carried

10.4 Adoption of the Tangata Whenua Remuneration Policy 2021

Staff Ariell King, Team Leader: Policy

Carlo Ellis, Manager: Strategic Maori Engagement

The report was taken as read.

In response to questions

· Although the current policy had been adopted in 2009, the current meeting fees pre-dated this.

· Te Rangapū was broadly supportive of the policy and appreciated that it had been independently evaluated, but looked for more regular reviews in the future.

· The review had been carried out by Strategic Pay and the State Services Commission cabinet fees framework had been used to set the rate. The rate set was similar to Western Bay of Plenty District Council’s rate.

Resolution CO1/21/4

Moved: Commissioner Shadrach Rolleston

Seconded: Commissioner Bill Wasley

That the Council:

(a) Receives the Adoption of the Tangata Whenua Remuneration Policy 2021 report.

(b) Adopts the Tangata Whenua Remuneration Policy 2021.

(c) Rescinds those parts of the External Representatives’ Remuneration Policy relating to tangata whenua remuneration and the Tangata Whenua Collective.

(d) Delegates authority to staff to make minor editorial changes to the Tangata Whenua Remuneration Policy 2021 for the purposes of correction or clarification.

Carried

10.5 Traffic and Parking Bylaw 2012 Amendments

Staff Nic Johansson, General Manager: Infrastructure

Brendan Bisley, Director of Transport

The report was taken as read.

Resolution CO1/21/5

Moved: Commissioner Stephen Selwood

Seconded: Commissioner Shadrach Rolleston

That the Commission:

(a) Receives the Traffic and Parking Bylaw 2012 Amendments Report.

(b) Adopts the proposed amendments to the Traffic and Parking Bylaw 2012 Attachment as per Appendix B, effective from 23 January 2021.

Carried

10.6 Water Services Bill - Draft Submission

Staff Nic Johansson, General Manager: Infrastructure

The report was taken as read.

In response to questions

· The impact of backflow on the quality of water was a big issue and needed to be regulated.

· Following a request from the Commission, standard wording would be used in future for recommendations that delegated authority to the Chief Executive and/or staff to make minor editorial changes to formal documents for the purposes of correction or clarification.

· Engagement for the submission had been undertaken with TCC’s immediate neighbours as well as the broader water supply sector of local government across the country.

Resolution CO1/21/6

Moved: Commissioner Bill Wasley

Seconded: Commissioner Shadrach Rolleston

That the Council:

(a) Receives the Water Services Bill – Draft Submission report; and

(b) Approves Tauranga City Council’s draft submission to the Water Services Bill, subject to final drafting changes as:

(i) Noted during this Council meeting; and/or

(ii) any subsequent minor editorial changes for the purposes of correction or clarification as approved by the Chief Executive.

Carried

Staff Action

Standard wording to be used in future for recommendations that delegate authority to the Chief Executive and/or staff to make minor editorial changes to formal documents for the purposes of correction or clarification:

“Delegates authority to the Chief Executive and/or staff to make minor editorial changes for the purposes of correction or clarification.”

11 Discussion of Late Items

Nil

12 Public Excluded Session

Carlo Ellis, Manager: Strategic Maori Engagement, closed the meeting with a Karakia.

The meeting closed at 10.34am.

The minutes of this meeting were confirmed at the Ordinary Council meeting held on 8 March 2021.

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

CHAIRPERSON

Issue 4: Omanawa Falls

8 March 2021

10 Business

10.1 2021-2031 Long-term Plan - Update and revised working draft

File Number: A12263838

Author: Jeremy Boase, Manager: Strategy and Corporate Planning

Kathryn Sharplin, Manager: Finance

Paul Davidson, General Manager: Corporate Services

Authoriser: Christine Jones, General Manager: Strategy & Growth

Purpose of the Report

1. This report provides an update on the process to develop the draft 2021-31 Long-term Plan, invites decision-making on outstanding matters, and introduces a workshop session to consider the revised working draft of the long-term plan and budget.

Recommendations

That the Council:

(a) Receives the report ‘2021-2031 Long-Term Plan – Update and revised working draft’.

(b) Notes that to address the transportation, housing and community infrastructure needs of the city the revised working draft Long-Term Plan is based on ‘Scenario C Plus’ and includes further amendments and additions as detailed in this report.

Issue 1: Road resealing

(c) Rescinds the decision of the Policy Committee on 20 October on to ‘Approve option 2 into the LTP prioritisation process and request further advice on funding this through a city-wide or a local targeted rate or combination of both’

(d) Retains the existing ‘fit for purpose’ level of service for road resealing and incorporate this decision into the draft Long-Term Plan process.

(e) Highlights the proposed approach to road resealing in the LTP consultation document and actively seeks community input on it.

Issue 2: City centre stocktake

(f) Supports a stocktake of strategic documents relating to the city centre and allocates $50,000 in the 2021/22 draft budget to complete this work.

(g) Notes that a further report-back on this work will occur before the final Long-Term Plan is adopted.

Issue 3: Tropical display house in Robbins Park

(h) Defers consideration of the future of the tropical display house in Robbins Park until after the completion of the stocktake of city centre strategy.

(i) Amends the budget allocation for the Omanawa Falls project to include a Council contribution of $3.5 million.

Issue 5: Sustainability

(j) Confirms the continuation of the $400,000 annual budget for the development and implementation of a sustainability framework and action plans.

(k) Ceases the process to establish an independent sustainability advisory board.

Executive Summary

2. The process to develop the 2021-31 Long-Term Plan (“LTP”) has been underway for many months and draws on a number of critical workstreams that have been underway for, in some case, years.

3. A substantial update was provided to Council on 14 December 2020. This report references that December report and decisions made by Council at that time, and provides a summary of progress on a number of relevant issues since.

4. As part of the meeting, a workshop session will be held where an up-to-date presentation of investment proposals and the associated financial information will be shared, and options discussed. This workshop session will help inform material required for formal decision-making at the subsequent Council meeting on 15 March.

5. This report also considers five matters where the Executive seek further direction on matters subject to prior resolutions.

Background

Legislative background

6. The purpose of a Long-Term Plan (“LTP”) is to:

(a) describe the activities of the local authority; and

(b) describe the community outcomes of the local authority’s district; and

(c) provide integrated decision-making and co-ordination of the resources of the local authority; and

(d) provide a long-term focus for the decisions and activities of the local authority; and

(e) provide a basis for accountability of the local authority to the community^{^[1]}.

7. An LTP is prepared every three years, covers ten years (and includes an infrastructure strategy that covers 30 years), must include specific information described in the Local Government Act 2002, must be audited, and can only be adopted after a period of public consultation on a consultation document which itself also needs to be audited^{^[2]}.

Community outcomes

8. On 8 September 2020, after a public consultation process, the Policy Committee adopted the following community outcomes as part of the preparation process for the LTP. Those community outcomes are:

· We value and protect our environment - Tauranga is a city that values our natural environment and outdoor lifestyle, and actively works to protect and enhance it.

· We have a well-planned city - Tauranga is a city that is well planned with a variety of successful and thriving compact centres and resilient infrastructure.

· We can move around our city easily - Tauranga is a well-connected city, easy to move around in and with a range of sustainable transport choices.

· We support business and education - Tauranga is a city that attracts and supports a range of business and education opportunities, creating jobs and a skilled workforce.

· We are inclusive, and value our culture and diversity - Tauranga is a city that recognises and values culture and diversity, and where people of all ages and backgrounds are included, feel safe, connected and healthy.

Previous reports

9. This report builds on a succession of other reports relating to both the process of developing an LTP and on individual components of the LTP.

10. Regarding the process of developing the LTP, these preceding reports include a report to Council on 11 August 2020 titled Long-Term Plan Workstreams which introduced (and received approval for) a number of workstreams under the following categories:

11. Using this framework, progress updates have been reported to:

· Policy Committee on 8 September 2020

· Finance, Audit, and Risk Committee on 22 September 2020

· Policy Committee on 22 October 2020

· Council on 17 November 2020

· Policy Committee on 1 December 2020

· Council on 14 December 2020.

Report to Council meeting of 14 December 2020 (“the 14 December report”)

12. The 14 December report sets out in some detail the journey and the challenges at that time. As such, the 14 December report is included as Attachment 1 to this report^{^[3]}.

13. For the purposes of background, the reader’s attention is drawn to:

(a) the list of strategic direction workstreams that have informed the preparation of the working draft (paragraph 17)

(b) the principles underpinning the preparation of the LTP (paragraph 18)

(d) the sub-section titled ‘Scenario-based approach’ and the description of the four scenarios A, B, C, and D (paragraphs 38 to 46)

(e) the sub-section titled ‘Future years’ costs resulting from past decisions’ (paragraph 50).

Council decisions after consideration of the 14 December report

14. As a result of consideration of the matters included in the 14 December report, Council resolved as follows:

(b) Requests the Executive report back in February 2021 with an updated working draft Long-Term Plan (LTP) for further detailed consideration that:

(i) Notes that Scenarios A & B have been useful for establishing the foundations of the 2021-2031 LTP;

(ii) Recognises that to address the transportation, housing and community infrastructure needs of the city, a ‘Scenario C Plus’ which includes expenditure to prepare Te Tumu for housing and the Papamoa East Interchange (PEI) infrastructure by 2026 is to be the baseline for the development of the Draft LTP;

(iii) Notes that any further funding over (that) allocated in ‘Scenario C Plus’ (per (ii) above) for Tauranga City Council commitment to the Western Bay of Plenty Transport System Plan (TSP) will be dependent on the alternative funding including outcomes of the Smartgrowth Funding and Financing project

(c) Requests the Chief Executive engage with Urban Form and Transport Initiative (UFTI) and TSP partners to explore their willingness / ability to contribute funding to enable the outcomes of Scenario D to be delivered for our communities

15. The decision to move to ‘Scenario C Plus’ as the baseline for the draft LTP has been reflected in an amended LTP Scenarios summary (initially attached to the 14 December report) which is included as Attachment 2 to this report.

Progress since 14 december report and decision-making

16. Since the above decisions were made, the Executive has continued to refine the contents of the working draft LTP and budgets. Key workstreams are briefly noted below.

Transport Systems Plan

17. The Western Bay of Plenty Transport System Plan (“TSP”) was endorsed by the SmartGrowth partners in October 2020. At that time, it was noted that further work would continue to be undertaken by TSP project partners to further refine the individual project scopes, timing and costs.

18. This ongoing work has helped to better understand the inter-dependency of projects with others (e.g. the issues one project needs to investigate and confirm before another project commences) and this in turn has enabled further refinement of project timing. This has meant that some projects are now programmed to occur earlier or later in the LTP than in the TSP.

19. In addition, project costs have been further considered. This has included further applying council’s cost estimation methodology to project costs included in the TSP. In general, this had led to higher project costs being reflected in the LTP than in the TSP as project risk and optimism bias cost factors are applied.

20. The revised working draft capital programme now includes $1.067 billion of TSP projects over the ten years of the LTP. Given council’s financial sustainability issues, options for debt retirement and/or targeted rates are being considered as part of the funding package for this work.

21. Despite the quantum of projects included, there are still a number of TSP projects that Council is unable to fund in the revised working draft.

Deliverability of capital programme

22. In recent weeks, the LTP capital programme has been reviewed to determine the confidence of the organisation to deliver the current portfolio of projects over the next 10 years.

23. This review has identified a number of factors, both at project level and also across the wider programme, that have led to adjustments to the working draft capital programme included with the 14 December report. These adjustments are particularly evident in the first three years where capital project cashflows have been pushed into later years as a result of challenging reviews of “project readiness”.

24. Staff continue to assess and review the programme and it is envisaged that there will be further adjustments recommended by staff prior to the adoption of both the draft and then final LTP capital programmes.

25. Capital project cashflow timing will also be informed by the programme of work underway to make improvements to the way the organisation delivers projects. This programme of work will improve the capability of the organisation to deliver projects on time, to budget and delivering agreed benefits with our community.

Community facilities investment plan

26. Encouraged by the 14 December decision to accelerate budgeting for development of the eastern corridor, and by public messaging relating to the appointment of the Commission, the Executive have refreshed consideration of the city’s community facility needs and how those needs are reflected in the revised working draft.

27. That reconsideration has focused on the need to ensure that new and existing parts of the city have the community facilities that are necessary to enable connected communities to thrive under a ‘live-work-play’ model. This has resulted to changes in the revised working draft capital programme that adds the following to the Scenario C programme included in the 14 December report:

(a) stage 2 development of the Memorial Park recreation hub (being the ‘dry’ facilities) – construction in 2026/27 to 2028/29 to start once stage 1 (aquatics) has been completed (additional $45m in years 6-8 of the LTP)

(b) develop, or commence development of, active reserves, library and community centre in the western corridor (additional $33m in years 7-10 of the LTP)

(c) capitalisable pre-construction costs for the community centre, indoor sports facility, library and aquatic facility in Te Tumu (additional $3.4m in years 9 and 10 of the LTP)

(d) capitalisable pre-construction costs for the indoor sports and aquatic facilities in the western corridor (additional $1.5m in year 10 of the LTP.

28. Note that land purchase costs for the projects in items (b) to (d) above were already included in the working draft as at 14 December 2020.

29. The overall capital expenditure impact of these additions to the Executive’s revised working draft are:

Year 6

2026/27

Year 7

2027/28

Year 8

2028/29

Year 9

2029/30

Year 10

2030/31

Ten-year total

$3.0m

$23.0m

$21.2m

$14.7m

$21.0m

$82.9m

30. As with the TSP above, because of council’s financial sustainability issues, options for debt retirement and/or targeted rates are being considered as part of the funding package for this work.

Resourcing levels

31. The Executive have conducted a further review of organisational resourcing and new resourcing requests. This included a reconsideration of both the organisational need for additional resources and then the proposed timing of each specific proposal to meet the agreed needs.

32. The executive’s agreed resourcing approach has been incorporated into the revised working draft financials that are recommended to Council.

Minor Spaces & Places capital projects

33. The working draft capital programme excluded a large number of individually small capital projects, predominantly related to better activating a large number of passive and active spaces across the city. These projects were prepared in line with the Tauranga Reserves Management Plan but were ‘prioritised out’ during preparations of the working draft.

34. After reconsideration, the Executive has supported a $500,000 annual bulk fund to cover the implementation of such projects. This is not sufficient to cover all such projects, but is intended to provide opportunities for improvements across the city as the Spaces & Places team determine. The $500,000 per annum bulk fund is included in the revised working draft capital programme.

35. Note that the full list of ‘parks minor capital development and upgrade’ projects not included in the working draft (and therefore to be potentially funded from the bulk fund) totals $19.2million over 10 years. As such, the bulk fund will be able to progress only a little over a quarter of these projects.

Major Spaces & Places capital projects

36. There are a number of ‘major’ capital projects in the parks portfolio that are also not included in the revised working draft. These involve greater investment (individually ranging from $1m to $17m and totalling $38m) and generate greater city-wide amenity than the ‘minor’ projects noted above.

37. Work is currently underway to consider funding options (such as a city-wide targeted rate or other external funding sources) to bring these projects into a future revision of the working draft. That work is not complete and as at the time of writing these capital projects are not included in the revised working draft capital programme.

38. Options will be presented to Council to bring some or all of these projects into the final LTP, potentially funded as part of a targeted rate alongside the community facilities investment plan projects considered above. Community consultation could be focused on a draft set of proposed projects to be so included.

Papamoa East Interchange

39. Council resolution (b)(ii) in response to the 14 December report brings forward the Papamoa East Interchange (“PEI”) project as part of the enablement of the development of the Wairakei/Te Tumu town centre and the wider Te Tumu urban growth area.

40. Work is underway with Waka Kotahi NZTA and other stakeholders to understand the opportunities and barriers to fast-tracking the construction of the PEI and identifying possible funding / financing pathways. An update on this work will be provided during the 15 March 2021 Council meeting.

Smartgrowth Funding & Financing

41. Council resolution (b)(iii) in response to the 14 December report references the Smartgrowth Funding & Financing project.

42. Work undertaken to date aims to identify a set of principles for the Smartgrowth partners to apply to consideration of funding projects to achieve the outcomes recognised through sub regional strategies and projects. These principles can apply over a number of projects and focus on providing mechanisms to provide better community outcomes. These may include transport projects, community amenity projects and other initiatives that may cross existing boundaries.

43. These principles are currently being completed and will be discussed with partners. They may be included in our submissions to Western Bay of Plenty District Council’s and Bay of Plenty Regional council’s LTP consultation documents with a view to providing more clarity around these opportunities through this LTP process.

UFTI and TSP partner funding

44. Council resolution (c) in response to the 14 December report references the willingness of UFTI and TSP partners to contribute to funding to allow Scenario D projects (which are currently excluded from the working draft) to be delivered for the benefit of the community.

45. As noted above, the Executive have included in the options for future decision-making on the LTP additional expenditure relating to additional community infrastructure projects. Efforts continue to develop additional funding and financing options for these projects, including those with our partners. However, it is acknowledged that agreement on such options is unlikely to occur prior to the release of the LTP consultation document on the draft. Therefore, various rating options have been explored to fund this potential expenditure including the use of targeted rates and debt retirement charges to enable these projects to be delivered within council’s constrained debt-to-revenue levels.

46. The Executive recognise that there are potential opportunities to obtain better outcomes for our community through more equitable allocations of funding and financing and will continue to explore further options. These may be able to be recognised in the final adopted LTP or in future LTPs (including as an amendment to the adopted 2021-31 LTP if necessary).

Revised working draft financials

47. During this meeting the Executive will present the revised working draft financials for the LTP. This revised working draft is based on the ‘Scenario C Plus’ resolution of Council on 14 December 2020, together with the outcome of the additional work outlined in the above section.

48. It is expected that the revised working draft financials will be discussed in a workshop session during the meeting. External members of the recently disestablished council committees will also be invited to the workshop session.

49. The information provided to the workshop session will be included in a formal report that will be prepared for the 15 March 2021 Council meeting.

Matters to be addressed

50. This section of the report considers a small number of matters where formal direction is sought.

Issue 1: Road resealing

51. On 20 October 2020, the Policy Committee considered a paper titled ‘LTP 2021-2031 Road Resealing Level of Service Issues and Options Paper’. That paper (“the 20 October report”) is included as Attachment 3 to this report^{^[4]}.

52. That paper addresses council’s level of service for road resealing and recommended that council:

Retains the current level of service for road resurfacing, including the replacement of asphalt with chipseal on neighbourhood roads (road categories 4 and 5)

53. This level of service, in place since 2012, is colloquially known as ‘fit for purpose’. In other words, the material used for road resealing is chosen to suit the use of the road, particularly relating to road categorisations and traffic volumes.

54. The Policy Committee did not accept the Executive’s recommendation and instead resolved (by 9-1 majority) to

Approve option 2 (‘Like for like’ or road resurfacing with the same material that is existing) into the LTP prioritisation process and request further advice on funding this through a city-wide or a local targeted rate or combination of both

55. As the name suggests, a ‘like for like’ policy means that a road that is currently surfaced in asphalt will be resurfaced with asphalt, while a road currently surfaced in chipseal will be resurfaced in chipseal, regardless of the engineering or traffic needs.

Cost implications

56. The 20 October paper highlighted the significant variance in costs between chipseal and asphalt for local and access roads (being the category 4 and 5 roads most affected by this policy decision^{^[5]}). This variance recognises:

(a) the higher cost per square metre of asphalt resealing

(b) that council will only receive subsidy for the lower chipseal cost if it undertakes resealing using asphalt that is considered by Waka Kotahi NZTA to be more than the necessary level of service

57. Using the above parameters, the comparable costs of chipseal and asphalt are shown below.

Road category 4 & 5 (local and access roads)	Fit for purpose = chipseal (i.e. eligible for full subsidy)	Like for like = Asphalt (i.e. not eligible for full subsidy)
Gross cost	$6 per m²	$30 per m²
Subsidy	$3.06 per m²	$3.06* per m²
Net cost (to ratepayer) / m²	$2.94 per m²	$26.94 per m²
Differential cost per square metre between policy options. This cost is fully borne by TCC.		$24 per m²
Net cost (to ratepayer) for nominal 500m long road, 8m wide (4000m2)	$11,760	$107,760 (nine times greater)
Expected useful life of surface	12 years	16 years
Per annum net cost (to ratepayer) per year of seal life for nominal 500m long road, 8m wide.	$980 p.a.	$6,735 p.a. (six times greater)

*subsidy amount up to the value ‘fit for purpose’ only as per Waka Kotahi NZTA advice

Other councils’ approach

58. The 20 October report (paragraph 50) discussed the approach of other councils as follows:

Most Councils in New Zealand have adopted a ‘fit for purpose’ resurfacing policy in line with NZTA funding assistance criteria. This includes the four major cities with network configuration or growth similar to Tauranga City (Auckland, Wellington, Christchurch and Hamilton).

There are a number of smaller councils who have adopted a ‘like for like’ policy approach, such as Hurunui District Council, Mackenzie District Council and Ashburton District Council. These smaller networks have a lot of unsealed and chipseal roads, so retaining similar surfacing is a more cost-effective option. Further, these smaller districts tend to have very little asphalt roads and therefore residents do not have the same expectation for asphalt on neighbourhood roads.

In addition, Selwyn District Council advised that they have experienced considerable growth in recent times resulting in asphalt being used in new subdivision areas. Consequently, Selwyn District Council are reviewing their ‘like for like’ policy as a result of increased cost, technical and equity issues.

Options summary

59. The options, including advantages, disadvantages, risks and costs are as included in the 20 October report (paragraphs 40 to 49) and are summarised here in the interests of brevity.

· Option 1: Fit for purpose (recommended)

o Maximises NZTA subsidy; consistent level of service city-wide; responsible use of financial resources; reduced level of service for some neighbourhood roads currently in asphalt and therefore some community dissatisfaction; total net costs to council over 10 years of $32 million.

· Option 2: Like for like

o Amenity in all areas remains as is; inequitable across the city; over-investment from a technical perspective; total net costs to council over 10 years of $57 million.

· Option 3: All asphalt

o Improvement in amenity of areas currently in chipseal; NZTA will not fund over ‘fit for purpose’; over-investment from a technical perspective; total net costs to council over 10 years of $86 million.

60. The 20 October report summarised the capital expenditure impacts of these options over the ten years of the LTP as follows:

	Overall programme	NZTA subsidy	Net cost to Council
Option 1
Road Categories 1, 2 & 3	$33.0M	$16.8M	$16.2M
Road Categories 4 & 5	$32.0M	$16.2M	$15.2M
Total	$65.0M	$33.0M	$32.0M
Option 2
Road Categories 1, 2 & 3	$33.0M	$16.8M	$16.2M
Road Categories 4 & 5	$57.0M	$16.2M	$40.8M
Total	$90.0M	$33.0M	$57.0M
Option 3
Road Categories 1, 2 & 3	$39.0M	$19.8M	$19.2M
Road Categories 4 & 5	$90.0M	$13.0M	$67.0M
Total	$129.0M	$32.8M	$86.2M

61. Note that, under option 3, the total cost to upgrade all roads across the city to asphalt is estimated at $176 million additional to current budgets. This includes a (conservative) estimate that 30% of the existing chipseal network would require additional pavement-strengthening work to support surfacing in less-flexible asphalt.

Funding and Financing implications

62. The rating impact of a decision to move to options 2 or 3 will depend on policy decisions yet to be made. For example, whether the costs are recovered on street-by-street or area-by-area targeted rates or whether they are absorbed into a city-wide rate.

63. The 20 October report included an example of the potential impact of a street-by-street targeted rate. This showed an additional rate of between $160 and $240 per annum depending on assumptions used.

64. Initial calculations have also been prepared on a city-wide targeted rate if all existing chip-seal roads were converted to asphalt. Existing chipseal roads make up approximately 45% of the city’s network. Using the $176 million capital cost identified above and upgrading all roads to asphalt over 15 years (used for modelling purposes), early indications suggest that a city-wide targeted rate of at least $300 would be required. Further work will be undertaken on these calculations if this option is preferred.

65. Note that this city-wide targeted rate would be paid by all properties: those currently on chipseal being upgraded to asphalt; those currently on asphalt who would retain asphalt that under a fit-for-purpose approach would have reverted to chipseal; and, those on asphalt who would have retained asphalt under a fit-for-purpose approach (because of traffic volumes, for instance).

66. Under options 2 and 3, additional debt will be incurred placing further pressure on Council’s balance sheet. In order to manage this additional debt pressure, additional funding (rating) via a debt retirement charge would need to be included in the LTP. This would be in addition to the direct rates amounts required as noted above for the reseal costs.

Executive recommendation

67. Option 1 is recommended, as it was in the 20 October report. If the recommendation is accepted, Council is advised to formally rescind the resolution of the Policy Committee on 20 October and then separately to resolve to retain the status quo of a ‘fit for purpose’ level of service. This is addressed in recommended resolutions (c) and (d).

68. Due to the previous public interest in this matter and the fact that the local road resealing level of service has impacts across the city, it is recommended that this issue and council’s proposed approach is highlighted in the LTP consultation document and public feedback sought. This is addressed in recommended resolution (e).

Issue 2: City centre stocktake

69. The Tauranga city centre has been the subject of a number of strategic planning exercises in recent years. These include the City Centre Strategy (2012 but still extant), the Tauranga Waterfront Masterplan (prepared for Council by LandLab in 2018), the City Centre Spatial Framework (from 2019), and significant work undertaken in various iterations on the civic campus and its surrounds.

70. In recent months three significant workstreams that affect the city centre (and other areas) have been completed. These are:

(a) The preparation and adoption on 13 October 2020^{^[6]} of the Te Papa Spatial Framework

(b) The completion of council’s natural hazards planning work (reported as part of the resilience project on 24 November 2020^{^[7]}), coupled with an increasing understanding of the impact of the Regional Policy Statement on Natural Hazards

(c) The UFTI report approved by Council on 1 July 2020 and the subsequent Transport System Plan (approved by Council on 28 October) which collectively identify implications for transport movements and planning within the city centre.

71. Given the importance of these three workstreams, it is intended to commence a stocktake of the existing city centre strategic documents taking into consideration the impacts of these workstreams. This work will commence in 2020/21 using existing budgets but will a need for an additional budget in 2021/22 to complete (estimate at $50,000).

72. It is intended to report back progress on the stocktake during Council’s deliberations on the draft LTP in June. At this time, any additional resourcing implications on the LTP emerging from the stocktake will be highlighted and direction sought.

Options analysis

73. There are two principal options for consideration.

· Option 1 – support the stocktake and include an additional $50,000 of operational funding in the 2021/22 year to enable its completion (recommended)

o This option ensures the stocktake can be completed and the implications for the city centre of recent planning workstreams understood.

o Further reporting back will occur before the final LTP is adopted.

· Option 2 – do not support the stocktake and do not provide additional operational funding in 2021/22

o Under this option, a detailed understanding of the implications on the city centre of the recent planning workstreams will not be obtained.

o There is a risk that city centre decisions will be made in isolation of a broad strategic understanding.

74. Option 1 is recommended and is reflected in recommended resolutions (f) and (g).

Issue 3: Tropical display house in Robbins Park

75. During the 2020/21 Annual Plan process, as part of Covid-related cost-saving measures, Council consulted on the future of the tropical display house. The proposal in the draft Annual Plan was to retain the service provided by the tropical display house and the $61,000 per annum budget.

76. Submissions on the matter were split between those wishing to retain the service and the budget and those wishing to remove the service and the budget.

77. After considered debate, Council resolved on 16 July 2020 to retain the budget in the 2020/21 Annual Plan and to:

… review the decision in the LTP including the options to upgrade, relocate or demolish the tropical display house.

78. This review was not commenced prior to or during the 14 December 2020 council meeting.

Options analysis

79. There are two principal options for consideration.

· Option 1 – defer the review of the tropical display house until completion of the stocktake of city centre strategic planning (recommended)

o This option ensures the best strategic approach to the wider city centre, including the role that the tropical display house, and the wider Robbins Park, may have.

o This option requires the continuation of the annual operational budget in the LTP until (and if) a decision is made that it is no longer warranted.

· Option 2 – undertake the review before the draft LTP is adopted as per the 16 July 2020 resolution

o Given the timeframe available and the relatively minor nature of this matter compared to other matters that Council needs to address ahead of the adoption of the LTP consultation document, this option is not considered feasible.

80. Option 1 is recommended and is reflected in recommended resolution (h).

Issue 4: Omanawa Falls

81. The Omanawa Falls are located on land owned by Tauranga City Council within the Western Bay of Plenty district. There is no safe formed access to the Falls and as such the site is currently closed to public access. Despite this, members of the public continue to attempt to access the site and in recent years this has resulted in a number of serious injuries and two fatalities.

82. The Omanawa Falls project is intended, in the first phase, to provide safe access to the Omanawa Falls.

83. The project is being delivered in two stages to achieve safe access by summer 2021/22. All components except the lookout location in the Ngahere walk are scheduled to be complete by mid-November 2021. The lookout will be completed by October 2022.

84. The project is currently budgeted at $3.857 million (in 2019 dollars). There is a significant degree of uncertainty regarding this total. A more certain budget estimate will not be established until contractor engagement is finalised. This is largely due to site constraints requiring the preferred contractor to be responsible for final detailed design of a number of elements.

85. In the meantime, it is recognised that construction cost inflation needs to be applied to this original budget. As such, it is recommended that the project budget be updated to a total of $4.5 million to better reflect 2021 likelihood.

86. Staff are currently working to provide cost certainty for the project. At present the project programme estimates that the final budget will be confirmed as follows:

Works	QS Budget Estimate	Cost Certainty
Early works	February 2021	March 2021
Cliff Stabilisation	NA	April 2021
Track works	NA	April 2021
Lower landing	To be confirmed	To be confirmed
Carpark	February 2021	June 2021
Upper platform (lookout)	June 2021	September 2021

87. An update on total project costs will be provided during the deliberations on the LTP in June.

88. During the 2020/21 Annual Plan process, Council supported the project and confirmed a total budget split as follows:

	Original estimate	Updated for new total estimate
Council contribution	$711,000	$1,354,000
Tourism Infrastructure Fund (already agreed)	$1,000,000	$1,000,000
Other external sources	$2,146,000	$2,146,000
Total	$3,857,000	*$4,500,000*

89. The staff report to council at the time this decision was made noted that the key risks of this option were: ‘External funding will not be found, serious safety concerns if the project doesn’t continue’.

90. A Funding Action Plan has been prepared for this project and is updated regularly. Many of the potential funding sources require consents to be secured prior to providing funding.

91. As consents are dependent on designs, and designs are dependent on contractor engagement, and good faith contractor engagement is dependent on funding certainty, the inability to guarantee funding sources for the project is not allowing the project to proceed with confidence. The opportunity to complete the project for safe access in the 2021/22 summer is at risk.

Options analysis

92. There are two principal options for consideration.

· Option 1 – increase council funding to $3.5 million (recommended)

o The $3.5m reflects council absorbing the increased total budget cost due to inflation ($4.5m minus $3.857m) as well as underwriting the proposed external contribution of $2.146m.

o This option provides funding certainty for the project and allows progress to continue.

o Efforts would continue to secure other external funding to reduce council’s commitment, but the project would proceed on the understanding that council will fund it.

o Note that the quantum of funding may change when the ‘cost certainty’ information is reported back in June. This will be considered trough the LTP deliberations.

o Other than the increased debt servicing involved with a greater capital contribution, there are no changes to operating expenditure as a result of this decision.

· Option 2 – retain the existing funding mix for planning purposes

o Under this option, the current issues with securing funds and the current risks to project delivery would remain. It is unlikely that the project will be delivered for the 2021/22 summer.

93. Option 1 is recommended and is reflected in recommended resolution (i).

Issue 5: Sustainability

94. As part of the 2020/21 Annual Plan process, Council approved a refreshed approach to sustainability encompassing social, environmental, cultural and economic wellbeing. That approach included:

· the delivery of a stock-take of council’s current approach to sustainability

· the creation and implementation of a sustainability framework for the organisation

· the development and implementation of action plans

· the establishment of an independent sustainability advisory board

· a $400,000 budget for the board, consultants and staff to enable this work to occur.

Stocktake, framework, action plan

95. The Policy Committee meeting of 20 October agreed that the most effective way to conduct the stocktake would be through external consultants.

96. In late 2020 staff undertook a closed Request for Proposal (“RFP”) process and appointed Proxima Consulting. Proxima are sustainability experts who came highly recommended from numerous sources and have deep connections and knowledge around sustainability.

97. Work commenced in January 2021 and a draft report will be produced by the end of March. This report will cover -

· High level analysis of different frameworks for assessing sustainability, pros and cons and recommendation of a suitable option (developed following a TCC workshop and targeted internal and external engagement)

· List of topics / themes in relation to sustainability (defined in a holistic sense and including a city-wide lens with consideration of council’s role – “control / influence / take an interest in”)

· A snapshot of our current progress / status across the topics and themes identified

98. The RFP only covered the initial stage (i.e. consideration of frameworks and stocktake of performance against relevant framework). Phase two (not yet tendered) will cover development of “action plans” to address gaps in current performance and respond to opportunities and challenges.

99. There are natural links between the sustainability framework and action plan and the broader ‘City Futures’ project that has previously been reported to Council and the Policy Committee. Those links will be further explored as the two workstreams are progressed.

Independent board

100. In accordance with Council’s resolution, during the fourth quarter of 2020, the Chief Executive and staff progressed the establishment of an independent sustainability advisory board. While significant progress has been made, this process is not yet complete; for instance, the terms of reference have not yet been finalised and as such the involvement of preferred candidates has not yet been confirmed.

101. During the establishment phase the need for sensitivity around perception and scope of the group was highlighted. This reflected fears that the model as originally proposed may alienate some in the community with the perception of ‘external commissioners checking everything with external consultants’ (being the independent board).

Options analysis

102. There are two principal options for consideration

103. Option 1: Discontinue establishment of independent board but continue with related sustainability work programme and objectives (recommended)

Under this option a person with sustainability skills and experience would be invited to join the City Futures Governance Group.

Advantages

Disadvantages

· Expedient achievement of objectives of original resolution i.e. stocktake, framework and action plans

· Avoids duplication of processes and delays to decision-making

· Allows for optimum design of sustainability approach in light of developments since resolution May 2020

· Increased resource for spending on other areas of sustainability

· Relationships already established with potential board members so may still be able to leverage these connections in future

· Potential damage to relationships with proposed board members and community who were in support

· Risk of less profile to sustainability

· Risk of less diverse perspectives and input

· Potential lack of a holistic view around sustainability and more fragmentation around the four well-beings rather than a joined-up approach

104. Option 2: Continue with establishment of independent sustainability advisory board, supplemented by external sustainability consultants

Advantages

Disadvantages

· External advisors provide independent information and expertise. High calibre experts have already accepted roles.

· Independent board concept supported by (narrow) majority of submissions in relation to revised Annual Plan

· Builds on momentum already established and previous Council majority agreement

· Increased profile of sustainability at a Council and city level

· No increase in cost beyond funding already proposed

· High risk of duplication of processes (for example City Futures project) and added layer of complexity for decision-making

· Lack of local involvement / input and risk of distrust from community in relation to multiple experts from outside Tauranga

· Role of independent board not clearly defined from the outset

· Cost per meeting (especially in light of likely Council rates rises across the city) could be utilised elsewhere, such as on implementation, further consultancy work, or increased organisational capacity

105. Under both option 1 and 2 decisions around future staff resource and structuring would be made following consideration by the Executive of the recommendations of the sustainability stocktake, sustainability framework and associated action plans. Until then, the $400,000 budget is proposed to remain in the draft LTP.

106. Option 1 is recommended and is reflected in recommended resolutions (j) and (k).

Legal Implications

107. Legislative issues are addressed in the Background section of this report and, more fully, in the Background section of the attached 14 December report (Attachment 1).

Significance

108. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

109. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision, or matter

110. In accordance with the considerations above, criteria and thresholds in the policy, the matter considered by this report, the 2021-31 Long-Term Plan, is considered of high significance. This is because it affects all residents, ratepayers and businesses in, and visitors to, the city, and because it involves council’s resource allocation decisions and rating decisions for the next three years.

111. However, the decisions to be made in response to this report are individually considered of low significance as they are interim steps in the process of developing the LTP.

ENGAGEMENT

112. Taking into consideration the above assessment, that the decisions recommended in this report are of low significance, officers are of the opinion that no further engagement is required prior to Council making a decision.

113. The LTP consultation document is scheduled to be adopted in early May 2021. After that adoption it will be consulted on with the community using the special consultative procedure outlined in section 93A of the Local Government Act 2002.

Click here to view the TCC Significance and Engagement Policy

Next Steps

114. Following this meeting and embedded workshop, reports will be prepared for the 15 March 2021 council meeting. These reports will outline and seek formal decisions on matters including:

· the outcomes sought through the 2021-31 Long-Term Plan, and the mix of projects and services to be delivered to meet those desired outcomes

· the costs of those projects and services and the preferred way in which those costs will be funded

· the impact of those projects and services on council’s financial management and preferred methods to manage council’s balance sheet.

115. Following direction on 15 March 2021, a full suite of documents supporting the draft LTP consultation document will be prepared for consideration by council on 29 March. These documents and other supporting information will then be subject to audit.

116. The adoption of the LTP consultation document is scheduled for 3 May 2021, followed by a period of public consultation from 7 May to 7 June. Hearings and deliberations will occur in June ahead of the adoption of the final LTP in the week commencing 26 July 2021.

117. Further information about the LTP process can be found on Council’s website at https://www.tauranga.govt.nz/council/council-documents/long-term-plans/long-term-plan-2021-31.

Attachments

1. Copy of Council 2020-12-14 Report - Long-Term Plan 2021-31 Update and working draft - A12278511 ⇩

2. Updated LTP Scenarios Approach to reflect Scenario C+ - 8 March 2021 - A12280006 ⇩

3. Copy of Policy Committee 20-10-20 Report - LTP 2021 - 2031 Road resealing level of service issues and options paper - A12278528 ⇩

(a) the reversal of temporary cost savings made through the 2020/21 Annual Plan process. This is consistent with the council resolution, unanimously carried during the Annual Plan deliberations meeting of 16 July 2020, which stated:

8 March 2021

10.3 Long-Term Plan 2021/31 - Update and Working Draft

File Number: A12084870

Author: Jeremy Boase, Manager: Strategy and Corporate Planning

Kathryn Sharplin, Manager: Finance

Christine Jones, General Manager: Strategy & Growth

Authoriser: Paul Davidson, General Manager: Corporate Services

Purpose of the Report

1. This report provides an update on the process to develop the draft Long-Term Plan 2021-31 and includes details of the current working draft. It also seeks input from Council ahead of a refined draft being presented to Council in February 2021 for decision-making.

Recommendations

That the Council:

(a) Receive the report ‘Long-Term Plan 2021-31 – Update and Working Draft’.

(b) Request the Executive report back in February 2021 with an updated working draft Long-Term Plan for further detailed consideration.

Executive Summary

2. The process to develop the Long-Term Plan (“LTP”) 2021-31 has been underway for many months and draws on a number of critical workstreams that have been underway for, in some cases, years.

3. It has been previously reported to council that there is likely to be a significant fiscal shortfall between the needs of current and future communities and council’s ability to finance and fund the relevant expenditure. As part of the development of the LTP budgets have been prepared and collated which confirm this.

4. The Executive have considered the LTP by building a series of cumulative scenarios, starting with a ‘baseline’ scenario (identified as Scenario A in Attachment 1) which does not deliver on community needs in any meaningful way and steadily expanding the delivery of outcomes. From this a working draft has been prepared. This working draft forms the basis of this report’s consideration.

5. There are a number of aspects of the LTP that are still under detailed consideration. Feedback on these matters will be built into an updated working draft for consideration by Council in February 2021.

Background

Legislative background

6. The purpose of a Long-Term Plan is to:

(a) describe the activities of the local authority; and

(b) describe the community outcomes of the local authority’s district; and

(c) provide integrated decision-making and co-ordination of the resources of the local authority; and

(d) provide a long-term focus for the decisions and activities of the local authority; and

(e) provide a basis for accountability of the local authority to the community[8].

Previous reports

8. This report builds on a succession of other reports relating to both the process of developing an LTP and on individual components of the LTP.

9. Regarding the process of developing the LTP, these preceding reports include a report to Council on 11 August 2020 titled Long-Term Plan Workstreams which introduced (and received approval for) a number of workstreams under the following categories:

10. Using this framework, progress updates have been reported to the Policy Committee on 8 September 2020, 22 October 2020 and 1 December 2020.

11. On 22 September 2020 the Finance, Audit & Risk Committee considered a report titled Funding & Financing for the Long-Term Plan which recognised the key challenge for the LTP process as there being insufficient funding and financing capacity to meet the city’s infrastructure needs. In response to this challenge the report identified a series of workstreams to consider funding and financing issues.

12. In addition, on 17 November 2020 Council received a paper titled Long Term Plan 2021-2031 Update. This report provided an update on high-level financial issues emerging through the LTP development process, the scenario-based approach to considering the capital expenditure programme and broader budget, and the need to prepare a budget that meets prudent financial management requirements.

Financial management obligations

13. Section 101 of the Local Government Act 2002 sets out council’s financial management obligations. Of particular relevance to the development of this LTP are the following sub-clauses:

(1) A local authority must manage its revenues, expenses, assets, liabilities, investments, and general financial dealings prudently and in a manner that promotes the current and future interests of the community.

(2) A local authority must make adequate and effective provision in its long-term plan and in its annual plan (where applicable) to meet the expenditure needs of the local authority identified in that long-term plan and annual plan.

14. The following sub-sections expand on the two key themes within these clauses.

‘Effective provision’ for the ‘current and future interests of the community’

15. The requirement to promote, and to provide the expenditure to meet, the current and future interests of the community gives effect to the purpose of local government, part of which is to “promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.” [10]

16. Current and future interests of the community have been identified through:

· key strategic direction provided by national policy and significant sub-regional or city planning processes; and

· specific LTP workstreams progressed to address identified gaps and opportunities.

17. The LTP scenarios (described later in this report) incorporate (to varying degrees) the type of expenditure necessary to provide for the identified current and future interests of the community. Those strategic directives workstreams with significant financial implications include the:

(a) National Policy Statement on Urban Development 2020 which came into effect on 20 August 2020, replacing the National Policy Statement on Urban Development Capacity 2016. This requires sufficient infrastructure-ready housing and business land development capacity to meet expected needs.

(b) Urban Form and Transport Initiative (“UFTI”) Report, approved and endorsed for inclusion in the LTP process by Council on 1 July 2020. This is a programme business case setting out the integrated land use and transport programme and high-level delivery plan for the western Bay of Plenty sub-region over the next 30-70 years.

(c) Western Bay of Plenty Transport System Plan and the Transport System Operating Framework, approved for the purposes of the development of the LTP by Council on 28 October 2020. This framework is intended to guide the development and implementation of transport projects identified under the UFTI programme business case.

(d) Te Papa Spatial Plan and Implementation Plan, approved, with funding subject to the LTP process, by the Urban Form and Transport Development Committee on 13 October 2020. This provides a 30-year blueprint of the strategic direction for growth in the Te Papa peninsula, forming the basis for the co-ordination of decision making across multiple agencies in a growth context.

(e) Community Facilities Investment Plan, adopted as the basis for consideration of such facilities in the LTP by the Urban Form and Transport Development Committee on 24 November 2020. This builds on existing strategies and recent needs assessments to provide investment priorities across the library, community centre, indoor court, aquatic centre, and sports field networks.

(f) Infrastructure Resilience Projects report, approved for use in the development of the LTP by the Urban Form and Transport Development Committee on 24 November 2020. This report follows a three-year process of identifying natural hazard risks and asset vulnerabilities and identifies the priority projects needed to improve the resilience of city-wide infrastructure.

(g) Eastern Corridor Wastewater Study, endorsed in principle with delivery subject to LTP funding by the Urban Form and Transport Development Committee on 9 June 2020. This programme, supporting a strategy developed in 2018/19, provides for the network improvements needed to service existing areas of the corridor as well as the Wairakei and Te Tumu growth areas.

(h) Western Corridor Wastewater Study, endorsed in principle with delivery subject to LTP funding by Council on 5 May 2020. This strategy considers the requirements to be able to service not only short-term developments in the corridor but also longer-term areas identified for future growth.

(i) Urban Communities Programme – Spatial Planning and Neighbourhood Planning, both approved by the Urban Form and Transport Development Committee on 24 November 2020 with expenditure to be considered through the LTP process. These projects provide for high-level and then more detailed planning for growth in existing areas of the city.

(j) Community Grant Fund, approved in principle for inclusion in the LTP consultation document by the Policy Committee on 20 October 2020 (noting that a further report on the details of this proposal was also requested). This provides for a bulk fund for community grants with devolved decision-making subject to a Council-approved framework.

(k) proposed changes to the road resealing level of service, approved for inclusion in the LTP prioritisation process by the Policy Committee on 20 October 2020. This decision provides for like-for-like road resealing rather than the current level of service which provides for resurfacing which is fit-for-purpose in an asset management and engineering sense.

18. In addition, after a period of community consultation the Policy Committee adopted the following community outcomes and principles for the LTP on 8 September 2020.

Community outcomes

· We value and protect our environment - Tauranga is a city that values our natural environment and outdoor lifestyle, and actively works to protect and enhance it.

· We have a well-planned city - Tauranga is a city that is well planned with a variety of successful and thriving compact centres and resilient infrastructure.

· We can move around our city easily - Tauranga is a well-connected city, easy to move around in and with a range of sustainable transport choices.

· We support business and education - Tauranga is a city that attracts and supports a range of business and education opportunities, creating jobs and a skilled workforce.

Principles

· We deliver value for our communities through prudent financial management, ensuring we plan and provide affordable fit-for-purpose services.

· Sustainability and resilience underpin our decision making and service delivery, protecting the future of our city.

· We work in partnership with Tangata Whenua, our communities, sub-regional stakeholders and central government.

· We manage the balance between social, economic, cultural and environmental wellbeing of our communities.

· We listen to our communities and make transparent, evidence-based decisions.

Prudent financial management

19. As noted in paragraph 11 above, the key challenge for this LTP process is to provide the funding and financing capacity to meet the city’s infrastructure needs. Through the LTP process, work has been done on a number of fiscal scenarios in order to explore the challenge of prudent financial management in light of the needs identified above.

20. Importantly each of these scenarios reflects a balance between meeting the current and future needs of the community and prudent financial management. The outcomes that are achieved from each scenario are outlined at a high level together with the fiscal implications of each scenario.

21. Those scenarios, together with relevant assumptions, are detailed later in this report

Background to council’s financial position

22. The issue of insufficient funding and financing capacity to meet the city’s infrastructure needs has not occurred over the short-term. Rather the issue has been emerging, and has been highlighted, for many years in formal council reports, council briefings, and informal discussions with the mayor and councillors. Referring back ten years to the 2010/11 Annual Plan consultation document demonstrates the ongoing pressure that this Council has faced for many years:

“Growth demands continue to place significant pressure on the Council to find ways to fund our city’s needs. It has created a funding problem, as affordability restricts the Council from increasing rates sufficient to meet the full costs of providing the infrastructure required. Long-term debt, used to help minimise the impact on today’s ratepayers, will soon reach its prudent maximum level.”

23. In March 2020, as part of the development of the first, pre-Covid, 2020/21 Annual Plan, the Policy Committee considered a report[11] on budget options for that year (“the March report”). That report included a significant section headed ‘How we got here’ which identified four noteworthy factors. These factors are summarised and partially re-produced below. Full copies of the March report can be found on council’s website.

Systemic issues

24. The March report referenced reports from Infrastructure New Zealand and the Productivity Commission regarding systemic issues with local government funding models and highlighting the particular pressures for councils in high population growth areas. That report also noted that the government has recognised these pressures and responded with initiatives including the Housing Infrastructure Fund and what is now the Infrastructure Funding and Financing Act 2020.

Cumulative revenue deficits

25. The March report highlighted the impact of approving in an LTP higher rates increases in years 2 and 3 of an LTP cycle but then, through the subsequent Annual Plan processes, reducing the actual adopted rate increase.

26. An example was prepared for the March report showing the cumulative impact of lower-than-planned rates increases in 2019/20 (year 2 of the 2018-28 LTP) and proposed (at that stage) for 2020/21 (year 3). The eventual, Covid-responsive, rate rise was marginally lower than the 5.1% then assumed for 2020/21 so the actual cumulative revenue deficit compared to the 2018-28 LTP will be marginally higher than the $21 million shown in the graphs below (replicated from the March report).

27. The cumulative effect of these revenue deficits is that council’s base revenue for the 2021-31 LTP is significantly lower than it might have been if the 2018-28 LTP revenue expectations were implemented.

Debt funding operating expenditure

28. The March report noted that, in general, operating expenditure is funded from operating revenue. This is consistent with the legislative principle that “that each year’s projected operating revenues are set at a level sufficient to meet that year’s projected operating expenses”[12].

29. However, exceptions to this principle are permitted and in recent years council has resolved to finance a number of significant operating projects through rate-funded loans. This has the effect of spreading the rating burden of these projects across a number of years. Compared to rate-funding in the year costs are incurred, this has the effect of increasing debt and reducing revenue. In terms of council’s debt-to-revenue ration (and therefore future capacity to raise debt) the increase in debt and reduction in revenue are both negative pressures.

30. In addition, the pressure to lower rates has resulted in some activities with negative cash balances being debt funded due to inadequate cash funding (for example in the marine activity). This has further increased debt pressure and lowered revenue.

31. Higher than forecast drawdowns on council’s risk reserve have also resulted in higher debt balances. This has resulted in a risk reserve with a negative balance.

Tauranga is not unique

32. The March report noted that other councils faced similar issues and that a group of high-growth councils (including Tauranga) were actively engaging with central government agencies to build a common understanding of the financial challenges of managing growth.

developing the Long-Term Plan

33. The development of an LTP and the associated ten-year operational and capital budgets is a significant task. It involves considerable input from staff across the organisation, a large number of often co-dependent workstreams (including those highlighted earlier in this report), and significant review, quality assurance, and decision-making input from the Executive and from the mayor and councillors.

Progress

34. It should be noted that with regards to the planning for this LTP, the timing is behind normal expectations. This is because of the impacts of the Covid-19 pandemic and specifically the need to prepare and consult on a second 2020/21 Annual Plan to amend the initial approved draft to reflect the Covid impact on the council’s and the community’s projected financial positions. This required significant resourcing by staff who would otherwise have been advancing preparations for the LTP.

35. In addition, council introduced a new financial system during the year, implementation of which was also delayed due to Covid. This put further pressure on the resources needed to develop the LTP both within the finance team and in the wider organisation.

36. This means that this report and the stage of the LTP development process that it represents is several weeks behind where it would be under more normal circumstances. As such, this report is a precursor to a more detailed consideration of the contents of the draft LTP to be undertaken in February 2021.

37. In the meantime, feedback is sought on the general direction incorporated in the working draft information presented in and alongside this report.

Scenario-based approach

38. Recognising the fundamental challenge as being the lack of funding and financing capacity available to meet the city’s infrastructure needs, the Executive have endorsed and led a scenario-based approach to the LTP development process.

39. Initially two scenarios were identified but as the LTP development process continued that was further split so that four broad principles-based scenarios were contemplated. These scenarios are briefly described below. Each scenario builds on the base of previous ones. Further detail on the scenarios is included in Attachment 1 to this report, including a description of the outcomes each scenario delivers to the community.

Scenario A – Current base, committed, and completion of in-progress projects

40. This scenario was a baseline created as a way to understand the ‘starting point’ for capital expenditure, operating expenditure, and revenue requirements. It is not a viable delivery option as it does not deliver on community needs in any meaningful way. Regarding capital expenditure, it only includes renewals, current contractual commitments, physical works in existing zoned growth areas, and physical works to progress construction which would be sensible to complete.

41. Regarding operating expenditure, Scenario A only includes additional spending on new projects or resourcing that is already committed (including kerbside waste collection, for instance) or which is considered critical or regulatory in nature.

Scenario B – Scenario A plus critical / highest priority projects

42. Scenario B was built on Scenario A by including projects and additional resourcing critical to the continued delivery of services and the development of core infrastructure to the city. It includes expenditure on the highest priority areas in the Te Papa peninsula (being the city centre and Gate Pa/Pukehinahina areas) and the highest priority projects from the Transport System Plan, as well as necessary capacity upgrades across the horizontal infrastructure activities and active reserves and some investment in identified resilience projects.

43. It should be noted that both Scenario A and Scenario B assume that there will be no development in either Tauriko West or Te Tumu in the ten years of the LTP. Both scenarios also assume that 50% of the currently planned capacity in those two greenfield areas over the ten-year period will be absorbed in infill and intensification.

Scenario C – Scenario B plus partial implementation of approved strategic direction

44. Scenario C was again built on the previous scenarios and includes some stepped investment to progress towards the achievement of council’s approved strategic direction. It assumes that development will occur in Tauriko West by 2026 and therefore includes additional capital expenditure to facilitate this. This scenario also provides for further work under the Transport System Plan though debt limitations mean that agreed timeframes may not be met if this scenario were to be considered financially viable.

45. This scenario also provides for necessary capacity upgrades across all asset types, the highest priority projects under the Community Facilities Investment Plan, and further works to facilitate intensification in the Te Papa corridor, still focusing on the city centre and Gate Pa areas.

Scenario D – Scenario C plus substantial implementation of approved strategic direction

46. Scenario D built further on previous scenarios and enables substantive delivery on key approved strategic directions. It assumes that development will occur in both Tauriko West and Te Tumu from 2026. It therefore includes additional capital expenditure in the eastern corridor (including the Papamoa East Interchange, for instance) and in city-wide assets to facilitate this. Scenario D also includes additional expenditure on resilience, community facilities, digital delivery, parks and reserve development and for resourcing and projects across a number of internal and external delivery activities.

Broad outcomes under the four scenarios

47. The impact on city outcomes across the four scenarios is broadly consistent with the diagram below. Outcomes under the Scenario A ‘base line’ are negative. As investment levels increase, outcomes improve but in some important areas, notably traffic congestion and housing affordability, even the investment proposed under Scenario D is unlikely to make significant improvements. The outcomes shown in this diagram are high level and illustrative of the potential scenarios. While it is recognised that there are many other factors at play, this diagram recognises the critical role council plays in these outcomes.

Operating costs and rates movements depend on infrastructure decisions

48. The scenarios for capital expenditure identified above directly impact operating costs and the associated rates and user fee requirements. Higher capital expenditure drives higher ongoing debt servicing and depreciation costs as well as the costs of operating and maintaining the additional infrastructure and facilities.

49. Tauranga already has relatively high debt levels as a result of providing the infrastructure required to cater for growth over many years. Council can only continue to meet the ongoing infrastructure financing requirements by raising revenue to retire existing debt or by finding other parties able to finance this infrastructure. Both approaches are under consideration through this LTP.

Future years’ costs result from past decisions

50. Regardless of the capital investment scenario, the rates and revenue requirements for the 2021/22 year will need to increase substantially from the current year. There are a number of reasons for this, including:

That the Council notes that where expenditure budget reductions are temporary, including putting a hold on the remuneration review and restricting new recruitment or where proposed savings are temporary in the list above, there will be a consequential increase in expenditure budgets in future years (likely in the range of 2-3% rates rise).

(b) depreciation on investments undertaken to date including new growth areas, the Waiāri water supply project, roading and three waters upgrades, and digital investment. In total there is an $11 million funded increase in depreciation, resulting in a general rates impact of over 5%. Further work is being undertaken to confirm the timing of likely new assets and how this will affect the final figure.

(c) significant increases in project-based costs in the city and infrastructure planning activity. Some costs relate to statutorily required projects such as preparations for and the delivery of the City Plan review over the next few years. Others are as a direct result of council decision-making, such as the spatial and neighbourhood planning projects approved by the Urban Form and Transport Development Committee on 24 November 2020

(d) all scenarios also assume a year one new rate to fund the new full kerbside service replacing the glass only service. This increases the kerbside collection targeted rate revenue by $10.4m (which is an additional 6.3% of total rates revenue, excluding water-by-meter charges).

Working draft developed

51. The Executive has reviewed and refined the four scenarios and from that has developed a working draft of the LTP capital and operational expenditure programmes.

52. The working draft assumes development in Tauriko West from 2026 but no development in Te Tumu during the ten years of the LTP.

53. The working draft capital expenditure budget (including separate identification of projects and programmes excluded from the working draft) is included as Attachment 2 to this report. In summary, the working draft capital expenditure budget includes:

	Yrs 1-3 ($m)	Yrs 4-10 ($m)	Total ($m)
Te Papa Intensification	99.5	364.5	464.0
Western Corridor – TBE & Tauriko West (two programmes)	116.2	65.8	182.0
Te Maunga WW Treatment Plant	88.4	92.9	181.3
Eastern Corridor - Trunk Wastewater	17.8	142.5	160.3
Waiari Water Treatment Plant Capital	70.2	74.5	144.7
Local Roads Renewals	42.2	82.4	124.6
WW Reticulation Upgrades & Renewals	26.7	97.8	124.5
Digital Services & IT Software (two programmes)	32.9	77.4	110.3
Infrastructure Resilience Capital Works	21.7	78.9	100.6
Transport Multi-Modal	11.4	84.8	96.2
Local Roads Upgrades and Improvements	47.4	47.9	95.3
Accessible Streets	41.2	47.1	88.3
Civic Rebuild Capital Programme	33.6	40.0	73.6
Bay Venues New Capital including Memorial Pool	11.4	55.7	67.1
All other programmes	309.8	586.5	896.3
Total in working draft	970.4	1938.7	2909.0

54. Note that current modelling shows that there will need to be some adjustment to the timing of some projects from years four to six into the later years to enable the council to remain within prudent financial limits throughout the LTP period. This timing review has not yet been undertaken.

55. In regard to operational costs, in addition to the matters identified in paragraph 50 above, the working draft includes the following significant aspects:

(a) depreciation and debt servicing on the capital programme

(b) increased staff requirements to meet workload requirements across the organisation, to provide for the planning requirements for the city, and to provide for infrastructure by improving capital programme delivery, risk management and quality assurance.

(c) increases in operational budgets associated with the capital programme. An increased need to coordinate planning and engagement for new infrastructure has resulted in costs that are operational in nature and therefore increase the potential rates requirement. Further consideration will be needed on the appropriate funding of this expenditure in the context of the revenue and financing policy as to whether it is rates or loan funded.

(d) increased costs of digital services to the business resulting from continued upgrades to old platforms, security, costs of licencing and software on the cloud, along with depreciation of new investments over relatively short timeframes.

56. The various components of increased rates identified above and in paragraph 50 are allocated across general rates and targeted rates including volumetric charging for water, the kerbside collection levy, and the wastewater uniform annual charge. Further work will be required to confirm the appropriate funding of costs as part of this LTP. It should be noted that a significant increase in the water by meter volumetric charge is needed to fully recover the costs of this activity.

57. Further detail on the operational costs and revenue (including rates) and debt over the long term is being prepared and will be presented along with further detail on the scenarios and their financial implications prior to the meeting.

58. The working draft is considered, from a balance sheet management perspective, to be broadly within the parameters of financial prudence subject to some further work on spreading the timing of capital costs and introducing a debt retirement levy. However, the year-on-year revenue increases associated with this working draft are substantial.

59. A debt retirement levy to help enable the working draft capital programme to be delivered (and assist with the management of unfunded liabilities as referred to below in paragraph 62) within prudent financial management constraints will be provided as part of the additional scenario-based information to be circulated prior to the meeting.

Issues to be further addressed

60. There are a number of issues that will need to be formally addressed prior to the adoption of an LTP consultation document for consideration by the community. These issues will be addressed in early 2021 but are included in this report for initial discussions as appropriate.

Risk reserve

61. As has been previously communicated[13] council’s risk reserve is significantly in deficit. Council will need to consider the measures that need to be taken to reverse the deficit and then will need to consider whether to provide funding to re-establish a genuine reserve.

62. Collecting rates to fund the unfunded liability of the in-deficit risk reserve would effectively reduce council’s total debt levels in the same way as more general debt retirement proposed below. The risk reserve deficit at June 2020 was $28m and this would increase if costs related to the Harington Street transport hub project, currently sitting in the parking account, are transferred in.

Development contributions shortfall

63. The Finance, Audit and Risk Committee considered a report on the cumulative shortfall of development contribution payments on 10 December 2020. Decisions made on that report will be reflected in the updated working draft to be considered by Council in early 2021.

Rating models

64. One of the LTP workstreams referred to earlier in this report is a review of the allocation of rates to different ratepayer groups. Through the 2018-28 LTP, council introduced a commercial differential and steadily moved that differential from 1 : 1 to 1.2 : 1 over three years. Also through the 2018-28 LTP a targeted rate for resilience expenditure was introduced.

65. The review of rating models for the 2021-31 LTP will include consideration of the commercial differential rate and the potential to introduce further targeted rates to help fund certain activities or programmes of work.

Debt retirement levy

66. A debt retirement levy was introduced in the 2009-19 LTP as a balance sheet management tool. Funding has also been applied to the risk reserve and this is currently $1 million per annum. Given council’s balance sheet capacity issues, consideration will need to be given to increasing the debt retirement levy and this will be reflected where applicable in the scenarios.

Activities in deficit

67. Under council’s Revenue and Financing Policy, a number of council activities or parts of those activities are intended to be self-funded. This means that non-rates revenues, through user fees and charges, grants or subsidies, are intended to be sufficient to cover all operating costs. However, some of these activities are currently in deficit and under existing settings are unlikely to return to a self-funded state. Activities in a deficit position include parking, the historic village, marine facilities, the marine precinct, and property management.

68. Note that rates funding was introduced to the historic village and marine facilities activities during the current LTP period to address current operational deficits. However, this funding is not sufficient to erase earlier deficits in those activities.

69. In all cases, consideration will need to be given to the deficits in these activities and action taken which may include some or all of: increasing user fees; introducing rates funding; or reducing levels of service.

Civic centre

70. Within the working draft are budgets related to the civic administration building (including demolition costs), civic plaza, and the central library. While the central library budget has been considered through the Community Facilities Investment Plan work, there is still work that needs to be undertaken on the quantum and timing of other civic centre projects. These will be updated for further consideration by council in February 2021.

Interim staff accommodation

71. There is currently work progressing on short- and medium-term solutions for accommodation for council’s city centre-based staff. This issue will be further reported to council in February 2021.

Elder housing

72. The working draft assumes a revenue flow in 2021/22 from the divestment of council’s elder housing portfolio (as consulted on through the last LTP process). If such a divestment is delayed, or if the sale value is different to expectations, there will be further financial impacts, including additional debt and the need to commit to additional maintenance expenditure if the assets continue in council ownership. Matters relating to the divestment of the elder housing portfolio will continue to be reported to Council and the likely financial impacts reflected in updated budgets prior to adoption of the LTP.

Approach to resilience

73. In November 2020, the Urban Form and Transport Delivery Committee approved the report from the Infrastructure Resilience Project as the basis for the development of the draft LTP. That report identified approximately $900 million of projects over a 30-year period. The extent to which council decides to implement these projects through this and subsequent LTPs depends upon council’s risk appetite.

74. The working draft currently includes $10 million per annum to implement projects identified through the infrastructure resilience project.

Assumption regarding waters reform

75. The government has signalled its intention to reform councils’ water supply, wastewater and potentially stormwater activities. While there is no firm proposal yet available for consideration, the likelihood of reform during the period of the 2021-31 LTP is high.

76. At this stage the working draft has been prepared under the assumption that council retains its waters’ activities. However, alternative working draft scenarios based on either two (water supply and wastewater) or all three activities being divested are being prepared. The impact of divestment, assuming both assets and debt are divested, will be to improve council’s balance sheet capacity enabling it to undertake other investments without the need for ongoing debt retirement levies.

Assumption regarding Infrastructure Funding and Financing (“IFF”) levies.

77. In August 2020 new legislation was introduced allowing the introduction of levies to fund new infrastructure investment. It is acknowledged that this still requires funding similar to a rating model however allows the use of off-balance sheet financing potentially reducing the need for debt retirement rates for balance sheet management. Staff continue to work with Crown Infrastructure Partners to investigate opportunities where this funding and financing may be applicable. As with water reform, scenarios will be prepared showing the implications of probable IFF levies where possible.

Sub-regional funding and financing.

78. On 1 July 2020 SmartGrowth Leadership Group approved a piece of work to be undertaken looking at possible sub-regional funding and financing options that may be available to support sub-regional outcomes. This work is planned to be completed in the first quarter of 2021 and any opportunities will be factored into the LTP. Given the timing of this work it may need to be shown as an additional scenario for the February meeting if sufficient information is available at that time. In the event that this work is not available for February it will be incorporated into future drafts or possibly the final LTP.

Delivery capacity

79. The working draft includes capital expenditure in the first three years of more than $300 million per annum. This is a level that has never before been achieved in the city. Organisationally, the response to this increased programme has seen significant changes in the current and future resourcing of capital project planning and delivery across the main infrastructure activities.

80. Externally, the capital projects delivery market is likely to be under pressure in the early years of the LTP. This is because of continued growth pressures in other North Island centres as well as significant additional infrastructure investment by central government on ‘shovel-ready’ and other Covid-recovery projects.

81. The preparation of a capital programme that meets the infrastructure needs of the community, is fiscally prudent, and which is also deliverable continues to be a focus.

Transport System Plan and Transport System Operating Framework

82. When adopted by Council and its funding partners[14], council’s commitment to the Transport System Plan in the first 10 years was in excess of $600 million. Despite this commitment to its partners, the working draft of the LTP does not include all of this planned work. The working draft includes the planned policy work, low cost low risk projects, business case development and only the top priority major physical works projects. There are $193 million of TSP projects in the first ten years of the LTP that are currently not included in the working draft.

Te Papa spatial plan

83. The Te Papa spatial plan was approved by the Urban Form and Transport Delivery Committee on 13 October 2020. At that time the estimated ten-year capital costs were shown as $536.3 million. While the investment in the working draft is substantial, it does not cover all of this amount. In preparing the working draft, the focus was on development activities in areas where other private and public sector funding was most likely to be realised. This means a focus on Cameron Road, the city centre and the Gate Pa/Pukehinahina area.

External funding assumptions

84. Within the working draft there are a number of projects which are only proposed to proceed if appropriate external funding is received. As is traditional, these items are included in the budget process but will be subject to ongoing review regarding such funding sources. Examples of projects include:

· the Papamoa East Interchange (planning in working draft but construction is not)

· Memorial Park aquatics upgrade (in working draft) and recreation hub (not in working draft)

· Kopurererua Valley development

· Tauranga Wellbeing Centre[15]

· Growing Communities Smart Hub (Sustainability Centre)⁸

85. Council may wish to consider a forward strategy to target more external funding for community amenity facilities and to consider the merits of ‘stretch targets’ to enable these projects to proceed.

Legal Implications / Risks

86. Legislative issues are considered in the Background section to this report.

Consultation / Engagement

87. The LTP consultation document is scheduled to be adopted in March 2021. After that adoption it will be consulted on with the community using the special consultative procedure outlined in section 93A of the Local Government Act 2002.

88. There is no intention to consult formally on the contents of this update report. However, staff have commenced pre-engagement with a number of key stakeholders on the general issues to be addressed through the LTP process.

89. In the event that the Minister of Local Government determines Commissioners are to be appointed, engagement and consultation will still be prioritised to ensure that:

· community views are gathered, considered and responded to

· these views are accessible to decision-makers

· the processes for decision-making remain transparent.

Significance

90. The matter considered by this report, the Long-Term Plan 2021-31, is considered of high significance in terms of council’s Significance and Engagement Policy. This is because it affects all residents, ratepayers and businesses in, and visitors to, the city, and because it involves council’s resource allocation decisions and rating decisions for the next three years.

91. However, the decisions to be made in response to this report are considered of low significance as they are just one interim step in the process of developing the LTP.

Click here to view the TCC Significance and Engagement Policy

Next Steps

92. A package of supporting information will be made available to councillors before Christmas. This package will include:

· draft activity area plans (detailing each activity and the important issues it is addressing)

· draft key performance indicators for each group of activities

· financial information for each activity

· detailed operational and capital expenditure schedules

93. In addition, further refinement of the working draft presented with this report will be undertaken, incorporating any feedback received during this meeting, and will be prepared for presentation to a Council meeting in February 2021.

Attachments

1. LTP Scenarios Approach (page 1 of A12065056) - A12100196

2. Working draft capital programme as at 9 Dec 2020 - A12101544

8 March 2021

8.5 LTP 2021 - 2031 Road resealing Level of Surface Issues and Options Paper

File Number: A11736812

Author: Russell Troup, Manager: Transport Network Operations

Authoriser: Nic Johansson, General Manager: Infrastructure

Purpose of the Report

1. This paper provides information about Council’s level of service for road resurfacing within Tauranga city. It includes a summary of the current level of service policy and its application; issues relating to the current approach; and, options for consideration in determining the appropriate level of service for the upcoming summer resurfacing season (2020/21) and the Long-Term Plan (LTP) 2021-2031.

Recommendations

That the Policy Committee:

(a) Receives the ‘Road Resurfacing Level of Service Issues and Options’ report;

(b) Retains the current level of service for road resurfacing, including the replacement of asphalt with chipseal on neighbourhood roads (road categories 4 and 5);

(c) Notes that the current level of service for road resurfacing aligns with NZTA’s funding criteria and optimises the NZTA available subsidy; and

(d) Notes that insufficient funding for road pavement and resurfacing over the years, and the Council directed hold on replacing asphalt with chipseal has resulted in a backlog that is impacting on the road network, and approves:

(i) 2020/2021 ‘fit for purpose’ resurfacing programme proceeding and

(ii) Funding to address historic backlog being included in the LTP 2021 – 2031 prioritisation process.

Executive Summary

2. Road resurfacing is required to contribute to the achievement of a safe transportation network. In residential areas, however, the road resurfacing level of service aligns more to amenity than transportation needs, with the quality of the road surface influencing how a local community perceives their neighbourhood. In general, asphalt roads are often perceived by communities as providing a higher level of amenity.

3. In new residential subdivisions, developers have primarily used asphalt to improve aesthetics and marketability. Asphalt surfaces also have the added advantage of providing a more durable surface that is less likely to suffer damage due to construction traffic stresses. Once subdivisions are complete, roads are vested in Council for continued management and maintenance. Changes by Council to the road surface when it is due to be renewed, can lead to some communities feeling aggrieved.

4. Council’s current level of service policy determines how road resurfacing treatment is applied across the road network. The policy is described as ‘fit for purpose’ with asphalt being used for moderate to high volume and/or stressed roads and chipseal being used for low volume neighbourhood roads.

5. Some community members have expressed their dissatisfaction with the current level of service for road resurfacing in residential areas. The key issue being that under the Council’s current level of service policy, many subdivision areas originally developed with asphalt road surfaces that are scheduled for resurfacing are to be resurfaced with chipseal. Some community members perceive this as a decrease in the level of service provided by Council, and a decrease in the overall amenity of their neighbourhood.

6. Although there may be aesthetic benefits for communities in resurfacing neighbourhood roads with asphalt, the cost implications for Council are substantial. Cost increase is primarily a result of New Zealand Transport Authority’s (NZTA) funding criteria that currently align with Council’s ‘fit for purpose’ level of service policy. Failure to comply with NZTA expectations has implications on the level of subsidy available for resurfacing purposes, dramatically increasing costs to the ratepayer beyond what is considered affordable (costing Council up to nine times more than chipseal).

7. In addition, insufficient funding in the past for pavement and resurfacing has resulted in a backlog of work that needs to be addressed, adding more pressure to available funds.

8. It is therefore recommended that Council retains the current level of service policy and commences road resurfacing over the 2020/21 summer resurfacing season, including starting to address the backlog of work.

Background

9. On 6 August 2019, Council considered two petitions from members of the community seeking to have their neighbourhood roads resealed with asphalt rather than the intended chipseal. As a result, Council agreed to defer replacing any asphalt surfaces with chipseal during the 2019-2020 summer resurfacing season.

10. Sites that provision chipseal over asphalt within the current 2020-2021 resurfacing programme remain on hold. Those sites are compromised and require resurfacing to prevent deterioration below an acceptable level of service that would require disproportionate maintenance cost to maintain in the interim.

11. Council also requested an issues and options paper regarding this level of service be brought to it for consideration during the Annual Plan 2020-2021 development process. This was subsequently deferred to the LTP 2021-2031 process and has resulted in the development of this issues and options paper.

road resurfacing

12. A road surface is the uppermost layer of a road pavement structure on which the traffic runs. The purpose of roading surfacing is to:

· Protect the valuable structure of the road under the surface, known as the road pavement, from water damage. If the road pavement gets wet, it will deteriorate rapidly.

· Minimise the rate of pavement wear and maintenance costs

· Provide a riding surface of suitable smoothness

· Minimise vehicle operating and maintenance costs

· Provide a dust-free surface

· Provide suitable properties for the local environment e.g. noise reduction and surface texture.

13. Council’s road pavement asset replacement cost is currently valued at $419 million. It is therefore important that we manage the asset in accordance with best practice.

Key characteristics of chipseal and asphalt

14. There are two main road resurfacing approaches used in Tauranga city:

· Chipseal – a layer of loose stone chips spread over bitumen binder and rolled into place

· Asphaltic concrete (known as AC or asphalt or hot mix) – pre-made bitumen and aggregate mixture.

15. Key physical characteristics of asphalt compared with chipseal resurfacing treatments is summarised in Table 1. Please note that the ‘flexibility’ characteristic is particularly relevant to this level of service discussion. In this context, flexibility relates to the strength of the underlying pavement and the amount of flex a pavement has under load (called deflection, measured in millimetres). Weak pavements with high deflection can cause cracking of the surface material.

16. Asphalt, like normal concrete, has no tensile strength so needs to be supported by a very strong base pavement with little, or no deflection. Often, our local and access roads do not have very strong pavements, so the extent of pavement strengthening work needed to support asphalt is considerably greater than chipseal. Sometimes a road pavement will need to be completely replaced (pavement rehabilitation). This has upward cost implications for the decision on resurfacing treatment.

17. The impact of climate change and the associated rise of groundwater levels is expected to accelerate pavement deterioration in affected areas. In those instances, the inherent flexibility of chipseal will provide greater resistance to deterioration.

18. In comparison, chipseal is more flexible and can be effectively applied to roads where the pavement has lost some strength and demonstrates moderate deflection. However, asphalt does provide a more durable, smooth surface producing less road noise.

Table 1: A comparison of chipseal and asphalt characteristics

Characteristic	Chipseal	Asphalt
Flexibility	High	Low
Durability – high traffic / stress	Poor	Good
Durability – medium traffic / stress	OK	Good
Durability – low traffic / stress	Good	Good
Appearance / smoothness	Textured (varies depending on size of chip)	Smooth
Tyre noise	2 – 4 dB more noise than hot mix. Noise difference is negligible at speeds up to 50 km/h	OK
Loose chips	Nuisance problem initially	None
Skid resistance – safety	Good	Good
Water spray	Medium	High

19. For most residential roads, a resurfacing renewal is required on average every 12 years for chipseal and 16 years for asphalt. This varies depending on traffic volumes, stresses and other environmental factors.

current level of service for road resurfacing

20. The current level of service policy adopted by Council can be described as “fit for purpose”. Table 2 outlines how the current approach is applied across the six categories of roads in Tauranga city. In summary, asphalt is used for high and moderate volume roads (categories 1-3) and chipseal for lower volume neighbourhood roads (categories 4 and 5).

Table 2: Current level of service for road resurfacing across road categories

Type of road	Category	Type of resurfacing
Commercial and industrial	1A	Asphalt
Tauranga city centre, Mount Mainstreet, and Greerton village	1B	Asphalt
Arterial roads – these are roads that carry significant volumes of traffic and link major state highways, urban and commercial areas.	2	Asphalt
Collector roads – these are roads that carry moderate volumes of traffic and provide a connection between residential or neighbourhood streets and the arterial network. Most collector roads in Tauranga have more than 10,000 vehicles using them per day (vpd).	3	Asphalt
Neighbourhood roads – with greater than 200 vehicles using them per day (vpd).	4	Chip seal – except where there is a cul-de-sac head or an intersection with high wear and tear, or another valid engineering reason.
Neighbourhood roads – with less than 200 vehicles using them per day (vpd).	5	Chip seal – except where there is a cul-de-sac head or an intersection with high wear and tear, or another valid engineering reason.

21. For the purpose of this report we are primarily concerned with Category 4 and 5 roads. These are the low volume ‘neighbourhood roads’ that service residential subdivisions and are the subject of some community dissatisfaction. Under Council’s current policy, when neighbourhood roads with asphalt are due for resurfacing, the treatment is chipseal rather than asphalt.

22. Figure 1 shows the breakdown of the road network by classification. ‘Access’ and ‘low volume’ roads, typically our neighbourhood roads, represent 54 percent of the total network length.

Figure 1: Network length by One Network Road Classification (ONRC)

Note: the number above each bar denotes the actual length of roads in that classification.

issues for consideration

23. Key issues for consideration for the road resurfacing level of service discussion include:

· Community expectations to retain the amenity value of asphalt road surfaces in new subdivisions, as well as perceived equity issues between the level of service provided in old and new subdivision areas.

· Continued growth of new residential subdivisions, with high amenity asphalt road surfaces, that are vested in Council for further maintenance continues to add to the current situation.

· Insufficient level of investment to address the backlog of road resurfacing needed, adding to financial constraints when considering increasing the level of service.

· NZTA expectations and funding criteria currently align with Council’s current ‘fit for purpose’ level of service policy. Failure to comply with NZTA expectations has significant implications on the level of subsidy available for resurfacing purposes.

Community expectations road resurfacing

24. In residential areas, the road resurfacing level of service relates more to amenity than transportation needs, i.e. the quality of road surface in a neighbourhood may impact how the local community perceives their neighbourhood. Asphalt roads are generally perceived by the community as providing a higher level of amenity, including less traffic noise.

25. Amenity and perceptions of inequity in relation to the level of service provided are the two key community issues to consider in this level of service review. Table 3 describes these two issues in more detail.

Table 3: Summary of community issues relating to road resurfacing

Community issue		Description
Amenity	Noise	· Chipsealed roads with high average speeds (greater than 60km/hr) result in higher noise levels that may be a nuisance for residents. As speed reduces, the noise difference between asphalt and chipseal diminishes.
Amenity	Aesthetics	· Asphalt is more often perceived as a more aesthetically pleasing surface treatment than chipseal.
Perception of inequity	Residents	· Residents living in areas with asphalt surfaces may expect to retain this higher level of service. · Residents who have had an asphalt road resealed with chipseal may be particularly aggrieved if the policy changed to ‘like for like’ because they would now be subject to chip renewal going forward.
Perception of inequity	New subdivision areas vs. older areas	· New subdivisions are being developed with asphalt road surfaces to maximise appeal for potential buyers. Some neighborhood (local and access) roads have an asphalt surface while others have chipseal depending on the resurfacing policy at the time. A change to the policy is likely to disadvantage older areas of the city which historically have been chip sealed as well as those chipsealed under a ‘fit for purpose’ policy in the past.

Growth issues – new subdivisions with high amenity asphalt

26. Tauranga city’s growth and the continued creation of new subdivisions with high amenity asphalt roading continues to add to this community issue.

27. Tauranga city has experienced considerable and increasing levels of growth in recent decades, including many new residential subdivisions. Developers have primarily used asphalt in new residential subdivisions to improve aesthetics and marketability. They also use asphalt to provide a more durable surface that is less likely to suffer damage due to construction traffic stresses.

28. Once subdivisions are complete, roads are vested in Council for continued management and maintenance. Figure 2 shows the growing length and number of roads vested in Council over the last ten years. This has led to a relatively high proportion of asphalt roads in Tauranga City. This was noted by NZTA in their investment audit in 2018 as an issue that needs to be addressed because it indicates deviance from best practice, ‘fit for purpose’ asset management that is economically optimal, particularly for neighbourhood roads^{^[16]}.

29. As growth continues, the proportion of asphalt roads will also increase with new subdivisions and subsequently new roads being vested in Council to maintain. This has significant cost implications. For example, the proportion of asphalt to chipseal roads increased from 50 percent in 2017 to 55 percent in 2019. Under a ‘like for like’ scenario, the costs to renew with asphalt will be considerable higher (five to nine times greater for asphalt), than the ‘fit for purpose’ level of service currently held by Council.

Figure 2: The length and number of new roads vested in Council over a ten-year period

Level of investment is currently insufficient resulting in a backlog of roads in need of resurfacing

30. Currently, there is an annual road renewals budget of around $5 million for pavement and surfacing. Available modelling and data have confirmed that this level of investment is insufficient to maintain the road surface at a level that prevents pavement deterioration. The road pavement is a high-value asset ($527.4 million), which costs significantly more to replace (or rehabilitate) than resurfacing.

31. This historic underinvestment in resurfacing has resulted in a current backlog of approximately 100km of roads in need of resurfacing (refer Attachment A, Figure A).

32. Based on the expected life of a road surface, we should be resurfacing about 6 to 8 percent of our network each year^{^[17]}. In recent years, we have only resurfaced between 1.6 and 4.4 percent per annum (refer Table 4).

Table 4: Proportion of network resurfaced annually

33. This substantial backlog of renewal sites across the road network typically have compromised waterproofness making them susceptible to damage (e.g. potholes and depressions). Those sites disproportionately contribute to the gradual decline in overall network condition that we are seeing through the data we are collecting and physical asset inspections (Attachment A, Figure B).

34. If this under-investment is not addressed, potholes will become increasingly prevalent as the pavement fails because of water ingress (refer Attachment A, Figure C). Further, the cost to repair will increase significantly with the need to renew the costly pavement ($80-150/m2), not just the road surface.

35. Although the aim is to address the historic backlog through the 2021-31 Long Term Plan (by optimising investment and increasing funds from $5 million to $7 million), there are also funding implications for the resurfacing level of service and an already stretched budget.

NZTA subsidy implications on costs and funding

36. In broad terms asphalt surfacing is around five times more expensive than chipseal. When NZTA subsidy eligibility is considered, asphalt is more than nine times more expensive than chipseal to install. Taking into account the fact that asphalt lasts longer than chipseal, the per annum cost, and net present value (NPV) is still considerably more expensive (refer Attachment B).

37. NZTA offer a 51 percent Funding Assistant Rate (FAR) subsidy for all resurfacing to achieve a ‘fit for purpose’ level of service. Under our current ‘fit for purpose’ policy, our resurfacing programme is endorsed by NZTA and optimally subsidised. NZTA have confirmed that they would not endorse a ‘like for like’ level of service (refer Attachment C for a letter confirming NZTA’s position).

38. If the Policy Committee were to adopt a ‘like for like’ or ‘all asphalt’ policy, NZTA are only willing to fund asphalt up to a ‘fit for purpose’ basis beyond road category three. This means that for category four and five roads the cost difference between a chipseal and asphalt resurface would be borne fully by Council. This is expected to be approximately $24 per square metre replacement cost and $1.37 per square metre annual cost (refer Table 5).

Table 5: Average cost and expected life by surface type

Surface Type	Average Cost	Average expected life	Average gross cost per m2 per year
Asphalt	$30/m2	16	$1.87
Chipseal	$6/m2	12	$0.50

39. Table 6 illustrates the stark cost implications observed for Category 4 and 5 roads (low volume / access / neighbourhood roads) where NZTA only subsidise to the ‘fit for purpose’ level (51% of the chipseal cost rather than 51% of asphalt cost on Category 4 & 5 roads). This means that if asphalt is used, the NZTA subsidy remains at the chipseal level ($3.06), leaving a shortfall of approximately $24/m2 that needs to be funded by the ratepayer as NZTA’s ‘fit for purpose’ criteria are not met. For a nominal 500 meter road, the net cost to the ratepayer of resurfacing a Category 4 or 5 road would be $11,760 for chipseal compared to $107,760 for asphalt.

Table 6: A comparison of resurfacing with chipseal and asphalt - NZTA subsidy implications and costs to the ratepayer

	Chipseal (per square metre)	Asphalt (per square metre)
NZTA subsidised (meets their “fit for purpose” criteria)
Gross cost	6	30
Subsidy @ 51%	3.06	15.30
Net cost (to ratepayer) / m2	2.94	14.70
ELIGIBLE FOR FULL SUBSIDY - Net cost (to ratepayer) for nominal 500m long road, 8m wide (4000m2). FULL SUBSIDY	$11,760	$58,800
Per annum net cost (to ratepayer) per year of seal life for nominal 500m long road, 8m wide.	$980	$3,675

Road category 4 & 5 (local and access roads)	Fit for purpose = chipseal (i.e. Eligible for full subsidy)	Like for like = Asphalt (i.e. Not eligible for full subsidy)
Gross cost	6	30
Subsidy	3.06	3.06*
Net cost (to ratepayer) / m2	2.94	26.94
Differential cost per square metre between policy options. This cost is fully borne by TCC.		$24
Net cost (to ratepayer) for nominal 500m long road, 8m wide (4000m2)	$11,760	$107,760
Per annum net cost (to ratepayer) per year of seal life for nominal 500m long road, 8m wide.	$980	$6,735

*subsidy amount up to the value ‘fit for purpose’ only as per NZTA advice

Options Analysis

40. Three level of service options are presented for the Policy Committee’s consideration in relation to the six road categories across Tauranga city:

· Option 1 – ‘Status quo’: ‘fit for purpose’ policy as outlined in the current policy

· Option 2 – ‘Like for like’ policy: resurfacing roads with the same material as currently used

· Option 3 – All asphalt: resurfacing all roads with asphalt

Option 1 – Status Quo – Fit for Purpose (preferred option)

41. Option 1 represents the status quo with no change to the level of service policy. The level of service provided for each road category is:

· Categories 1, 2 and 3 roads (or greater than 10,000 vehicles per day) are resurfaced with asphalt.

· Categories 4 and 5 roads are resurfaced with chipseal (except where there is a cul-de-sac head, intersection with high wear and tear, or a valid engineering reason).

42. Table 7 summarises the key advantages, disadvantages, risks and costs associated with this option.

Table 7: Advantages, disadvantages, risks and costs associated with Option 1.

OPTION 1 – STATUS QUO

Advantages

Disadvantages

Council maximises NZTA subsidy

Reduced / changed level of service in neighborhoods that previously had asphalt

Consistent level of service is provided across city

Some residents may feel dissatisfied with the level of service provided, especially where chipseal replaces asphalt. This may result in negative media attention.

Effective and responsible use of financial resources

Greater length of resurfacing can be achieved

Improved ability to address the historical backlog of renewal need

Asphalt is still applied where it is considered appropriate

General ratepayers satisfied with cost savings

Costs remain the same.

Key risks

· Community risk – some sectors of the community will remain dissatisfied with this decision. This may result in negative media attention. Community expectations would need to be managed through clear communication outlining the reasoning for the policy decision.

Risk mitigation measures for consideration include:

· Council could change the Infrastructure Development Code to require the use of chipseal in residential subdivisions to mitigate this issue. However, the initial asphalt surfacing is not at the Council’s cost and its durability is more appropriate to mitigate risk of damage from construction/building traffic stresses during the intensive building phase.

· Requiring every LIM issued for a property in a neighbourhood road (Category 4 or 5) that has an asphalt surface to contain advice to the purchaser of the estimated year when the street will be due for resurfacing, and that chipseal will be applied.

Costs for Option 1: 10 Year programme level indicative cost analysis

	Road categories 1, 2 and 3	Road categories 4 and 5	Total cost
Overall programme Gross cost	$33M	$32M	$65M
NZTA subsidy	$16.8M	$16.2M	$33M
Net cost to Council	$16.2M	$15.2M	$32M

Option 2 – ‘Like for Like’ or road resurfacing with the same material that is existing (either asphalt or chipseal)

43. Option 2 represents a change to the level of service provided. This ‘like for like’ option represents resurfacing roads with the same material as currently used. The level of service provided for each road category would include:

· Categories 1, 2 and 3 roads (or greater than 10,000 vehicles per day) are resurfaced with asphalt.

· Categories 4 and 5 roads are resurfaced either chipseal or asphalt depending on what is existing.

44. Table 8 summarises the key advantages, disadvantages, risks and costs associated with Option 2.

Table 8: Advantages, disadvantages, risks and costs associated with Option 2.

OPTION 2 – LIKE FOR LIKE

Advantages

Disadvantages

Amenity values remain unchanged in residential areas with asphalt (smooth roads with high aesthetic qualities and less noise)

NZTA will not fund above ‘fit for purpose’ treatments, so all additional cost is borne by ratepayers

Some residents satisfied with level of service provided

Community perceptions relating to inequitable and inconsistent decision making. This may particularly apply to residents who have recently had chipseal resurfacing over asphalt on their neighborhood road

Over-investment in both cost and level of service from an optimal asset management perspective resulting in low value for money outcomes

As growth continues, the proportion of the network in asphalt will increase with associated higher renewal costs

Considerably higher costs to manage the same length of network with increased costs associated with maintenance of the underlying pavement

Higher depreciation costs

Ratepayers are dissatisfied with increased funding spent on residential subdivision road resurfacing

Key risks

· Community risk – Ratepayers are dissatisfied with increased funding spent on residential subdivision road resurfacing at the cost of projects perceived to be more important.

· Reputational risk – Council’s inconsistent decision making and over-investment in a level of service that provides low value for money for ratepayers in this financially constrained environment.

Costs for Option 2: 10 Year programme level indicative cost analysis

	Road categories 1, 2 and 3	Road categories 4 and 5	Total cost
Overall programme Gross cost	$33M	$57M	$90M
NZTA subsidy	$16.8M	$16.2M	$33M
Net cost to Council	$16.2M	$40.8M	$57M

Option 3 – ‘All Asphalt’: resurfacing all roads with asphalt

45. Option 3 represents a change to the level of service provided. This option provides for the entire road network to be renewed with asphalt. Over time, all chipseal would be converted to asphalt as renewal need arises.

46. The level of service provided for each road category would include:

· Categories 1, 2, 3, 4 and 5 roads are all resurfaced with asphalt.

47. Table 9 summarises the key advantages, disadvantages, risks and costs associated with Option 3.

Table 9: Advantages, disadvantages, risks and costs associated with Option 3.

OPTION 3 – RESURFACING ALL ROADS WITH ASPHALT

Advantages

Disadvantages

Amenity values remain unchanged in residential areas already with asphalt and improve in areas currently with chipseal (smooth roads with high aesthetic qualities and less noise)

NZTA will not fund above ‘fit for purpose’ treatments, so all additional cost is borne by ratepayers

Overtime, this results in the same level of service provided across the entire network

Any existing equity and inconsistency issues remain until the next resurfacing renewal. This may cause residents to pressure Council to expedite renewals ahead of when it is technically optimal.

Slightly longer life expectancy of road resealing.

Over-investment in both cost and level of service from optimal asset management perspective – sub-optimal value for money outcomes.

Improvements in overall road network durability.

As growth continues, the proportion of the network in asphalt will increase with associated higher renewal costs.

Considerably higher costs to manage the same length of network with increased costs associated with maintenance of the underlying pavement

Higher depreciation costs

Ratepayers are dissatisfied with increased funding spent on residential subdivision road resurfacing

Key risks

· Community risk – Ratepayers are dissatisfied with increased funding spent on residential subdivision road resurfacing at the cost of projects perceived to be more important.

Costs for Option 3: 10 Year programme level indicative cost analysis

	Road categories 1, 2 & 3	Road categories 4 & 5	Total cost
Overall programme Gross Cost	$39M	$90M	$129M
NZTA subsidy	$19.8M	$13M	$32.8M
Net cost to Council	$19.2M	$67M	$86.2M

Summary of Options Analysis

48. A comparison across the three options for all road categories is summarised in Table 10 below. It is clearly illustrated that although Options 2 and 3 may result in higher levels of amenity for category 4 and 5 roads (and a consistent level of service for Option 3) across the roading network, the total costs are significantly higher. The cost to Council for a 500 meter road is $11,760 under Option 1, compared to $107,760 for both Option 2 and Option 3.

49. Continuing to resurface neighbourhood roads using chipseal represents the most cost effective and appropriate option. Option 1 is therefore the preferred option. This requires no change to the level of service policy.

Table 10: A comparison of key factors for each option

	Option 1: Status Quo	Option 2: Like for Like	Option 3: All asphalt
Categories 1, 2 & 3	Asphalt	Asphalt	Asphalt
Categories 4 & 5 (local and access roads)	Chipseal	Asphalt or chipseal depending on existing surface	Asphalt

The following relate to affected roads (Category 4 & 5) only:
Surfacing Treatment	Chipseal (fully subsidised)	*Asphalt (not fully subsidised)**
Cost effectiveness / financial prudence	High	Low
Amenity	Moderate	High
Consistent level of service across the network	Moderate	Low
Indicative cost to TCC (per m2) after NZTA subsidy	$2.94	$26.94
Cost to TCC for nominal road 500m long, 8m wide (4000m2) after NZTA subsidy	$11,760	$107,760
Cost per annum for life of seal (nominal road 4000m2)	$3,167	$9,113

*Asphalt treatment does not meet NZTA ‘fit for purpose’ funding criteria, therefore the subsidy applied matches that for a chipseal treatment only. Table 6 provides further detail.

**Detailed NPV calculations are provided in attachment B.

50. The recommended, ‘fit for purpose’ option also aligns with majority of other similar Council approaches to road resurfacing. Most Councils in New Zealand have adopted a ‘fit for purpose’ resurfacing policy in line with NZTA funding assistance criteria. This includes the four major cities with network configuration or growth similar to Tauranga City (Auckland, Wellington, Christchurch and Hamilton). There are a number of smaller councils who have adopted a ‘like for like’ policy approach, such as Hurunui District Council, Mackenzie District Council and Ashburton District Council. These smaller networks have a lot of unsealed and chipseal roads, so retaining similar surfacing is a more cost-effective option. Further, these smaller districts tend to have very little asphalt roads and therefore residents do not have the same expectation for asphalt on neighbourhood roads. In addition, Selwyn District Council advised that they have experienced considerable growth in recent times resulting in asphalt being used in new subdivision areas. Consequently, Selwyn District Council are reviewing their ‘like for like’ policy as a result of increased cost, technical and equity issues.

Financial Considerations

51. Financial considerations are detailed above in both the ‘Issues for Consideration’ and ‘Options Analysis’ sections of this report. The cost impact on the overall ten year programme and available funding sources are summarised below.

Cost impact on overall 10 year programme

52. The overall cost implication of the reseal level of service is outlined within the three options presented in this report. The summary table below (Table 11) compares the cost to complete Council’s ten-year renewal programme under the various option scenarios considered in this report. A key consideration is the cost to Council once subsidy is considered. The bottom right cell of each option presents a considerable difference in cost to Council.

Table 11: Cost implications for Council on the ten-year renewal programme

	Overall programme	NZTA subsidy	Net cost to Council
Option 1
Road Categories 1, 2 & 3	$33M	$16.8M	$16.2M
Road Categories 4 & 5	$32M	$16.2M	$15.2M
Total	$65M	$33M	$32M
Option 2
Road Categories 1, 2 & 3	$33M	$16.8M	$16.2M
Road Categories 4 & 5	$57M	$16.2M	$40.8M
Total	$90M	$33M	$57M
Option 3
Road Categories 1, 2 & 3	$39M	$19.8M	$19.2M
Road Categories 4 & 5	$90M	$13M	$67M
Total	$129M	$32.8M	$86.2M

Other relevant considerations:

53. Vested assets each year are typically asphalt, so over time the cost for a ‘like for like’ or ‘all asphalt’ option increases.

54. A net present value (NPV) assessment between chipseal and asphalt that includes provision for maintenance and pre-seal repair is included in attachment B. It shows that the whole of life cost of asphalt, in today’s dollars, is considerably more than chipseal, refer Table 12. Therefore, where conditions permit (i.e. traffic volumes and stresses), chipseal is the most cost-effective solution and provides the lowest whole of life cost for Council.

Table 12: Net Present Value (NPV) summary comparison between Asphalt and chipseal

	Chipseal	Asphalt
7 year NPV	$28,200	$123,460
30 year NPV	$55,716	$182,930
48 year NPV (aligns with an assumed pavement life / renewal)	$61,832	$206,661

55.

Available funding sources

56. The roading renewal activity is funded as part of the Council’s capital programme and is provisioned through Council’s Long Term Plan and Annual Plan.

57. As discussed, the current ‘fit for purpose’ policy is endorsed by NZTA and therefore optimally achieves a 51% Funding Assistance Rate for the full resurfacing programme each year.

58. If Council were to adopt Option 2 or Option 3, the additional cost for a higher level of service would be borne by Council and not subsidised by NZTA.

59. If Council wished to proceed with either Option 2 or Option 3, Council could consider targeted rates to offset these additional costs. An indication of the requisite targeted rates for a nominal road 500m long, 8m wide is summarised in Table 12 below. Further cost details are also provided in attachment D.

60. Council would need to consider whether such a targeted rate should be implemented across the whole of the city (following public consultation), or by suburb or street where a specified level of community support is expressed. It should be noted that administrative overhead cost increases relative to the complexity of the targeted rate.

Table 12: Option 2 and 3: Targeted rates dependent on housing density and road surface life

Total cost to be recovered		$133,960.00
Total Annual Target Rate	16 years @ 50 properties	$192.57
Total Annual Target Rate	16 year @ 60 properties	$160.47
Total Annual Target Rate	16 years @ 40 properties	$240.71
Total Annual Target Rate	20 years @ 50 properties	$164.25

Legal Implications / Risks

61. Key risks associated with each option are identified within the ‘Options Analysis’ section. There are no legal implications arising from this report.

Significance

62. Under the Council’s Significance and Engagement Policy, the preferred option is of ‘low’ significance as it represents a continuation of a level of service already provided.

63. If the Policy Committee decide to adopt an alternative option, that decision would result in a change to the level of service and is likely to be considered ‘high’ significance.

Consultation / Engagement

64. If the Policy Committee proceeds with the recommendations contained in this report, additional community consultation beyond the usual resurfacing programme process is not considered necessary because there is no change from the current policy. It should be noted that this decision is likely to result in some sectors of the community being dissatisfied, and it is therefore suggested that community expectations be managed through clear and targeted communications outlining the reasons for the policy decision.

65. The primary submitters of the two petitions received by Council on 6 August 2019 have been notified by TCC staff of the decision being considered at this Policy Committee meeting.

66. If the Policy Committee decide to proceed with an alternative option (including Options 2 and 3), a high level of community engagement would be appropriate as there is likely to be high public interest in a change to the level of service. This could be best achieved through the upcoming LTP consultation process.

Next Steps

67. If the decisions in this report are adopted by the Policy Committee, the next steps are to:

· Provide clear and targeted communications detailing the reasons for the decision;

· Undertake Council’s normal resurfacing notification process with affected communities; and

· Implement the summer resurfacing programme for 2020/21 by applying the level of service policy.

Attachments

1. Attachment A Background information regarding resurfacing backlog and network condition - A11885509

2. Attachment B Net Present Value Assessment - compares chipseal and asphalt - A11885510

3. Attachment C Letter from NZTA confirming funding assistance implications - A11885511

4. Attachment D Target Rate calculation - A11885513

8 March 2021

10.2 2021-2031 Long-term Plan - Significant Forecasting Assumptions

File Number: A12252600

Author: Josh Logan, Team Leader: Corporate Planning

Ben Corbett, Corporate Planner

Authoriser: Christine Jones, General Manager: Strategy & Growth

Purpose of the Report

1. The purpose of this report is to present the Significant Forecasting Assumptions (SFAs) that underpin planning for the 2021-2031 Long-term Plan (LTP) to Council.

Recommendations

That the Council:

(a) Receives the report;

(b) Approve the draft Significant Forecasting Assumptions as set out in Attachment 1;

(c) Agrees the assumption regarding demographics may be updated as necessary to reflect data due to be released by Tatauranga Aotearoa Stats NZ on 31 March 2021;

and

(d) Agrees the actions detailed as mitigations to address risk may be updated to reflect the outcomes of developing the LTP.

Executive Summary

2. The draft Significant Forecasting Assumptions are presented to Council for formal adoption.

3. The Significant Forecasting Assumptions have been developed iteratively over the last six months building on those used for the Long-term Plan 2018-2028 with adjustments, additions and exclusions made to reflect updated data from third parties, legislative changes and the impacts of COVID-19.

Background

4. An LTP is prepared every three years, covers ten years (and includes an Infrastructure Strategy that covers 30 years), must include specific information as prescribed in the Local Government Act 2002 (LGA), must be audited, and can only be adopted after a period of public consultation on a consultation document which itself also needs to be audited[18].

5. The LTP is a lead Council document and key to our public accountability. It is developed with substantial community consultation and we regularly report on our performance against it.

6. The Significant Forecasting Assumptions (Attachment 1), sets the basis for developing the LTP. It provides the common set of data and direction for the organisation to use in its planning.

7. The Significant Forecasting Assumptions have been reviewed regularly to take account of the implications of COVID-19 and the latest data available from third parties including Tatauranga Aotearoa Stats NZ.

8. The Significant Forecasting Assumptions are used by activity and asset managers to inform their planning and development of issues and options. They also underpin Council’s decisions and funding approaches.

Purpose of the Significant forecasting assumptions

9. The Significant Forecasting Assumptions are one of the essential building blocks in developing the LTP. They represent the important trends and projections that are expected to affect the Council and the city.

10. The Significant Forecasting Assumptions outline the key assumptions. These include demographic assumptions around population growth, aging, socioeconomic deprivation and the ethnic profile of the city. It also includes assumptions around our environment, employment in the city and technological change.

11. The key assumptions represent the most important items for consideration in our planning. However, each activity may also have their own specific assumptions.

12. These assumptions have been used by the LTP project team and activity managers to inform and underpin the LTP. They are applied consistently across activity areas.

13. The assumptions will be revised prior to finalising the LTP, to ensure that we are using the most up to date and relevant information.

Strategic / Statutory Context

14. Schedule 10, Section 17 of the Local Government Act 2002 (LGA 2002), requires Council to identify significant forecasting assumptions. Similarly, section 94(b) LGA 2002, requires that these assumptions be audited, with the quality of the information and assumptions underlying the forecast information to be commented on. Assumptions are also a requirement of the financial accounting standards (under the GAAP – Accounting standard PBE FRS 42 Prospective Financial Information).

15. The assumptions are part of the key underlying information that drive good planning.

SIGNIFICANT FOReCASTING ASSUMPTIONS Document overview

16. The 37 assumptions are outlined in Attachment 1. These are significant forecasting assumptions as they address key drivers for council, or City-wide issues.

17. Each assumption is considered under a series of headings:

(a) Forecasting assumption: general topic to which the assumption relates

(b) Detail: further detail regarding the nature of the assumption

(d) Risks: the risks to Council if the events occur which are materially different to those assumed

(e) Level of uncertainty: the level of uncertainty as to whether events will unfold as assumed

(f) Effect: the impact of the risks eventuating; and

(g) Mitigation: steps taken by Council to mitigate the effects.

18. The Significant Forecasting Assumptions are based on reliable data sources, both internal and external. External sources include Tatauranga Aotearoa Stats NZ, NIWA and BERL, among others.

19. Council’s assumptions regarding population and demographic changes are awaiting further update on the release of population data by Tatauranga Aotearoa Stats NZ due on 31 March 2021.

Options Analysis

Option 1: Council adopts the draft Significant Forecasting Assumptions

20. The Council approves the draft Significant Forecasting Assumptions (SFAs) as proposed in Attachment 1.

Advantages		Disadvantages
· Managers have reviewed the SFAs and have made recommendations based on reasonable expectations · The SFAs reflect best practice guidance · The SFAs provide clarity and certainty to council staff in preparing the LTP · The assumptions form the basis of planning and are auditable.		· Potential opportunities for amendments to the SFAs may not have been considered.

Key risks	Further opportunities to evaluate and modify the SFAs will be foregone.
Recommended?	Yes

Option 2: Council does not adopt the draft Significant Forecasting Assumptions

21. The Council does not approve the draft Significant Forecasting Assumptions as proposed in Attachment 1.

Advantages		Disadvantages
· Potential opportunities for SFAs to be amended and reconsidered.		· Further staff time required to consider or reconsider SFAs · Delay in adopting the SFAs (depending on the duration) may delay preparation of the LTP.

Key risks	Delay in accepting the SFAs may jeopardize timely delivery of the LTP.
Recommended?	No

Financial Considerations

22. There are no specific costs associated with option one, however pursuing option two could lead to time delays as processes and decision-making may need to be revisited.

Legal Implications / Risks

23. The recommendation meets the legislative requirements of the LGA and reflect best practice in preparing the LTP.

Consultation / Engagement

24. The community are able to submit on the Significant Forecasting Assumptions as part of the formal consultation on the LTP in May 2021.

Significance

25. The LGA requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

26. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision, or matter

27. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the LTP and its contents is of high significance. However, this decision is considered to be of low significance.

ENGAGEMENT

28. Taking into consideration the above assessment, that the decision is of low significance, staff are of the opinion that no further engagement is required prior to Council undertaking engagement on the Significant Forecasting Assumptions as part of the supporting information alongside the LTP Consultation Document.

Next Steps

29. The approved Significant Forecasting Assumptions will continue to be refined as new information comes to hand. They will also be used as the basis for further preparation of the LTP.

30. The Significant Forecasting Assumptions will be included as supporting material as part of the formal consultation on the LTP in May 2021.

1. Attachment 1 - Draft SFA 2021 - A12269959 ⇩

12. Having completed this analysis for each activity the second step is to aggregate all of the results and consider the impact that these results might have on the community. This includes consideration of differentials, the level of rates set on a uniform basis, and the factors used to set the wastewater targeted rate. Council will consider this at the Council meeting on the 15th March 2021

8 March 2021

10.4 Approval of the draft Revenue and Financing Policy Framework

File Number: A12259005

Author: Jane Barnett, Policy Analyst

Josh Logan, Team Leader: Corporate Planning

Jim Taylor, Transactional Services Manager

Ariell King, Team Leader: Policy

Kathryn Sharplin, Manager: Finance

Authoriser: Paul Davidson, General Manager: Corporate Services

Purpose of the Report

1. To provide information on Council’s obligation relating to its Revenue and Financing policy Council.

2. For Council to approve the preliminary stage of the Revenue and Financing Policy review.

Recommendations

That the Council:

(a) Approve the draft Funding Needs Analysis (Attachment 1) and the preliminary draft Revenue and Funding Policy (Attachment 2) subject to decisions on the overall impact of the allocation of liability for revenue.

Executive Summary

3. Council is required to review and adopt a Revenue and Financing policy every three years. The purpose of the policy is to show how Council’s activities are funded - who pays for what and why.

4. This report presents the first step in the policy review process by putting forward the draft Funding Needs Analysis (Attachment 1) and preliminary draft Revenue and Financing Policy (Attachment 2) for approval.

5. The funding decisions in the draft Funding Needs Analysis largely reflect the funding positions in the current Revenue and Financing Policy. However provisional changes are proposed for city and infrastructure planning, libraries, spaces and places, transportation, sustainability and waste and support services.

6. These changes reflect an increase or potential increase in funding for these activities from targeted rates. This will provide greater transparency for the community and ensure funding is secured for these activities.

7. The draft Revenue and Financing Policy also sets out that Council is investigating alternative funding and financing options for capital expenditure and allows for the possibility of these being used.

Discussion

Legal Requirements

8. The Local Government Act 2002 (LGA) requires Council to adopt a Revenue and Financing Policy, that is then included in the Long-term Plan.

9. The Revenue and Financing Policy sets out how Council plans to fund each of its activities and outlines how it has made these decisions.

10. The policy is an important step in the rate setting process, determining levels of development contributions and setting fees and charges. A defective policy may result in decision that flow out of the policy being invalid.

11. Two separate steps are required under the legislation to develop the draft Revenue and Financing policy. The first step is the process prescribed in section 101(3)(a) of the LGA (see chart below).

The two step funding process.

13. The Funding Needs Analysis (Attachment 1) is the documentation of the step one analysis and informs the draft Revenue and Financing Policy.

14. Approval of the proposed analysis is sought to allow step 2 to be progressed on the 15 March 2021.

Provisional Changes

15. The funding decisions set out in the Funding Needs Analysis largely reflect the funding positions in the current Revenue and Financing Policy. However, provisional changes are proposed for the city and infrastructure planning, libraries, spaces and places, transport, sustainability and waste, and support services.

16. These changes reflect an increase or potential increase in funding for these activities from targeted rates. This will provide greater transparency for the community and ensure funding is secured for these activities.

17. The other change set out in the draft Revenue and Financing Policy is that Council is investigating alternative funding and financing options for capital expenditure and allows for the possibility of these being used.

Presentation changes in the draft Revenue and Financing Policy

18. The ranges to show the extent of each funding source have been aggregated to allow for greater flexibility given the more uncertain environment we are operating in. The current policy has 7 ranges and this has been reduced to 5 in the draft policy.

Strategic / Statutory Context

19. The policy sets out how Council will fund its activities. These activities help deliver our community outcomes.

Options Analysis

20. The decision is whether to approve the proposed draft Funding Needs Analysis and preliminary draft Revenue and Financing Policy or not.

Option 1: Approve

Advantages		Disadvantages
· Meets the initial legislative requirements of developing a Revenue and Financing Policy · Enhances transparency in how Council has decided to fund its activities · Allows the second step in looking at the impacts of the community to progress.		· None.

Key Risk	There is no risk to adopting the proposed draft Funding Needs Analysis because this approval just sets the framework and approves step 1. Further consideration is required in step 2 and this allows for adjustments to funding sources once the full impacts are known.
Recommended?	Yes. The approval of the proposed Funding Needs Analysis will enable the LTP process to progress. It will also increase the transparency and accountability of Council’s funding decisions.

Option 2: Do not approve

Advantages		Disadvantages
· None.		· The LTP is likely to be delayed if the proposed Revenue and Financing framework is not approved.

Key Risk	There is a risk that the LTP could be further delayed because the funding decision process would be behind schedule.
Recommended?	No. Not approving the proposed draft Funding Needs Anaylysis would put the LTP at risk by causing delays in the process.

Financial Considerations

21. The financial implications of the proposed funding sources for each activity will be considered in the step 2 analysis and will be included in the initial drafting of the 2021-31 Long-term Plan.

Legal Implications / Risks

22. Key risks are identified in the individual options above.

Consultation / Engagement

23. Consultation on the draft Revenue and Financing policy will occur as part of the 2021-31 LTP plan consultation.

Significance

24. The LGA requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

25. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in the decision, or matter

26. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that issue of how Council activities are funded is of high significance however the decision to approval the draft revenue and financing framework is of low significance.

Next Steps

27. Once Council approves the draft Funding Needs Analysis, the funding decisions can be applied to calculate the aggregate impact on the community. Council will consider this impact on the 15 March 2021. In considering the impact on the community, Council can make changes to the draft Revenue and Financing Policy.

28. After any changes have been made to the policy, a revised policy will be adopted for legal review.

29. The revised draft Revenue and Financing policy will form part of the draft LTP consultation so that Council can receive feedback from the community on their funding decisions.

Attachments

1. Attachment 1 DRAFT Funding Needs Analysis 2021 - A12289973 ⇩

2. Attachment 2 Draft Revenue and Financing Policy 2021 - A12289978 ⇩

8 March 2021

10.5 Development Contributions - Community Housing Providers

File Number: A12259559

Author: Jeremy Boase, Manager: Strategy and Corporate Planning

Authoriser: Christine Jones, General Manager: Strategy & Growth

Purpose of the Report

1. To consider a request to amend the development contributions policy to specifically address relief for registered community housing providers.

Recommendations

That the Council:

(a) Does not provide special provisions in the development contributions policy for community housing providers and that any grants to such organisations to offset development contributions continue to be considered under section 2.14.4 of the policy (option (a) – status quo)

Executive Summary

2. A request was received through the 2020/21 Annual Plan process to consider amending the development contributions policy to provide guaranteed discounts to community housing providers.

3. While a subsidy was granted by Council in regard to the specific development to which that submission related, the underlying issue of a discount system being embedded formally in the policy was not.

4. The policy currently allows for such requests to be made on a case-by-case basis. Because of the significantly different scale of community housing trusts operating or potentially operating in the city, and of the significantly different scale of potential developments, the staff recommendation is to retain the case-by-case approach to considering subsidies.

Background

2020/21 Annual Plan

5. During the 2020/21 Annual Plan process the following submission point[19] was received from the Tauranga Community Housing Trust (“TCHT”), a registered community housing provider (“CHP”).

Amendment of the Development Contributions Policy this year to give at least 50% relief of TCC charges for registered CHP’s who are developing new homes to permanently add to their community housing stock. As you know, entities such as TCHT find it very difficult to fund building projects when having to raise all the capital themselves without Government loans or grants. There is precedent for this policy as a “community good” and we now seek certainty through a specific statement in the DC policy so that the current delegated power can be applied automatically when the waiver/relief application is received.

6. Through the 2020/21 Annual Plan process, this submission was treated as a one-off decision as to whether or not to provide a grant to TCHT for their then-current development proposal in Greerton. Council resolved to provide a grant of 50% of the development contributions payable on that development, capped at a maximum of $40,000.

7. While this resolution dealt with the specifics of the TCHT development it didn’t address the request for an amendment to the development contributions policy to cover all CHPs.

Development contributions

8. Development contributions are a mechanism to recover the capital cost of growth-related infrastructure. As this is a cost-recovery process, any approach that reduces development contribution revenue requires council to find an alternative funding source (usually the general ratepayer) or to continue to carry the associated debt until such a source is identified.

Development contributions policy

9. Section 2.14 of the development contributions policy covers remissions and refunds. Within that section, sub-section 2.14.4 states:

Council will consider making grants to offset development contributions payable in relation to developments undertaken by or for the benefit of community groups through submissions received to the Annual Plan or Long-Term Plan process.

10. While ‘community group’ is not defined in the policy, it is this clause that was used to consider the TCHT development.

11. When developing the policy, this approach of using council-determined grants to provide relief against development contribution charges rather than embedding discounts in the policy itself was preferred. This was because of the increased transparency that the grant process provides, and because this approach allows development contributions to be charged and then paid in full (as for all other developments), albeit with some of that payment coming from a separate council grant.

Community housing providers

12. TCHT is not the only CHP currently operating in Tauranga or that could potentially operate in the city in the future. The Community Housing Regulatory Authority currently lists 58 CHPs, of which seven are shown as operating in Tauranga or the wider Bay of Plenty[20] on its website. These CHPs vary significantly in scale of operation and ambition. They also vary significantly in their asset base and financial structures.

13. For the avoidance of doubt, Kāinga Ora is not a CHP.

Strategic / Statutory Context

14. Housing supply and housing affordability are acknowledged issues for Tauranga. Community housing providers supply and manage social housing in the city, for which there is also an acknowledged shortage.

15. In 2020, the Kāinga Tupu Mayoral Taskforce[21] developed the Kāinga Tupu: Growing Homes strategy. That strategy included actions under four headings: prevention; support; supply; and, system enablers. A priority action under the ‘support’ heading is:

Consider incentivising the development of social and affordable housing

Options Analysis

16. The key issue to be considered is whether there should be separate provisions in the development contributions policy in regard to CHPs. A secondary issue is, if so, whether similar provisions should apply to other similar developments not undertaken by CHPs.

17. The following options are provided for consideration:

(a) Status quo

(b) New provisions for CHPs

Option (a) – status quo (Recommended)

18. Under this option, CHPs would continue to be able to submit to the annual plan or long-term plan process for grants in relation to development contributions.

19. The advantages and disadvantages of this option include:

Advantages		Disadvantages
· Allows Council to make case-by-case decisions based on the merits of each development. · By making decisions during the annual plan or long-term plan process, financial implications are automatically built into that year’s budget, therefore no risk of unbudgeted expenditure. · Flexibility in decision-making enables grants at any level up to and including 100%. · A more transparent approach than the embedding discounts in the policy. · Retains the integrity of the development contributions policy by treating all developments equally, while allowing a separate mechanism by which council can provide relief from those charges if it chooses.		· Lack of certainty for CHPs regarding the level of development contributions payable during the project development phase. · Potentially inconsistent decision-making by council between developments and over time. · Annual decision-making round may not be agile enough for property development proposals. · May not be considered to be fully aligned with the Kāinga Tupu action to ‘consider incentivising the development of social and affordable housing’.
Budget - Capex	$0
Budget - Opex	Entirely dependent on applications received and supported by the council of the day
Key risks	None identified

Option (b) – new provisions in the development contributions policy for CHPs

20. Under this option, specific provisions for the subsidisation of development contributions payable by CHPs would be written into the draft development contributions policy.

21. If this option is preferred, direction will be sought from Council regarding the scale of the subsidisation. Reference is made to 50% below, though it should be noted that the original request from TCHT was for ‘at least 50%’.

22. The advantages and disadvantages of this option include:

Advantages		Disadvantages
· Provides certainty to CHPs when planning for new developments. · Ensures consistent decision-making for all CHPs and over time. · If the policy provided for a 50% discount, CHPs could still apply under section 2.14.4 for a grant for the balance. · Consistent with the Kāinga Tupu action to ‘consider incentivising the development of social and affordable housing’.		· Difficult for council to budget for as the extent of applications in any one year may not be known at the time budgets are approved. · Increase in general rates to reflect the subsidies provided. · A blanket policy for subsidies does not provide discretion to target support to those organisations and developments in most need of support. · Undermines the integrity of the development contributions policy by treating developments differently depending on who is undertaking the development. · A less transparent form of subsidy than a separately determined grant.
Budget - Capex	$0
Budget - Opex	Entirely dependent on applications received during any year
Key risks	Applications under this clause exceed expectations and create an unreasonable impact on general rates. Funding is provided to organisations and developments that will likely be successful without such ratepayer support.

Option (c) – new provisions in the development contributions policy for CHPs and other organisations

23. Under this option, the provisions introduced for CHPs (as outlined in option (b) above) would be extended to other organisations delivering social or community or emergency housing (clear definition would be required within the policy).

24. The advantages are as for option (b) but the disadvantages and risks are exacerbated due to a wider pool of potential applicants.

Financial Considerations

25. The financial impact of this decision is dependent on:

· the extent of demand for subsidies; and

· the level of subsidies provided for in the policy (under option (b) and (c)) and,

· under option (a), the decisions made by the council of the day.

Significance

26. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

27. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision, or matter

28. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the matter/ of social housing is of high significance. However, the specific decision sought regarding the approach to development contribution subsidies is of low significance.

ENGAGEMENT

29. The draft development contributions policy will be updated for any changes made as a result of this paper. The draft policy will be consulted on alongside the 2021-31 long-term plan, providing interested parties with the opportunity to submit on any matter, including the provision or otherwise of subsidies for community and social housing provision.

Next Steps

30. The draft policy will be prepared for formal adoption by Council prior to the public consultation process.

31. Community housing providers will be advised of Council’s decision on this matter and invited to submit to both the development contributions policy and the long-term plan.

Nil

8 March 2021

10.6 Development Contributions - Papakainga housing

File Number: A12237387

Author: Jeremy Boase, Manager: Strategy and Corporate Planning

Carlo Ellis, Manager: Strategic Maori Engagement

Authoriser: Christine Jones, General Manager: Strategy & Growth

Purpose of the Report

1. To consider alternative approaches to development contributions payable on papakainga housing.

Recommendations

That the Council:

(a) Adopt the following approach to the matter of development contributions on papakainga housing:

(i) Option (a) – status quo – case-by-case consideration (no special provisions in the policy for papakainga housing); OR

(ii) Option (b) – subsidise development contributions on papakainga developments by 50% with an annual rate funded budget of $200,000 and a fund cap of $500,000; OR

(iii) Option (c) – fully subsidise development contributions on papakainga developments with an annual rate funded budget of $400,000 and a fund cap of $1 million; OR

(iv) Option (d) – provide for long-term deferral of development contributions on papakainga developments

(b) Incorporates the above decision into the draft development contributions policy and draft long-term plan for the purposes of consultation.

Executive Summary

2. Council has received submissions and representations relating to the levying of development contributions on papakainga housing developments on multiple-owned Maori land for some time. Fundamental to these discussions is a recognition that the nature of multiple-owned Maori land is unique, both in the connection between mana whenua and their land and in the legal requirements and constraints on that land.

3. Development contributions are a mechanism used by council to recover the costs of infrastructure required to enable growth. The principle underlying council’s development contributions policy is that all new developments should contribute fairly to the funding of that new infrastructure. To this extent, papakainga housing is not treated differently to other new housing.

4. This report considers options that would allow for papakainga housing development to be treated differently. These options involve either subsidising development contributions from a separate funding source (typically general rates) or deferring the payment of development contributions over an extended period.

5. While options have been provided, no formal recommendations are included in the report. This is because the balancing of various, and at times competing, advantages, disadvantages, opportunities and risks is considered a political rather than technical assessment.

Background

Development contributions

6. Development contributions are a mechanism to recover the capital cost of growth-related infrastructure. As this is a cost-recovery process, any approach that reduces development contribution revenue requires council to find an alternative funding source (usually the general ratepayer) or to continue to carry the associated debt until such a source is identified.

7. Under the operative development contributions policy there is a requirement to pay both a citywide and a local development contribution.

8. The citywide development contribution is currently $10,615 per residential dwelling ($6,900 for a two-bedroom and $5,307 for a one-bedroom dwelling). All fees are excluding GST. The contributions are lower in rural areas where reticulated wastewater (and in some cases potable water) is not provided. This citywide development contribution is expected to increase significantly in the 2021/22 financial year due to the costs associated with the Waiari water treatment investment.

9. Local development contributions vary significantly depending on where the development is situated. This is because of the different actual costs that council has incurred to service those growth areas.

Development contributions policy regarding papakainga housing

10. Council has received requests to review the provisions of the development contributions policy in relation to papakainga development with a view to reducing or removing the requirements.

11. Examples of local development contributions in areas where papakainga development is more likely include:

(a) Tauranga - $3,614

(b) Papamoa - $8,728

(d) Bethlehem - $12,550

(e) West Bethlehem - $27,620

12. These fees are per the current policy and are subject to change when an updated policy is adopted alongside the 2021-31 long-term plan.

13. Development of papakainga housing on multiple-owned Maori land is subject to the same development contributions as other forms of residential development with two specific exclusions. Those exclusions are:

(a) local development contributions are not payable for reserves and community infrastructure costs in Rural Marae Community, Urban Marae Community or Ngati Kahu Papakainga Zones (or for development of multiple owned Maori land within 500m of these zones); and

(b) the citywide development contribution payable for a Ngati Kahu Kaumatua household unit is the amount that would usually be payable for a one-bedroom dwelling.

Development contributions policy approach to remissions and deferrals

14. In general, the development contributions policy makes very limited provision for remissions. Section 2.14 of the current policy states:

2.14.1 Refunds of development contributions will be made in accordance with sections 209 and 210 of the Local Government Act 2002.

2.14.2 There will be no remission or postponement of development contributions except in exceptional circumstances at the sole discretion of the Chief Executive or his or her nominated representative that are consistent with the principles or broad intent of the Policy, or direction provided by elected members. Any such request for remission or postponement shall be made to Council in writing. (emphasis added)

15. There is also a specific opportunity for grants to be provided to ‘community groups’ to offset development contributions:

2.14.4 Council will consider making grants to offset development contributions payable in relation to developments undertaken by or for the benefit of community groups through submissions received to the Annual Plan or Long-Term Plan processes

16. Note that there is no definition of ‘community group’ included in the policy. A separate definition of ‘community organisation’ does not include papakainga development.

17. With regard to deferrals, the development contributions policy provides for deferrals subject to specific conditions and for a maximum of six months from the date of a building consent being issued. Additional deferrals can be considered upon application as long as the arrangements ‘have no financial cost to council and incorporate sufficient security to recover deferred development contributions in the event of payment default’^{^[22]}.

Development of Maori land for residential purposes

18. The unique nature of the tenure applying to multiple owned Maori land is that the development of this land is subject to additional consideration and processes under the Te Ture Whenua Act. The purpose of this Act is to promote the retention of Maori land and its use for the benefit of its owners, whanau and their hapu.

19. Multiple owned Maori Land is usually owned by a number of owners who hold shares in the land in question. Individual shareholders wishing to build a house/develop papakainga on the land must gain permission from most of the other shareholders to build and this can include applications to the Maori Land Court to secure such permission.

20. The permission to build a house/develop papakainga does not automatically create new land parcels/titles. The creation of a new Maori land parcel/title also requires permission under the Te Ture Whenua Act. Multiple owned Maori Land parcels cannot be brought or sold on the general real estate market.

Housing affordability

21. While affordability of housing generally, and development contributions specifically, is a significant issue across the wider Tauranga community, it is particularly significant in regard to multiple owned Maori land because:

(a) raising mortgage finance is a challenge because the land cannot be used as security;

(b) development on Maori-owned land is not being on sold to private owners and therefore there is a limited ability to recoup costs;

(c) the manner in which Maori land is valued means that the development contribution is not reflected in the subsequent valuation of the land to a level that enables recovery through equity, if at all;

(d) coupled with point (a) above, any equity achieved is irrelevant because lending facilities are largely unavailable or severely restricted;

(e) as noted above, there are often additional complexities involved with development of Maori land which can add to costs, processes and timeframes such as Maori Land Court processes. In addition, in seeking to utilise multiple owned lands for the establishment of papakainga a resource consent may also be required through the City Plan (developed under the Resource Management Act);

(f) some Maori Land Trusts own land but lack capital finance and need to seek central and regional funding for the building and servicing of developments. There are issues with the required timing of development contribution payments in relation to when central government funding can be drawn down.

Tangata Whenua views

22. Tangata Whenua views recorded in paragraphs 23 to 26 below reflect consultation with Te Rangapū Mana Whenua o Tauranga Moana, iwi and hapu visits by the Manager: Strategic Maori Engagement, and from communications from individual trusts with aspirations to progress papakainga developments^{^[23]}.

23. The tangata whenua view is that Maori land has significant and unique restrictions^{^[24]} that warrant the consideration of alternative options to remove or reduce barriers to Papakainga development.

24. Tangata whenua are acutely aware of the housing pressure that has built up especially for low to medium cost housing. Enabling the development of papakainga will allow tangata whenua to contribute solutions to the current housing crisis in Tauranga, with a particular focus on providing for wider whanau members and their families, for low to middle income earners and in a supportive and proven model that is culturally appropriate^{^[25]}. The removal and/or reduction of development contribution payments will address one of the barriers to papakainga development.

25. The tangata whenua view of development contributions is a long-term perspective that encompasses the greater development of Tauranga starting with the many acts of kindness and generosity alongside the forced acquisitions, confiscations and subsequent trail of legislation that created the collective contribution tangata whenua have made. These contributions are still very real and raw for tangata whenua as direct descendants of the people of the time and there is no dispute that this has led to great benefit and growth for Tauranga over time.

26. The papakainga model represents an opportunity to develop Maori land for the benefit of landowners whilst restricting further alienation of the little land that remains in Maori ownership. In doing so this adds to the pool of housing available for City needs. However, this comes with the restrictions outlined in paragraph 21 above. Tangata whenua have previously submitted to Council on a number of occasions seeking removal or reduction of development contributions (see below for examples of recent submissions on the subject).

Submissions to 2020/21 Annual Plan

27. Te Rangapū Mana Whenua o Tauranga Moana’s submission included the following relating to the development contributions policy.

Engage with an external consultant to work alongside Policy team following the approval of an external consultant to develop the Maori Housing paper, inclusive of this policy.

To ensure that, when applying the policy multiple owned Maori land, TCC fully recognise that Tangata Whenua have contributed enough to the development of this city over the years. And especially when applied to rural land we do not have many of the infrastructure and services provided

Development contributions policy and its mechanisms must reflect the historical and ongoing contribution made by Maori that has enabled the development of the District. Council has a liability to ensure charges, fees and contributions are fairly adjudicated and targeted.

Council should work with mana whenua to co-construct a policy and implementation design.

28. Separately, the Ranginui 12 Trust made a specific submission relating to development contributions on their papakainga development in Welcome Bay. This included the following general statements about development contributions.

In summary, the Trust seeks that Council include specific policy relating to Papakainga development in the wider Tauranga City Council District into the Annual Plan and Development Contributions Policy and allow for reductions and or methods for calculating reductions where appropriate.

The development of Papakainga on Maori land has a wide range of benefits including:

§ Modern, quality housing for the landowners

§ Unlocking/freeing up current housing supply in urban areas where future residents currently reside, providing additional housing stock in urban areas

§ Provision of additional housing stock on currently underutilised land

§ Providing cultural connections to the land (whenua).

Scale of opportunity

29. Over the period of 2015-19 there have been four resource consents granted for papakainga housing, accommodating 60 dwellings across Tauranga.

30. Estimating short to medium term demand going forward there is significant potential supply available given the large tracts of land in multiple ownership across the city. Council has received expressions of interest from iwi and hapu groups as well as individual land blocks with intentions to build facilities of 15-30 homes each.

31. A coordinated approach to papakainga development also has the potential to attract significant central government investment that the City would not usually have access to. For example, one Papakainga development of 20-30 houses has secured around $650,000 of infrastructure funding from Te Puni Kokiri.

32. With 17 iwi and hapu groups across the city there is the potential to unlock a large number of new homes by working alongside tangata whenua to enable their housing aspirations.

33. Based on the above it is not unreasonable to estimate approximately 10-15 dwellings per year on average delivered via papakainga developments.

34. Remodelling the approach to development contributions for papakainga developments on multiple owned Maori land has the potential to bring the following benefits to Tauranga City.

(a) Recognises the contribution tangata whenua have made to the development of Tauranga city both voluntarily and involuntarily.

(b) Assists in unlocking previously unutilised Maori land for residential development.

(c) Facilitates culturally appropriate housing solutions in the face of a housing crisis and building social issues that accompany this.

(d) In doing the above it may have a modest impact on relieving pressure on the open housing market leaving more options available for the general population.

(e) Assists post settlement entities to engage business and investment into areas of mutual interest and benefit i.e. to tangata whenua and the wider city alike.

(f) Facilitates the attracting and securing of central government funding that would otherwise be unattainable e.g. Te Puni Kokiri infrastructure funding.

(g) Adds rating units to the Tauranga City rating base.

Options Analysis

35. There are a number of potential options to address development contributions on papakainga developments and tangata whenua views on same. For simplicity, these options have been limited to the following four, the effective of which are to:

(a) retain the status quo

(b) subsidise development contributions on papakainga developments by 50%

(d) provide for long-term deferral of development contributions on papakainga developments.

36. The consideration of advantages, disadvantages, risks and opportunities across the options is considered to be political rather than technical in nature. As such, a formal recommendation has not been provided.

37. Note that this report and the options that follow relate to the development of papakainga housing only. This report does not relate to other residential or commercial developments that may occur on multiple-owned Maori land

Option (a) Status quo – Case by case consideration (no special provisions for papakainga housing)

38. Under this option, development contributions continue to be assessed and levied on papakainga developments and, in accordance with the current policy, remissions are not provided and deferrals beyond six months are considered on a case-by-case basis and subject to appropriate security being available. Case-by-case requests for grant funding to cover full or partial development contributions are considered through the Annual Plan or LTP process. For clarification, a specific reference to the opportunity for case by case consideration of specific Papakainga proposals would be added into the Development Contributions Policy (similar to community groups).

39. The advantages and disadvantages of this approach include:

Advantages		Disadvantages
· Maintains the integrity of the development contributions policy and provides transparency. · Allows Council to make case-by-case decisions based on the merits of each papakainga development. · Flexibility in decision-making enables grants at any level. · By making decisions during the annual plan or long-term plan process financial implications are automatically built into that year’s budget, therefore no risk of unbudgeted expenditure. · From the narrower perspective of infrastructure demand, it would not create inequality in charging of development contributions with other forms of development that have similar effects/demands on infrastructure requirements and servicing.		· Lack of certainty for Maori landowners regarding the level of development contributions payable during the project development phase. · Missed opportunity to improve relationship with tangata whenua and to recognise the unique difficulties relating to the development of multiple-owned Maori land · Potential reduction in (or lack of increase in) the future level of papakainga development · Reduced ability to leverage central government infrastructure funding for Papakainga development (due to lack of certainty).
Budget - Capex	$0
Budget - Opex	$0 provided for in 2021-31 LTP. Budgeted on case by case basis if approved through Annual Plan or LTP process subsequent to specific request being considered.
Key risks	Impacts on papakainga development proposals and broader tangata whenua / Council relations.

Option (b) Subsidise development contributions on papakainga developments by 50%

40. Under this option, development contributions are assessed and levied as normal on papakainga developments, but a separate funding source is used to reduce the amount payable by the development entity^{^[26]}. The separate funding source would typically be general rates.

41. An annual contribution to a ‘subsidy fund’ would be budgeted, with the ‘fund’ capped to a set amount if not drawn down. Distributions in any financial year would be limited to the amount available in the ‘subsidy fund’.

42. This is similar to the system used by Western Bay of Plenty District Council (“WBoPDC”) as part of their financial contributions regime. Subsidies are provided if the applicant has worked their way through the Papakainga Toolkit programme^{^[27]}. Applicants are also encouraged to apply for a Kainga Whenua Infrastructure Grant for the remaining 50%, though the published information does not specifically state that financial or development contributions are eligible for such grants.

43. The advantages and disadvantages of this approach include:

Advantages		Disadvantages
· Opportunity to improve relationship with Tangata Whenua by positively assisting with their housing aspirations · Recognises the unique difficulties relating to the development of multiple-owned Maori land · Possible increase in the future level of papakainga development which would contribute to better social and health outcomes for this part of the community · Adds housing to Tauranga City to assist in managing the city’s rapid pace of growth · Provide consistency in policy with the WBoPDC approach		· Tangata Whenua who are unable to raise the security for the full DC fee may find it equally as challenging to raise 50% and therefore may not be an advantage or achieve the outcome of enabling Papakainga development · Any fee reduction must be subsidised by an alternative funding source – most likely to be a burden which is transferred to general ratepayers. · From the narrower perspective of infrastructure demand, it would create inequality in charging of development contributions in relation to other forms of development that have similar effects/demands on infrastructure requirements and servicing · Potentially creates inequality in charging in relation to other organisations or individuals that have similar financial and affordability constraints (e.g. community housing organisations, voluntary organisations)
Budget - Capex	$0
Budget - Opex	Difficult to quantify. It would depend on the level of papakainga development going forward, its location and the degree to which development contributions were reduced by. A 50% subsidy on development contributions using the 2020/21 fee structure equates applied to 15 two-bedroom units per annum equates to between $79,000 and $259,000 per annum depending on location. Staff suggest an annual rate funded budget of $200,000 and a fund cap of $500,000.
Key risks	May result in requests for reduced development contributions from other social / community-based organisations which face financial constraints. However, the Council may choose to distinguish papakainga development from these other activities due to the unique limitations faced by Maori landowners.

Option (c) Fully subsidise development contributions on papakainga developments

44. Under this option, development contributions are assessed and levied as normal on papakainga developments, but a separate funding source is used. Therefore, the development entity is effectively not required to pay development contributions. The separate funding source would typically be general rates.

45. Again, an annual contribution to a ‘subsidy fund’ would be budgeted, the fund would be capped to a set amount if not drawn down, and distributions in any financial year limited to the amount available in the fund.

46. This option is similar, other than by way of scale, to option (b) above. It ensures that development contributions are not a barrier to the development of papakainga housing.

Advantages		Disadvantages
· Opportunity to improve relationship with Tangata Whenua by positively assisting with their housing aspirations · Recognises the unique difficulties relating to the development of multiple-owned Maori land · Possible increase in the future level of papakainga development which would contribute to better social and health outcomes for this part of the community · Adds housing to Tauranga City to assist in managing the city’s rapid pace of growth · Provide consistency in policy with the WBoPDC approach		· Any fee reduction must be subsidised by an alternative funding source – most likely to be a burden which is transferred to general ratepayers. · From the narrower perspective of infrastructure demand, it would create inequality in charging of development contributions in relation to other forms of development that have similar effects/demands on infrastructure requirements and servicing · Potentially creates inequality in charging in relation to other organisations or individuals that have similar financial and affordability constraints (e.g. community housing organisations, voluntary organisations)
Budget - Capex	$0
Budget - Opex	Difficult to quantify. It would depend on the level of papakainga development going forward, its location and the degree to which development contributions were reduced by. A 100% subsidy on development contributions using the 2020/21 fee structure equates applied to 15 two-bedroom units per annum equates to between $158,000 and $518,000 per annum depending on location. Staff suggest an annual rate funded budget of $400,000 and a fund cap of $1 million.
Key risks	May result in requests for reduced development contributions from other social / community-based organisations which face financial constraints. However, the Council may choose to distinguish papakainga development from these other activities due to the unique limitations faced by Maori landowners.

Option (d) Provide for long-term deferral of development contributions on papakainga developments

47. Under this option, development contributions would be assessed and levied as normal on papakainga developments and would be ultimately payable. However, that payment would be deferred for a significant time period (say 10-15 years).

48. This approach requires that those undertaking papakainga development will need to make the standard contribution to the costs of infrastructure servicing those developments. However, it also recognises the unique nature of Maori land and the difficulty in raising finance against it. Deferring development contributions removes an ‘up-front’ cost and allows the development entity to recover these costs over time before passing them onto council.

49. The current deferral provisions of six months or, separately, providing appropriate financial security are less applicable to multiple-owned Maori land than fee simple land. As such, if this option was preferred specific provisions relating to papakainga housing on multiple-owned Maori land will need to be incorporated in the policy. Policy matters to be addressed would include the extent of any security required and how interest on deferred fees would be dealt with.

50. The advantages and disadvantages of this approach include:

Advantages		Disadvantages
· Clearly recognises that papakainga housing on multiple-owned Maori and requires different treatment in the policy · Development contributions would still be paid, just at a later point in time · Opportunity to improve relationship with Tangata Whenua by positively assisting with their housing aspirations · Likely increase in the future level of Papakainga development which would contribute to better social and health outcomes for this part of the community · Adds housing to Tauranga City to assist in managing the city’s rapid pace of growth		· Potential risk of payment default given the long deferral periods and therefore non-recovery of development contributions · Potential risk that interest costs associated with deferring the receipt of development contribution revenue may have to be rate funded · Additional administrative burden associated with managing deferment arrangements · Council continues to hold debt that, without a deferral, would ordinarily be paid down
Budget - Capex	$0
Budget - Opex	Assuming payment default was not an issue and deferment arrangements could be managed within existing staff resources, opex costs would be little or none.
Key risks	Identifying a suitable manner in which security can be provided in the event of payment default. Determining the funding source for interest costs over the deferment period. Administrative burden of managing deferment arrangement not being able to be managed within existing staff resources.

Financial Considerations

51. Financial considerations are identified in the individual options above.

Legal Implications / Risks

52. Key risks are identified in the individual options above.

Consultation / Engagement

53. The development contributions policy is subject to the special consultative procedure when it is adopted or amended. This will occur alongside the 2021-31 long-term plan consultation. Any changes to the policy relating to papakainga housing will be consulted on.

54. Should council prefer an option that does not require a change to the policy, a decision will be required as to whether to consult on that preference through the long-term plan process.

Significance

55. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

56. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision, or matter

57. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the matter is of medium significance.

Next Steps

58. Council’s preferred approach will be incorporated into the draft long-term plan and/or draft development contributions policy as appropriate. Consultation relating to those documents will commence in early May 2021. Specific engagement on this matter will occur with Te Rangapu and other interested parties.

Attachments

Nil

39. The following is a summary of the recommended capital and operational budgets for inclusion in the LTP excluding the Civic Administration Premises. Detailed breakdowns are available.

8 March 2021

10.7 Civic Rebuild - Priority Decisions

File Number: A12280010

Author: Brigid McDonald, Manager: Strategic Investment & Commercial Facilitation

Jo Stone, Senior Strategic Advisor

Authoriser: Christine Jones, General Manager: Strategy & Growth

Purpose of the Report

1. To obtain approval to advance the Civic Rebuild Programme, which includes confirmation of the Civic Precinct Master Plan, prioritisation of investment in a new Community space and Library facility at Willow Street, and negotiations with the preferred developer for the construction of leasehold civic office accommodation in the City Centre.

Recommendations

That the Council advances the Civic Rebuild programme as follows:

a) Notes the Council has a key role in supporting City Centre revitalisation through investment in Civic Facilities and amenity and contributing to a City Centre environment which incentivises activity, future private investment, and increased mixed-use development;

b) Confirms the September 2020 decision of Council to refresh and revise the Civic Precinct Master Plan. Approves a revised streamlined challenge process to the existing Master Plan and a subsequent report back to Council;

c) Includes in the draft Long-Term Plan the proposed programme and projected capital expenditure of:

· $45 million to provide the new Community space and Library facility, (commencement August 2021, expected completion December 2023); and

· $11 million to provide enhanced public spaces in the Civic Plaza and surrounding area (including Masonic Park);

· $2 million for temporary relocation and associated fitout costs

· $3 million for demolition of existing buildings on Civic site.

d) Confirms the intent of the Commissioners to meet with Ngai Tamarawaho representatives to discuss arrangements for meaningful engagement regarding the future development of the Civic Precinct;

e) Confirms the March 2020 in-principle decision of Council to secure leased interim office accommodation for the purpose of consolidation of Council’s administration staff in a single location and approves negotiations being entered into with third parties to this effect;

f) Approves the demolition of Willow Street Buildings A, B and C (refer Attachment 1) as soon as possible following existing Council services relocating to other temporary premises; and

g) Notes that the capital and operating expenditure forecast in this report includes projected costs relating to the demolition of the Willow Street buildings and temporary premises (relocation, rent, outgoings) whilst the new facilities are built.

Executive Summary

2. Since 2015, comprehensive planning, feasibility and engagement has been undertaken and presented to Council regarding the redevelopment of the Civic Precinct and related CBD sites (the former Heart of the City / Civic Heart programme).

3. This work has included a partnership agreement involving the master planning and redevelopment of the Willow street civic properties, consideration of the relocation and future build of ancillary civic facilities, and programming and funding of these related projects.

4. While much comprehensive work has been completed, a lack of commitment to long term decisions has impacted on the ability of Council to move from planning into implementation phases to address the need.

5. Resolutions to date include:

(a) Approval of a programme business case;

(b) Inclusion of civic projects in previous Long-Term Plans (LTPs) - 2016 LTPA, 2018-2028 LTP;

(d) In principle agreement to reconsolidate Council's office-based services to a single location (leased interim office accommodation); and

(e) Exploring and assessing proposals to Council for interim accommodation options before a decision is made to proceed to a final detailed lease negotiation phase.

6. What is now sought is approval to investment through Council’s Long-Term Plan 2021-31 to prioritise the development of a new Community space and Library and commitment to a preferred Civic Administration Building development option.

7. The recommended review and refresh of the Civic Precinct Master Plan will progress in parallel to the City Centre stocktake programme (referred to in the report to Council, ‘2021-2031 Long-term Plan – Update and revised working draft), 8 March 2021). Staff will ensure the respective programmes’ strategic outcomes are aligned.

8. The original Heart of the City (‘HOC’) programme drivers remain unchanged and the need to advance the Civic Precinct Rebuild Programme and components is now critical to support revitalisation of the city centre and meet the current and future needs of Tauranga’s community. These drivers are multipronged;

(a) CBD Activation. The civic centre and surrounding areas of the city centre are in rapid decline both in terms of building quality, facility quality, commercial activity, social activity and sense of community. Council is in a key position to inject commercial and social activation by commencing and positioning its building projects strategically.

(b) Council operations are hampered by split locations, short term leases, location from CBD and an acceptable single environment to foster performance and to attract and retain employees.[28] The need for a single site civic administration building is urgent.

(c) Council has already prioritised investment in a Community space / Library over staff accommodation and determined that the Civic Site is not recommended for the location of the Civic Administration Building in the next 10-15 years.

9. The recommended options will support city centre revitalisation including the incentivisation of future private investment and further support current investment in the business and education sectors. This will also support increased mixed-use development in the city centre including more residential activity.

Background

10. The background to the current issues and recommendations is covered in numerous reports to Council from 2015. For brevity, the background is summarised as follows:

Civic precinct master plan

11. The Civic Precinct is the Council-owned land highlighted in the plan at Attachment 2.

12. The following table sets out the key decision points relating to the master planning and potential development of the Civic Precinct:

Date	Decision
June 2015	Council resolved to commence a strategic assessment of the issues and opportunities associated with the future of the civic campus buildings.
April 2016	Council agreed that staff should prepare a business case for civic space options based on the master plan (option 3) developed by architects Warren and Mahoney and landscape architects LandLab.
June 2016	Council considered the business case and agreed to consult on a proposed change to the LTP based on the business case which included the development of a new Civic Administration Building on the site.
Sept 2016	Council adopted an amendment to the LTP (2015 - 2025) to include a number of projects including: "Work with the private sector to deliver a new Civic Administration Building for Council to lease on the 91 Willow St land. $22.3m in capital costs plus an ongoing lease cost ($2.5m/an)".
Sept 2016	Council adopted the Warren and Mahoney / LandLab developed master plan as proposed as a reference design that subsequent phases and alternative proposals could be tested against on a merit basis to "meet or better".
Feb 2018	Council accepted in principle the master plan developed by Willis Bond. This master plan is at Attachment 3.
June 2018	The Council approved the Partnering Agreement with Willis Bond and approved the master plan "for the purpose of the project, but on the basis that the master plan is 'indicative' and currently needs to be revised and in the future amended as necessary in response to requirements of the [Heart of the City] Project during the [12-year] Term.”
June 2018	Council adopted the 2018-2028 LTP which included a new central Library on the Willow Street Civic site with a capital investment of $39 million to be completed by June 2021.
June 2019	Council adopts 2019/20 Annual Plan removing $18.8 million from the 2019/20 budget to defer new central Library while Civic Rebuild options are reviewed.
Sept 2019	Council considered a proposal to commission a feasibility report to develop a Civic Administration Building (and bus facility) at 21 Durham Street. The proposal was left to lie on the table.
March 2020	Council agreed to proceed with revision of the master plan.
June 2020	Council’s Urban Form and Transport Development Committee – · Acknowledged Ngai Tamarawaho's connection with the land in the vicinity of the Willow Street Precinct and, in particular Lot 45 and Lot 38, due to the historical land dealings since the 1830's. · Approved the Chief Executive progressing discussions with Ngai Tamarawaho to understand Ngai Tamarawaho's view and aspirations for the future of Lot 45 and Lot 38, and explore opportunities to strengthen the relationship between Council and the hapu in respect of Lots 45 and 38, together with the future development of the Civic Precinct. · Requested that the Chief Executive reports to Council on relationship opportunities and action options for consideration and approval. · Requested that the Mayor, Deputy Mayor and Cr Kelvin Clout meet with representatives of Ngai Tamarāwaho to discuss means and timing for meaningful engagement with the hapū.
September 2020	Council approved an advisory and decision-making framework for the purpose of reviewing, confirming and implementing a master plan for the Civic Precinct, specifically: · Council’s role being to receive advice from the project team (including recommendations of the Project Advisory Board and feedback from the Reference Group), and make decisions on strategic direction and redevelopment on a case-by-case basis, limited to strategy, cost and timing; · A Project Advisory Board who will consider information from the project team, test this against the strategic direction set by Council, apply their expertise, and recommend complying projects for approval; · A Reference Group who will inform Council’s project team on matters of local / community perspective and expertise.

13. The Project Advisory Board and Reference Group are considered by staff to no longer be required. These structures were proposed to better support the Elected Members’ decision-making process by providing greater confidence in the review process. It is now recommended that a streamlined review and refresh process occur with a panel of 3-4 experts with national urban planning experience and local knowledge. This can progress quickly with a view to completion of the expert review/challenge in April and master planning refresh in April-May 2021, resulting in a revised master plan reported back to Council in June 2021.

14. The master plan review and refresh process will involve work to scope (high level), assess and agree the developments to be delivered at the Civic Precinct. As set out below, the first key development recommended is a new Community space / Library facility, with adjacent open space amenity area.

15. The master plan would proceed in a staged process –

(a) Phase 1 (from July/August 2021, subject to LTP decisions) planning and development of new Community space / Library and Civic Open Space. This work builds on considerable existing work from the HOC project, which aligns with existing city centre strategic documents and is supported by recent needs analysis assessments and earlier strategic cases. More recently, the role of the city centre and civic facilities, and city centre-specific projects such as the central library redevelopment, civic amenities and civic space enhancements, and community facility rationalisation / space, have been included in the scope of the Te Papa Spatial Plan. In progressing Phase 1, staff will work to ensure this remains aligned and/or integrated with other current and planned city centre strategic work; and

(b) Phase 2, involving planning for the other components of the plan, including further community engagement. This work will be aligned with the city centre strategic stocktake work (noted above).

16. Ahead of Phase 1, Council would engage further with Ngai Tamarawaho, who have mana whenua in relation to a significant proportion of the Te Papa Peninsula and have expressed a particular interest in Lots 38 and 45, which are within the Civic Precinct.

17. The Te Papa Peninsula has a long and complex history, which includes numerous battles between Maori tribes, the contentious transfer of Maori land by the Church Missionary Society (CMS) and subsequent sale to the Crown. More recently in the late 1980's, the Willow Street Precinct and, in particular, Lot 45, was the site of occupations by Ngai Tamarawaho, and protests. These events highlighted the unresolved 150-year-old land grievance, which remains to this day.

18. From around 2017, in response to Council’s Civic Heart project, Ngai Tamarawaho, again signalled the unresolved land grievance notifying of a potential claim against Council in relation to CMS land.

19. Although contentious to date, the consideration of the future of the Civic Precinct, and, in particular Lot 45, may provide an opportunity for Council and Ngai Tamarawaho to work together to strengthen their relationship, and deliver sustainable cultural, civic and commercial outcomes for the City Centre and the wider community.

20. It is recommended that the Commission now engage with Ngai Tamarawaho, as the Elected Members were unable to do so following the 9 June 2020 Urban Form and Transport Development Committee resolution noted in the table above.

Community Space and Central Library Facility

21. The Community Space and Library facility is a priority amenity, providing a much-needed anchor for community focus, activating the Civic Precinct and wider area, and helping to stimulate private sector investment within the CBD.

22. Between 2015 and 2018 considerable work occurred including investigations, business case development and community consultation / engagement to support building both a new Central Library and Museum within the CBD. Through this work a number of options for new Library facilities were investigated and approvals for funding the build / new facility was confirmed through the LTP processes.

23. As a result of the more recent community engagement, the preferred option agreed was ‘to provide at new a city Library to meet current community needs’. The favoured approach at that time was identified as a $40 million concept, decoupling the museum from the scope as it had been incorporated into the last Long-Term Plan. This Library facility workstream fed into the overall Civic Master plan, adopted in 2018.

24. Subsequent to this, a later decision in Council (Sept 2018), resulted in a requirement to include a ‘future proofed’ element to the service requirements.

25. The proposed facility was included in the 2018 Willis Bond Partnering Agreement as part of the Willis Bond priority negotiation rights in respect of a number of specified developments within the City Centre.

26. During 2019/2020 Annual Plan deliberations the decision to defer expenditure on a new central Library was made. Coupled with Governance unable to reach decision on direction of Civic redevelopment the progress to build a new library has been impacted.

27. As the Library / Community space facility build programme is a development component of the civic precinct site and Master plan, it is envisaged that Ngai Tamarawaho are engaged throughout the process as a key partner.

Going forward

28. In 2019, TCC commissioned a Community Facilities Needs Analysis (CFNA) that considered the current and emerging (growth-related) demand for community facilities, the condition and suitability of our existing facilities networks and emerging participation trends, to present a development pathway for investments across each facility type.

29. The Needs Analysis confirmed the need to progress the central library development at a scale to accommodate growth (of 22% in the central library catchment over the next 25 years). It also considered the need for improved provision of community space in the central city.

30. As a result of that work, the need to refresh the Strategic Case for a central library and community space, and to inform the LTP process with an up-to-date understanding of objectives, space requirements and costs, we commissioned further work last year. The final report will be available in early March. The key conclusions of that refreshed strategic case are that a new central library and community space should:

(a) Perform three important roles within the Tauranga library network:

• Local library – serving those living close-by or working/studying in city centre. This includes general collections, technology, study/relaxation spaces, meeting, and programmes spaces.

• Regional library – serving the city and region to access specialist services. This includes provision of special collections, archive of important documents and research centre.

• Network role – serving the Tauranga library network with collection management, programme development and administration

(b) Integrate community space and be a people-centered facility, which includes spaces for:

• Arrival – welcoming and guiding people to the opportunities within.

• Living room – providing recreation, reading, studying, learning and relaxation.

• Discovery and Innovation – supporting literacy, learning and creativity.

• Connections – enabling community interaction, engagement, and connections.

• Revitalise – assisting people to relax, revive and refresh

31. The proposed facility would be approximately 4,750m², with a total project costs estimated at circa $45m.

32. The Community space / Library is recommended as priority development within the greater Civic Rebuild context, providing the community with a much-needed community asset at the same time as Civic Precinct master planning moves into the development and implementation stages.

33. It is recognised that the Community space / Library needs to be a modern facility reflective of current and future needs of the community, likely to be significant different in the experience it offers from a traditional library. Further work will be required to explore opportunities of what such a facility can offer the community and how it is best configured. This work can commence once there is a higher level of certainty that the project will be proceeding.

Civic Administration accoMmodation

34. It is well established that the Willow Street civic buildings are no longer fit for purpose and are beyond repair and that it is undesirable to accommodate Council’s staff and services across multiples sites as is currently the case (e.g. 24 March 2020 report to Council – ‘Council Accommodation Strategy’).

35. The following table sets out the key actions and decision points regarding a new civic office accommodation, particularly those from March 2020 that have led to the recommendation in this paper to confirm the leasehold option for a new office building in the City Centre.

Date	Action / Decision
Sept 2016	Decision to demolish Buildings A (includes current Chambers and below) & C (includes current Customer Service Centre, Executive Office etc)
Sept 2019	Council considered a proposal to commission a feasibility report to develop a Civic administration Building (and bus facility) at 21 Durham Street. The proposal was left to lie on the table.
March 2020	Council approved the following – · In principle agreement to reconsolidate Council’s office-based services to a single location as soon as possible; · In principle agreement to secure leased interim office accommodation for the purpose of consolidation Council’s administration staff in a single location; · Enter into good faith, non-binding negotiations with a developer who had offered to provide new leasehold office premises for Council lease and explore and assess any other proposal to Council for interim accommodation options before a decision is made to proceed to a final detailed lease negotiation phase.
Mid-late 2020	Further assessment of costs for remedial works on Willow St buildings occurred.
July-Oct 2020	Proposals were considered from private CBD landowners / developers on a Civic administrative development to meet Council’s needs for a 10-15 year timeframe.

36. The change from a new Civic administrative building within the Civic Precinct to short – medium term leased accommodation on another CBD site is considered significant with regards to Council’s Significance and Engagement Policy. Therefore, consultation on this matter in the context of the current LTP process is consistent with the requirements of the Local Government Act 2002. The primary reasons for deeming significance being that the location of a new Civic administrative building was part of the wider suite of civic facilities planned for delivery at the Civic Precinct through the former Heart of the City Programme and the likely term of lease (beyond 10 years).

37. Council’s change of direction regarding the civic administration building location is outlined above. While there is a sound basis for this change, including the Council-led activation of two city centre locations, consultation enables Council to understand community views about the proposed change, providing greater transparency to decision-making.

38. Consultation via the LTP would include an outline of the preferred option and rationale.

Financial considerations

Financial Summary - Civic Rebuild
Forecast 26 February 2021	(000’s)

New Central Library - Completion June 2024
Capital Cost - Design, Construction and Fit Out	45,000
Fit Out Temporary Location	2,000
Total Capital	47,000

*One off and Annual Operating Costs:
Total one off costs associated with project (inc Relocation)	500
Annual Operating Costs Prior to completion of new Library	1688
Annual Operating Costs New Library (2025 onwards)	1389


Other Related Projects
Civic Building Demolishment	3,000
Civic Plaza and Surrounding Area (inc Masonic Park)	11,000
Total Related Projects	14,000


Total Project Costs Civic Rebuild (excl Civic Admin. Premises)	61,000

* Operating Costs exclude interest, depreciation, debt retirement and internal overheads
Refer confidential report for costs associated with Civic Administration Building

Legal Implications / Risks

40. Previous reports to Council have outlined the risks of various options considered regarding the Council’s obligations under the Partnering Agreement with Willis Bond and decision-making requirements more generally. Staff can seek / communicate relevant advice to the Commission as required.

41. In summary, the preferred options recommended through this report, have been assessed to best manage risk for Council and the community. For example –

(a) Proceeding with the Community space / Library facility aligns with the existing Master Plan and Partnering Agreement – Council is committing to what it has previously communicated to the community and Willis Bond;

(b) A sound selection process has determined a preferred Civic administration offices option;

(c) The LTP 2021-31 consultation process enables Council to receive community feedback on the recommended investments ahead of a final decision.

(d) The risk of continuing to defer such investment is a significant risk to Council in terms of deferred costs, inadequate community facilities relative to current and projected future need, likely deferred private investment in the city centre, and consequent reputational impacts for Council.

Consultation / Engagement and significance

42. Addressed briefly above and via the upcoming Long-Term Plan consultation process.

Next Steps

43. The following work can occur ahead of LTP consultation and decision-making:

(a) Master plan review and refresh;

(b) Project planning for decant/relocation and demolition-related activities;

44. The following work will be undertaken subject to confirmation through the LTP 2021-31:

(a) Secure temporary library, Chambers and customer service centre facilities based in the CBD (includes confirmation of demolition programme);

(b) Commence design and pricing process for new library (includes regeneration/creation of adjacent civic open space);

(c) Commence negotiation for a Development Agreement for leased interim Council administration office space on a CBD site.

1. Attachment 1. Willow St Buildings - A12280049 ⇩

2. Attachment 2. Civic Precinct Map and Council Owned Land - A12281876 ⇩

3. Attachment 3. Masterplan TCC Civic Heart 2018 - A12280086 ⇩

8 March 2021

10.8 Financial and Non-Financial Monitoring Report: Period ended 31 December 2020

File Number: A12200977

Author: Kathryn Sharplin, Manager: Finance

Authoriser: Paul Davidson, General Manager: Corporate Services

Purpose of the Report

1. The purpose of this report is to inform Council and the public of our financial and service level performance result for the first six months of the financial year 2020/21 and provide an overview of resident perceptions.

Recommendations

That the Finance, Audit and Risk Committee:

(a) Receives Report Financial and Non-Financial Monitoring Report: Period ended 31 December 2020.

Executive Summary

2. The full year financial projection for operating surplus is for a deficit of $24m which is $4.9m favourable to budget. The key variances occur across non-rate funded activities. The rates requirement is currently projected to be as budgeted. Net debt at year end is projected to be $640m which is $46m below budget due to slower timing of capital delivery. The main risk to this debt projection is timing and cost of capital project delivery.

3. Attachment A presents how Council and the community are tracking towards achieving Council’s non-financial performance measures and levels of service.

4. Of the 151 non-financial performance measures, 123 have been measured and reported on. 72 measures (48%) are on track, 38 measures (25%) off track and 28 measures (18%) yet to be measured. Thirteen measures (9%) have achieved the annual target.

5. Attachment B presents a summary of the second wave of reporting from the 2020/21 annual residents’ survey undertaken between 15 January – 10 February 2021.

Background

6. This report is for monitoring and reporting purposes showing Council’s financial and non-financial performance in delivering services to the community

7. In a long-term plan (LTP), the level of service that the council will deliver is agreed upon by the council in consultation with the public.

8. The Local Government Act 2002 stipulates that local authorities are required to report on how well they are performing in delivering these levels of service to their communities as measured by the non-financial performance Indicators.

9. In the 2018-28 Long-term Plan there were 148 KPIs that were agreed upon (subsequent measures have also been added to increase total to 151 via this committee, no levels of services have been changed), 23 of which are mandatory measures as per section 261B of the Local Government Act.

10. The budget to achieve the agreed level of service is set in the LTP. Rates are set based on the agreed budget.

Strategic Context

11. Maintaining expenditure within budget ensures delivery of services in a financially sustainable way.

12. Monitoring non-financial performance is a key function of the committee.

DISCUSSION

Part 1: Financial Performance

13. Attachments C and D to this report provide a summary of Council’s financial performance for the year to date. The content of this report includes:

(a) A summary of revenue and expenditure year to date with revised full year projections presented as a Statement of Comprehensive Revenue and Expense (Attachment C).

(b) The Treasury report which shows borrowing year to date and full year projections, the average cost of funds and money market investments benchmarked to average return (Attachment C).

14. Summary Statement of Comprehensive Revenue and Expense (Attachment C) shows the operating and capital revenue and expenses in a format consistent with the Annual Report. It shows the year to date results for revenue and expenditure and provides full year forecasts.

15. The six-month result in the SOCRE forecasts a full year deficit of $24m, which is $4.9m favourable to budget. Revenue and expenditure budgets had been reduced in the revised annual plan post Covid-19. Actual operating revenue is ahead of budget primarily as a result of higher user fees revenue across building and airport activities. Expenditure has been higher in response to higher levels of activity across the business.

16. Summary Revenue and Expenditure variance by activity (Attachment C) highlights key variances by activity and provides a full year forecast. These results feed into the whole of council forecasts contained in the SOCRE.

17. The Treasury Report (Attachment C) shows total net debt to 31 December 2020 of $565m with the full year debt forecast $640m, which is lower than budget by $46m as a result of slower timing of capital delivery.

18. The interest rate average at the end of December was 3.04%. Total HIF borrowing at 0% interest has increased to $78.7m. The year-end forecast average interest rate is approximately 3%.

19. The TCC Capital expenditure table (Attachment D) identifies capital project budgets for the year by significant projects and remaining growth, level of service and renewal project expenditure. It also shows $43m of capital expenditure adjustment which was the budgeted amount of capital non-delivery for the year. To the end of December, capital spend has been 27% of full year budget. The projections at the end of December remained optimistic at 84% of budget by year end. However, this projection is currently being revised downwards recognising the later start to construction of several projects.

Part 2: Non-Financial Performance Measures

20. Attachment A presents how Council and the community are tracking towards achieving Council’s non-financial performance measures and levels of service.

21. Of the 151 non-financial performance measures, 123 have been measured and reported on. 72 measures (48%) are on track, 38 measures (25%) off track and 28 measures (18%) yet to be measured. Thirteen measures (9%) have achieved the annual target.

22. Initial analysis of the non-financial performance measures shows that of the 38 measures off track, 10 measures (26%) across six activities, continue to be affected by the impact of COVID-19.

23. Of the six activities that continue to be affected, five relate to Community Services (83%), and one to Sustainability and Waste (17%).

24. Where data is not available, the majority relate to annual measures which are only surveyed at one point through the year or to measures that have no current method of assessment.

Perceptions Monitor

25. The Annual Residents’ Survey supports non-financial reporting by measuring the perceptions of residents regarding various aspects of services that Council provides.

26. The mail out quotas for each of the three waves are applied according to age, gender and ward, to ensure that a representative sample of Tauranga City’s population is achieved. The data is weighted to account for variances in the achieved quota and to ensure that the sample reflects the population profile achieved.

27. The overall results have an anticipated margin of error of +/- 4.6% at the 95% confidence level.

28. Data collection takes place in three waves between September 2020 and May 2021. Wave two results were collected between January and February 2021 and based on a sample size of a maximum 211 respondents for each question.

29. The third, and final wave, will be undertaken in May 2021, with a minimum goal of 600 responses per section across the three waves.

30. A summary of the results is attached in Attachment B. This summary helps provide an insight into how different elements of Council’s core service deliverables, reputation and the perception of value for money contribute to respondents’ perception of Council’s overall performance.

31. The level of positive sentiment regarding Tauranga City Council’s overall performance dropped from 46% in wave two 2019/20 to 29% for the current wave two period. Negative sentiment increased from 20% to 34% respectively, for the same period.

32. Of the negative verbatim commentary, the most common theme related to poor perception of elected members’ leadership abilities.

33. This change in sentiment was further reflected in the sub-measures of image and reputation and value for money, as follows:

a. Positive sentiment regarding image and reputation dropped from 36% in wave two 2019/20 to 17% for the current wave two period. Negative sentiment rose from 35% to 49% for the same period. The primary driver of this change, from responses provided to-date, was the poor perception of elected members’ leadership abilities and poor engagement with communities overall.

b. Positive sentiment regarding value for money dropped from 39% in wave two 2019/20 to 30% for the current wave two period. Negative sentiment rose from 29% to 39% respectively. Of the negative comments, the most common theme was that rates were too high, with some respondents referring to perceived better value for money elsewhere in New Zealand. Additionally, there was a sense that spending was poorly prioritised and dissatisfaction with how projects are managed (including engagement and cost overruns).

c. Positive sentiment regarding council’s core services and facilities dropped from 63% in wave two 2019/20 to 57% for the current wave two period. Negative sentiment decreased from 14% to 11% in the same period. As no substantial change in level of service or delivery of service occurred, it is likely the reduction in positive sentiment is influenced by factors other than the service delivery.

OPTIONS

34. There are no options associated with this report. The report is provided as information only.

Significance

35. Under the Significance and Engagement Policy 2014, the decision to receive this report is of low significance. The decisions to approve the capital overspends are also of low significance as the size of the overspends do not reach a higher threshold.

Next Steps

36. This report ensures monitoring of Council performance to ensure compliance with Council’s budgets, policies and delegations.