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Ordinary
Council meeting Agenda
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14
November 2022
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11 Business
11.1 Options
for delivery of Te Manawataki o Te Papa development project by a
council-controlled organisation
File
Number: A14170628
Author: Alastair
McNeil, General Manager: Corporate Services
Authoriser: Marty
Grenfell, Chief Executive
Purpose of the Report
1. To
consider the establishment of a council-controlled organisation to lead
delivery of Te Manawataki o Te Papa projects.
Executive Summary
2. Following adoption in
June 2022 of the Long-term Plan amendment that approved the inclusion of the Te
Manawataki o Te Papa civic development projects, consideration has been given
to the optimum governance and operational model to ensure delivery of those
projects.
3. That consideration, by a
consultant supported by senior council staff, assessed various options
including status quo and has resulted in a recommendation that a
council-controlled organisation be established to govern and lead delivery of
the civic development projects.
4. Establishment of a council-controlled
organisation requires various legislative steps and considerations, including
community consultation. This report recommends commencing that
process.
Background
Te Manawataki o Te Papa
5. In
June 2022, after extensive public engagement and consultation, Council approved
an amendment to the Long-term Plan to bring the full vision for our civic
precinct, called Te Manawataki o Te Papa, to life in a single-stage, phased
development.
6. The
programme of work will see a $303.4 million investment in developing the city centre
over the next eight years and includes facilities such as a civic whare (public
meeting house), museum, library, an exhibition and events centre, as well as
the associated landscaping. It
will be subject to achieving 50% of the required funding from sources other
than rates.
Delivery review
7. In
July 2022, the Chief Executive commissioned a review of potential options for
the long-term delivery of the Te Manawataki o Te Papa programme of works.
This occurred at the same time as internal staffing structures were increased
and strengthened to commence the delivery phase.
8. That
commission ultimately resulted in two reports.
Report 1
9. In
August 2022, Council received a report (“the August 2022 Pedersen
report”) against the original brief, the objective of which was:
· To
investigate the use of council-controlled organisations (“CCOs”) or
other subsidiary entities for the purpose of developing significant community
facilities, by other councils within New Zealand, and
· To
identify whether or not there could be potential advantages or benefits for
Tauranga City Council in applying a CCO or other subsidiary entity model to the
redevelopment of the Tauranga civic precinct and other major community
facilities.
10. The
August 2022 Pedersen report is included as Attachment 1 to this
report. That report considered the merits of:
· a
CCO model to lead the delivery of the civic development, and
· a
modified status quo of in-house delivery with a delegated ‘project
board’.
11. The
August 2022 Pedersen report concluded that:
“There is a good case for considering the creation of
a company structure CCO to manage the redevelopment of the Tauranga civic
precinct. The potential benefits of a more commercial approach to project
governance and management, greater confidence from potential funders and other
stakeholders, and the ability to structure a CCO to enhance project certainty,
lead me to that conclusion.”
12. The
August 2022 Pedersen report also recommended that council proceed to a detailed
implementation investigation into the establishment of a company structure CCO.
Report 2
13. Consistent
with the recommendation above, further work was undertaken to consider
different potential CCO models for the delivery of the civic development.
14. That
work was underpinned by an assumption that the key drivers for establishing a
CCO for the civic development project are:
· To
establish a capable delivery vehicle for large scale TCC community facilities
· To
create greater confidence amongst the community, funders and other stakeholders
in TCC’s ability to successfully deliver large scale community
facilities.
15. Following
collaborative work between senior council staff and the consultant, a second
report (“the November 2022 Pedersen report”) was received and is
included as Attachment 2 to this report.
16. The November 2022 Pedersen report
evaluated three CCO models in terms of their appropriateness for implementation
as a delivery vehicle for the civic development. These included one that was
purely a governance model and two that were governance and delivery models with
varying degrees of separation from Council. That report also evaluated
both the status quo approach and a modified status quo approach against the
same 13 criteria.
17. The November 2022 Pedersen report
recommends the governance-only CCO model as that option “was
considered to be superior to the other CCO options and also superior to the
status quo or any other internal TCC structure that could be created in terms
of project outcomes that could be achieved.”
Strategic
/ Statutory Context
18. Te
Manawataki o Te Papa – the heartbeat of Te Papa – is a blueprint
for the transformation of the city centre into a place where people will want
to live, work, play and visit – a place where we can tell the amazing
stories of our city’s heritage and culture.
19. Te
Manawataki o Te Papa strongly promotes that part of the recently adopted vision
for Tauranga that speaks of fuelling possibility:
Tauranga is a city where we foster creativity and innovation,
celebrate our arts and culture, and empower our changemakers to create a
vibrant city into the future.
20. Te
Manawataki o Te Papa helps, strongly or partially, to advance each of
council’s community outcomes:
· An
inclusive city
· A
well-planned city
· A
city that supports business and education
· A
city that values, protects and enhances our environment
· A
city we can move around easily.
21. As
a masterplan, Te Manawataki o Te Papa links to all of the above strategic
aims. However, until the masterplan is delivered, and delivered well, the
strategic benefits will not be realised. This paper, and the proposed
establishment of a CCO to drive the project implementation, is intended to ensure
that delivery of the Te Manawataki o Te Papa projects is exemplary and for the
ultimate benefit of all Tauranga’s residents and visitors.
Options
Analysis
22. As noted above, the November 2022
Pedersen report (at Attachment 2) assessed three CCO models against 13 criteria,
as well as assessing both the status quo and a modified status quo
approach. A summary of that assessment can be found at paragraph 26 of
that report.
23. The November 2022 Pedersen report
makes a clear recommendation – for a governance-only CCO to lead the
delivery of the civic development projects (option 1 per that report).
Paragraph 27 of that report provides extensive reasoning behind that
recommendation.
24. As such, there are now three options
for Council to consider:
Option 1
– accept the Pedersen recommendation and move to establish a company
structure CCO responsible for delivery of the civic development per the report
Option 2 – accept the
principle of establishing a CCO but modify the model
Option 3
– reject the Pedersen recommendation and retain a status quo (or modified
status quo) approach to governing and delivering the civic redevelopment
projects
25. The advantages and disadvantages,
including an indication of additional costs, of these options are covered in
the November 2022 Pedersen report and are not repeated here.
26. Staff recommend that Option 1
– accept the Pedersen recommendation and move to establish a company
structure CCO is approved by Council.
Financial Considerations
27. The
estimated costs for the establishment of this CCO are $100k. This will
include costs of establishment, board set up and recruitment costs, and legal
costs. Given there is no asset ownership within the proposed CCO, minimum
equity will be used to establish the CCO.
28. Annual
costs of the proposed CCO have not been fully costed but are expected to be
approximately $600k. These costs will be predominately for the costs of
the board and senior executive.
29. These
costs will be funded by a loan funded grant from Council to the CCO. It
is recommended to loan fund this grant given the nature of this CCO and its
sole focus on the governance of delivery of long-term capital
expenditure. This has not been included in the overall budget of Te
Manawataki o Te Papa and would therefore be additional budget which would be
funded through a ratepayer funded charge over a maximum ten year time period.
30. Existing
governance costs are approximately $130k per annum, plus internal staff costs, which
will not be incurred once this CCO is established and operating.
31. Any
current year costs are estimated to fall within Chief Executive delegated
authority consistent with the funding methodology proposed above.
Legal
Implications / Risks
32. The establishment and operation of a
CCO is subject to a number of provisions in the Local Government Act 2002
(“the Act”). These provisions predominantly relate to the
governance of the CCO and the accountability of the CCO and its directors back
to council and ultimately the community.
33. Key among the provisions in the Act
are that:
(a) Directors of the CCO need to
be appointed in accordance with council’s Appointment of Directors to
Council Organisations policy
(b) Council may prepare a
‘statement of expectations’ outlining its expectations of the CCO
(c) The CCO must prepare and adopt
an annual statement of intent (following council input) the purpose of which ‘is
to:
(i) state publicly the
activities and intentions of the CCO for the year and the objectives to which
those activities will contribute; and
(ii) provide an opportunity for
shareholders to influence the direction of the organisation; and
(iii) provide a basis for the
accountability of the directors to their shareholders for the performance of
the organisation.’
(d) The CCO must prepare, and
provide to council, six-monthly and annual reports on its operations.
Consultation
/ Engagement
34. Under Section 56 of the Act council
must consult with the community before establishing a CCO. While that
consultation needs to meet the principles of consultation set out in section 82
of the Act, the way that those principles are met is at council’s
discretion.
35. Key within the principles of
consultation are that persons who are affected by, or interested in, the matter
should be:
· given clear
information about the purpose of the consultation
· provided with
reasonable access to relevant information
· encouraged to
provide and present their views
… and that council should
receive those views with an open mind.
36. Given the nature of the matter for
consultation – the establishment of a CCO structure to guide delivery of
an already-agreed programme of works – staff consider that a consultation
process that meets the statutory requirements should be:
· widely available
(advertised through council’s digital channels and print media)
· relatively brief
· focused on the
single key decision to be made (to establish, or not, a CCO)
· supported by links
to this report, the August 2022 Pedersen report and the November 2022 Pedersen
report.
37. Appropriate communications material
will be prepared to support the consultation.
38. The substance of the Te Manawataki o
Te Papa masterplan and the delivery of that masterplan through the amended
Long-term Plan has been extensively consulted on previously. There is no
need or intention to re-consult on those matters.
Significance
39. 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.
40. 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 matter.
(c) the capacity of the local authority to
perform its role, and the financial and other costs of doing so.
41. In accordance with the
considerations above, criteria and thresholds in the policy, it is considered
that the proposal is of medium significance.
ENGAGEMENT
42. Taking into consideration the above
assessment, that the proposal is of medium significance, and the legal
requirement to consult on the establishment of a CCO, staff are of the opinion
that consultation under section 82 of the Local Government Act 2002
(‘principles of consultation’) should occur prior to Council making
a final decision.
Click here to view the TCC
Significance and Engagement Policy
Next
Steps
43. If
the above recommendation is adopted, consultation is proposed to commence on 21
November, closing on 2 December. Depending on the extent of feedback
received and the issues covered in that feedback, it is expected that a further
report will be presented to Council on 12 December.
44. If,
following consultation, Council determines to proceed with the creation of a
CCO for the purpose of governing the delivery of civic development projects,
the following steps will be required:
(a) incorporate the CCO company
and adopt a constitution (this may have one initial director for the purposes
of establishment)
(b) identify the skills required
for the Board and prepare an information pack for potential directors including
a briefing on the objectives and status of the project, the role of the CCO and
relationship with Council, other parties and organisations involved, funding
streams, time commitment, remuneration, directors' and officers' insurance
cover etc
(c) seek and engage directors in
accordance with Council's Appointment of Directors to Council Organisations policy
(d) issue a Statement of
Expectations to the CCO
(e) delegate powers and functions
to the CCO and identify reporting requirements of the CCO back to Council
(f) receive and consider the
draft Statement of Intent produced by the CCO.
Attachments
1. Final
civic precinct report 200822 - A14174289 ⇩ 
2. Final CCO report 041122
- A14174291 ⇩
