Agenda of Finance and Council Controlled Organisations Committee

Finance and Council Controlled Organisations Committee

22 May 2018

Part A Reports

Heritage Rates Relief 2017-18

Department: Planning

EXECUTIVE SUMMARY

1 This report provides recommendations on applications for rates relief for six earthquake strengthening and re-use projects.

2 Four of the applications meet the purpose of the Contestable Fund for Rates Relief for Heritage Buildings policy, which offers relief as an incentive for restoration and upgrade, and recognises the investment in seismic, fire, and other upgrades on heritage buildings.

3 Two of the applications meet the purpose of the Contestable Fund for Rates Relief for the Comprehensive Reuse of Heritage Buildings policy, which offers temporary relief where investment in heritage buildings result in a substantial increase in the value of the building.

4 Details and recommendations for each project are provided.

RECOMMENDATIONS

That the Committee:

a) Grants 100% rates relief (based on the general rate amount of $4,921.61) for two years for the earthquake strengthening and restoration of 52 Tennyson Street from the Contestable Fund for Rates Relief for Heritage Buildings.

b) Grants 100% rates relief (based on the general rate amount of $11,510.02) for one year for the design and construction of a replica boundary wall and railings for Dunedin Prison from the Contestable Fund for Rates Relief for Heritage Buildings.

c) Grants 100% rates relief for three years (based on general rate amount of $5,122.32) for the earthquake strengthening, fire safety improvements and façade restoration of 192 Princes Street from the Contestable Fund for Rates Relief for Heritage Buildings.

d) Grants 100% rates relief for three years (based on general rate amount of $7,328.98) for the earthquake strengthening and façade restoration of 50 Dundas Street from the Contestable Fund for Rates Relief for Heritage Buildings.

e) Grants a rates freeze for two years upon completion of the conversion of the ground and first floors of 8 Stafford Street from storage to a start-up hub and associated uses from the Contestable Fund for Rates Relief for the Comprehensive Reuse of Heritage Buildings.

f) Grants a rates freeze for two years upon completion of the conversion of the upper floors of 77 Stuart Street from offices to a hotel from the Contestable Fund for Rates Relief for the Comprehensive Reuse of Heritage Buildings.

BACKGROUND

5 The Contestable Fund for Rates Relief for Heritage Buildings policy offers relief as an incentive for restoration and upgrade, and recognises the investment in seismic, fire, and other upgrades on heritage buildings.

6 The Contestable Fund for Rates Relief for the Comprehensive Reuse of Heritage Buildings policy targets reuse projects in buildings with heritage significance, where the investment in the building will result in a substantial increase in the value of the building.

7 The policies assesses building projects against the following criteria:

· Contribution to heritage protection: The Council will consider whether, and to what extent, the work being undertaken contributes positively to the protection of heritage values and long-term retention of the building.

· Level of investment: The Council will consider the level of financial investment in the building. The Council recognises that some of the most important heritage building projects will not necessarily provide the greatest economic returns. However, there will often be tangible and intangible benefits.

· Expediting the use of heritage buildings: The Council will consider whether, and to what extent, the continued and on-going use and retention of the building will be facilitated by the granting of relief.

· Integration with other Council policies and strategies: The Council will consider the extent to which proposed works are consistent with the Dunedin District Plan and the Dunedin Spatial Plan. Preference will be given to projects that are consistent with the objectives and policies of the District Plan and Spatial Plan. The Council will look favourably on projects that align with other Council strategies such as the Economic Development Strategy and Arts and Culture Strategy. In order to increase the potential for area-wide regeneration, the Council may target specific geographic areas of the city on an annual basis in conjunction with this scheme and other targeted incentives. The Council will view projects in areas of the city where there is substantial private investment in re-use positively.

· Public benefit: The Council recognises that the community benefit from the upgrade and improvement of heritage buildings, in terms of improved amenity, public safety and longer term economic and rating benefits. Projects with high public visibility and continued public access/use will be viewed positively.

8 The budget for the Contestable Fund for Rates Relief for Heritage Buildings in 2017/18 is $70,000. Previously committed allocations equal $5,194.54. This year’s applications will total $27,982.93. If the recommendations are accepted and approved, the total spend of the Contestable Fund for Rates Relief for Heritage Buildings will be $33,177.47.

9 The budget of the Contestable Fund for Rates Relief for the Comprehensive Reuse of Heritage Buildings is $100,000. Previously committed allocations equal $61,957.65. There are currently four outstanding projects that have not been completed and therefore have not had their rates recalculated based on their new values. It is highly likely that two of these projects will be completed within the next twelve months and will draw upon their allocations in the new financial year.

10 Both contestable funds will no longer be open for new applications from 2018/19 onwards, as all the funding for the heritage grants schemes will be subsumed into a larger Dunedin Heritage Fund.

DISCUSSION

11 The following applications have been made to the Contestable Fund. Where heritage buildings have previously received financial support from the Contestable Funds, the Dunedin Heritage Fund, or the Central City Heritage Reuse Grants Scheme, the amounts have been noted.

Hulmes Court, 52 Tennyson Street

12 Hulmes Court is an ornately detailed early villa dating from the 1860s and is a rare survivor of Dunedin’s original wooden construction. It is currently used as a Bed and Breakfast. It is a scheduled heritage building on the District Plan and is a Category 2 Historic Place on the New Zealand Heritage List. The property has been recently awarded a grant of $20,000 from the Dunedin Heritage Fund towards the cost of earthquake strengthening the chimneys and restoring the slate roof.

13 The applicant seeks rates relief towards the costs of these works as well as for repairs to the walls, including replacing timber cladding where necessary and repainting of the villa while the scaffolding is in place for the works to the roof.

14 The assessment against the policies is as follows:

· Contribution to heritage protection: the work proposed will keep the building watertight and improve its seismic performance while limiting its impact on the villa’s architectural and historic significance.

· Level of investment: the property is in good condition and has been successfully used as a heritage B&B for some time. As well as being a notable heritage building in the city centre, its current role supports heritage tourism in Dunedin.

· Expediting the use of heritage buildings: use as a B&B minuses the degree of subdivision and attendant harm to the building’s interior that would be likely to occur were the building be converted into apartments, offices or flats. Granting rates relief will allow the continued use of the building as a heritage B&B during a period of construction work.

· Integration with other Council policies and strategies: the proposed works are consistent with the District Plan and the Spatial Plan. The use of the building as visitor accommodation also accords with the Economic Development Strategy.

· Public Benefit: the proposed works are visible from the street and will improve the appearance of the building and public safety.

15 It is recommended that 100% rates relief is granted for two years, based on the current general rate amount of $4,921.61.

Dunedin Prison, Castle Street

16 Dunedin Prison was constructed between 1895 and 1897 in a Queen Anne Style. It is a scheduled heritage building and is located within the Anzac Square/Railway Station Heritage Precinct in the District Plan. It is a Category 1 Historic Place on the New Zealand Heritage List. The Dunedin Prison Charitable Trust has been awarded grants totalling $65,000 from the Dunedin Heritage Fund in recent years and has previously been awarded rates relief between 2014 and 2017.

17 The applicant is seeking rates relief for the cost of restoring the previously demolished boundary walls and railings facing Castle Street.

18 The assessment against the policies is as follows:

· Contribution to heritage protection: while the works proposed will not directly support the restoration of the historic building, they will greatly improve the appearance of the building from Castle Street and Anzac Square when viewed from the Railway Station and Toitū Otago Settlers Museum in particular.

· Level of investment: The Dunedin Prison Charitable Trust has taken on a substantial challenge in the form of a large heritage building that can no longer be used for its intended purpose. They have already successfully restored the roof and façade of the Administration Block and have started to find tenants to use parts of the historic complex.

· Expediting the use of heritage buildings: improving the appearance of the Prison through restoring the lost boundary wall and railings may help secure additional tenants for the heritage building, which will support its further restoration and its long-term future.

· Integration with other Council policies and strategies: the proposed works are consistent with the District Plan and the Spatial Plan.

· Public Benefit: the new boundary wall will contribute to the heritage character of Anzac Square and further increase its appeal for visitors.

19 It is recommended that 100% rates relief is granted for one year, based on the current general rate amount of $11,510.02.

Eldon Chambers, 192 Princes Street

20 The building at 192 Princes Street was originally constructed in 1866 to a design by R.A. Lawson, but was substantially remodelled to an Art Deco design by Clere, Clere & Hill in 1939 for Boots the Chemist. The building was later occupied by the New Canton Restaurant until 2013. The building is located within the North Princes Street/Moray Place/Exchange Townscape Precinct in the District Plan and is identified as a Character Contributing Building in the Second Generation District Plan. The property has recently been awarded a grant of $10,000 from the Dunedin Heritage Fund and a grant of $30,000 from the Central City Heritage Reuse Grants Scheme for the restoration of the building’s Art Deco façade and the earthquake strengthening of the building.

21 The applicant is seeking rates relief for the cost of restoring the façade, the earthquake strengthening and the fire safety upgrade of the building.

22 Contribution to heritage protection: the works proposed will ensure that the building will perform to at least 67% of modern standards in the event of an earthquake and meet modern fire standards, ensuring its long-term use. The associated restoration of the Art Deco façade will also improve the appearance of the building and of this section of Princes Street which contains a large concentration of high-quality heritage buildings.

23 The assessment against the policies is as follows:

· Level of investment: the applicant has already commissioned detailed seismic assessment and design work for the earthquake strengthening and associated upgrades of the building.

· Expediting the use of heritage buildings: the applicant has a tenant in place for the ground floor café. Strengthening the building will enable the applicant’s planned uses for the upper floor and basement level. It is also likely to increase footfall and interest in Rattray Street and the northern section of Princes Street where there has been a gradual decline in economic activity and building maintenance.

· Integration with other Council policies and strategies: the proposed works are consistent with the District Plan and the Spatial Plan.

· Public Benefit: the proposal will improve public safety on Princes Street and improve the appearance of the local area. It also has the potential to contribute to the regeneration of Rattray Street and Prices Street area.

24 It is recommended that 100% rates relief is granted for three years, based on the current general rate amount of $5,122.32.

Former Methodist Church, 50 Dundas Street

25 50 Dundas Street is a former Methodist Church and Sunday School Hall dating from 1879. It is a scheduled heritage building in the North Dunedin Residential Townscape Precinct in the District Plan. It is a Category 2 Historic Place on the New Zealand Heritage List. The church was most recently used as a shop while the hall’s ground floor is the home of Dunedin Folk Club and its upper floors are used for student accommodation. An application to the Dunedin Heritage Fund towards the costs of earthquake strengthening and façade restoration is currently under consideration.

26 The applicant seeks rates relief towards the costs of earthquake strengthening and façade restoration.

27 The assessment against the policies is as follows:

· Contribution to heritage protection: the proposed earthquake strengthening and façade restoration will positively contribute to the protection of the building’s heritage values and support its long-term use.

· Level of investment: the applicant has carried out repairs and maintenance to the building and has commissioned detailed seismic assessment and design.

· Expediting the use of heritage buildings: the proposed works will support the on-going use of the building and help attract and retain tenants.

· Integration with other Council policies and strategies: the proposed works are consistent with the District Plan and the Spatial Plan and will also support the aims of Ara Toi Arts and Cultural Strategy by maintaining a performance venue.

· Public benefit: the proposal will improve public safety and improve the appearance of the building. It will help also support a performance venue.

28 It is recommended that 100% rates relief is granted for three years, based on the current general rate amount of $7,328.98.

Former Ross & Glendining Building, 8 Stafford Street

29 8 Stafford Street is a former warehouse, dating in parts from 1866 and extended and altered in 1874 and 1919. It is currently being converted into a start-up and tech business hub. It is a scheduled heritage building in the North Princes Street/Moray Place/Exchange Townscape Precinct in the District Plan. The property has previously received $20,000 from the Dunedin Heritage Fund and $10,000 from the Central City Heritage Reuse Grants Scheme. Between 2014 and 2017 the property was granted rates relief for three years from the Contestable Fund for Rates Relief for Heritage Buildings.

30 The applicant is seeking rates relief towards the costs of the next stage of the conversion project for the basement, ground and first floors. This comprises earthquake strengthening and fire upgrades, window frame repair and other associated works to convert the current storage space to shared office facilities.

31 The assessment against the policies is as follows:

· Contribution to heritage protection: : the works proposed will ensure that the building will perform to modern standards in the event of an earthquake and meet modern fire standards, ensuring its long-term use. The appropriate repair of the extensive glazing will contribute to the building’s performance and its appearance and accords with the building’s heritage values.

· Level of investment: the total cost of the conversion of the building to a start-up and tech business hub has been estimated by the applicant to be approximately $4 million.

· Expediting the use of heritage buildings: the granting of a rates freeze will support the substantial increase in floor space while maintaining the heritage values of the building.

· Integration with other Council policies and strategies: the proposed works are consistent with the District Plan and the Spatial Plan. The use of the building as a start-up space also accords with the Economic Development Strategy.

· Public benefit: the proposed use will improve public safety further and improve the appearance of the building.

32 It is recommended that a rates freeze is granted for two years.

77 Stuart Street

33 77 Stuart Street is located on the corner of Crawford Street and Stuart Street and dates from around 1910. A cycle store occupies the ground floor while its vacant upper floors were previously leased to the Department of Conservation. It is a scheduled heritage building and is located within the Lower Stuart Street Heritage Precinct. It is a Category 2 Historic Place on the New Zealand Heritage List. It has recently been awarded $5,000 from the Dunedin Heritage Fund towards the renovation of the windows to the upper storeys as part of the current conversion to short-stay apartments.

34 The applicant is seeking rates relief from the Contestable Fund for Rates Relief for the Comprehensive Reuse of Heritage Buildings for the conversion of the building.

35 The assessment against the policies is as follows:

· Contribution to heritage protection: the works proposed primarily impact upon elements of the building that have been altered by previous office fit-outs. The appropriate repair of the stained glass windows will contribute to the building’s performance and its appearance and accords with the building’s heritage values.

· Level of investment: the total cost of the conversion of the building to apartments has been estimated by the applicant to be approximately $4 million.

· Expediting the use of heritage buildings: a rates freeze will support the establishment of a new long-term use for the upper floors which will increase pedestrian traffic on lower Stuart Street.

· Public benefit: the proposed use will improve public safety further and improve the appearance of the building.

36 It is recommended that a rates freeze is granted for two years.

OPTIONS

37 The Committee could choose to amend any of the recommended amounts provided in the report.

NEXT STEPS

38 Following the Committee decisions related to the above projects, owners will be notified of the rates relief amounts available.

Signatories

Author:

Dan Windwood – Heritage Planner

Authoriser:

Anna Johnson – City Development Manager

Nicola Pinfold – Group Manager Community and Planning

Attachments

There are no attachments for this report.

SUMMARY OF CONSIDERATIONS

Fit with purpose of Local Government

This report relates to providing a public service and it is considered good-quality and cost-effective.

The report supports creating a safer city while retaining its heritage buildings that contribute to Dunedin’s identity and attract tourists.

The funding levels contribute towards the public benefit while at the same ensuring that private gain is paid for by the building owners, providing value for money to ratepayers.

Fit with strategic framework

	Contributes	Detracts	Not applicable
Social Wellbeing Strategy	☐	☐	☒
Economic Development Strategy	☒	☐	☐
Environment Strategy	☒	☐	☐
Arts and Culture Strategy	☒	☐	☐
3 Waters Strategy	☐	☐	☒
Spatial Plan	☒	☐	☐
Integrated Transport Strategy	☐	☐	☒
Parks and Recreation Strategy	☐	☐	☒
Other strategic projects/policies/plans	☒	☐	☐

The report supports the commercial reuse of heritage buildings in accordance with the aims of the Spatial Plan and the Economic Development Strategy as well as the Arts and Culture Strategy. It also accords with the Heritage Strategy.

Māori Impact Statement

There are no known impacts for tangata whenua.

Sustainability

The report supports the reuse of existing buildings and positively contributes to the economic, social and environment sustainability of Dunedin.

LTP/Annual Plan / Financial Strategy /Infrastructure Strategy

There are no implications.

Financial considerations

Both Contestable Funds are budgeted for. The recommended grants are within the funds’ limits.

Significance

This decision is considered to be of low significance in terms of the Council’s Significance and Engagement Policy.

Engagement – external

No external engagement has occurred.

Engagement - internal

No internal engagement has occurred.

Risks: Legal / Health and Safety etc.

There are no identified risks.

Conflict of Interest

There are no known conflicts of interest.

Community Boards

There are no implications for Community Boards.

Finance and Council Controlled Organisations Committee

22 May 2018

Financial Result - Period Ended 31 March 2018

Department: Finance

EXECUTIVE SUMMARY

1 This report provides the financial results for the period ended 31 March 2018 and the financial position as at that date.

RECOMMENDATIONS

That the Committee:

a) Notes the Financial Performance for the period ended 31 March 2018 and the Financial Position as at 31 March 2018.

BACKGROUND

2 This report provides a commentary of:

· the forecast operating result of Council for the whole of the 2017/18 financial year (Part 3), and

· The performance of Council for the period ended 31 March 2018 and the financial position as at that date (Parts 4 to 7).

DISCUSSION

3 Commentary on expected Full Year Budget Overspend

Section 1 to this Report shows that Council has a YTD Net Deficit (excluding Waipori) of $15.6m which is $7.1m worse than the budgeted deficit figure of $8.5m. Various events occur throughout each financial year that cause variances between the actual operating surplus/deficit and the budgeted operating surplus/deficit. The following events will impact on Council’s budgeted Net Deficit (excluding Waipori) for 2017/18 (approximate figures):

Operating Expenditure – the following unbudgeted operating expenditure items are expected to be incurred:

· $9.5m related to work carried out in response to the July 2017 flood event (additional $4m capital expenditure will also be incurred)

· $4.5m related to the Property Division focussing on its deferred maintenance program and a general increase in its service levels

· $1.5m related to the extra activity conducted by council due to a privately owned facility no longer operating (offset by extra revenue – see below)

Revenue – the following budgeted approximate revenue streams will not be received in 2017/18 (largely just a timing difference as these have been deferred to 2018/19):

· $5m due to the deferral of capital works, mainly related to LED and cycle ways

· $3m due to the deferral of NZTA funding related to the Peninsula project

These ‘negatives’ are expected to be partially offset by the following unbudgeted revenue streams that are expected to arise:

· $9m, being NZTA funding for work carried out in response to the July 2017 flood event

· $2m as the level of waste received to landfill exceeds the budgeted figure as a privately owned facility is no longer operating

· $1m in additional Development Contributions, mainly associated with development in Mosgiel

The nett effect of these matters on the Operating Result (excluding Waipori) is that:

· Operating Expenditure will exceed budget by around $15m

· Income is expected to exceed budget by around $4m and

· Operating Result will be around $11m worse than budget

4 Commentary on Year to Date Result (Table in Section 1)

The unfavourable YTD variance against budget was due to the following:

· $5.823 million higher than expected asset operations and maintenance expenditure primarily due to emergency repair work associated with the July 2017 flood event.

· $3.017 million higher fees & levies costs. This included consultancy costs in Property covering for vacant positions and a high volume of building survey and inspection work undertaken to inform maintenance and renewal programmes. In addition Building Services expenditure is higher than expected to ensure consenting activity meets the required statutory deadlines. A number of other departments had higher than expected expenditure associated with the development of asset renewal plans (eg: Logan Park Precinct, Dunedin Ice Stadium), system & process reviews and coverage for position vacancies including procurement activities.

· $2.116 million lower than expected grants revenue in Transport due to the delays being experienced in the capital programme (including cycleways and Peninsula projects), partially offset by the higher revenue associated with the emergency repair work discussed above.

· $1.356 million higher than expected staffing costs due to unbudgeted recruitment costs to resource activities across Council, higher than expected FTE's as a result of this recruitment drive and higher than budgeted training costs.

· $707k higher materials, supplies & services expenditure. This included costs associated with the 2GP, flood relief expenditure and contracted services to assist in the management of the property portfolio.

5 These unfavourable YTD variances were partially offset by:

· $3.433 million – higher than expected Other Operating Revenue. This favourable variance was mainly due to: Waste and Environmental Solutions revenue was greater than expected with additional tonnage through the Green Island landfill being the overflow from the closure of the Fairfield Landfill, higher than expected building consent activity in Regulatory Services and Parking revenue being higher than expected due to increased metered activity.

· $1.182 million – favourable interest expenditure driven by the lower debt level and favourable floating interest rate.

· $914k higher than expected development contributions particularly in relation to developments in Mosgiel.

· $644k – Grants expenditure was lower than budget due to the delayed timing of grant payments including the grant associated with the development on the new hockey turf in South Dunedin ($510k).

6 YTD Capital expenditure was less than budget by $26.060 million. Project delays have arisen across a number of portfolios while project scoping and design is finalised.

7 Total Council debt as at 31 March 2018 was $198.987 million or $14.915 million lower than budget. This variance reflected delayed expenditure on capital projects, partially offset by the higher level of operating expenditure discussed above.

OPTIONS

8 Not applicable.

NEXT STEPS

9 Not applicable.

Signatories

Author:

Gavin Logie - Financial Controller

Lawrie Warwood - Financial Analyst

Authoriser:

Dave Tombs - General Manager Finance and Commercial

Attachments

	Title	Page
a	Financial Graphs	29
b	Statement of Financial Performance	30
c	Statement of Financial Position	31
d	Statement of Cashflows	32
e	Capital Expenditure Summary	33
f	Borrowing & Investment Policy	34
g	Statement of Public Debt	35
h	Summary of Operating Variances	36
i	Financial Review	37

SUMMARY OF CONSIDERATIONS

Fit with purpose of Local Government

The financial expenditure reported in this report relates to providing local infrastructure, public services and regulatory functions for the community.

Fit with strategic framework

	Contributes	Detracts	Not applicable
Social Wellbeing Strategy	☐	☐	☒
Economic Development Strategy	☐	☐	☒
Environment Strategy	☐	☐	☒
Arts and Culture Strategy	☐	☐	☒
3 Waters Strategy	☐	☐	☒
Spatial Plan	☐	☐	☒
Integrated Transport Strategy	☐	☐	☒
Parks and Recreation Strategy	☐	☐	☒
Other strategic projects/policies/plans	☐	☐	☒

This report has no direct contribution to the Strategic Framework, although the financial expenditure reported in this report has contributed to all of the strategies.

Māori Impact Statement

There are no known impacts for tangata whenua.

Sustainability

There are no known implications for sustainability.

LTP/Annual Plan / Financial Strategy /Infrastructure Strategy

This report fulfils the internal financial reporting requirements for Council.

Financial considerations

Not applicable – reporting only.

Significance

Not applicable – reporting only.

Engagement – external

There has been no external engagement.

Engagement - internal

The report is prepared as a summary for the individual department financial reports.

Risks: Legal / Health and Safety etc.

There are no known risks.

Conflict of Interest

There are no known conflicts of interest.

Community Boards

There are no known implications for Community Boards.

Finance and Council Controlled Organisations Committee

22 May 2018

Financial Review

For The Period ended 31 March 2018

This report provides a detailed commentary on the Council’s financial results for the period ended 31 March 2018 and the financial position at that date.

net surplus/(Deficit) (including waipori)

The net deficit (including Waipori) for the period ended 31 March 2018 was
$12.897 million or $6.882 million worse than budget.

REVENUE

The total revenue for the period was $201.044 million or $2.588 million greater than budget.

The major variances were as follows:

Other Operating Revenue

Actual $51.465 million, Budget $48.032 million, Favourable variance $3.433 million

Waste and Environmental Solutions revenue was favourable $2.434 million due mainly to the level of waste received to landfill being greater than expected.

Three Waters revenue was $374k favourable. Water consumption charges and Trade Waste charges were favourable $215k due to the timing of the closure of the Cadbury factory. External recoveries were favourable $147k due to unbudgeted recoveries relating to a capital project.

Parking Operations revenue was favourable $383k reflecting increased usage for on-street and off-street car parks and car park buildings.

Economic Development revenue was favourable $366k due to timing of Regional Business Partnership revenue and Work Ready Coordinator funding. This variance is expected to disappear by year-end.

Regulatory Services revenue was favourable $146k due to greater than expected number of building consent applications. Alcohol licencing and dog registration revenue was also ahead of target.

Civic and Administration revenue was favourable $95k due to unbudgeted revenue relating to an Otago Regional Council by-election in their Dunstan constituency. This was partly offset by unbudgeted expenditure.

These favourable variances were partially offset by:

Property revenue was unfavourable $373k due to some vacancies in Investment properties and reduced rent in the miscellaneous property portfolio while building improvement work was done.

Aquatic Services revenue was unfavourable $184k. Unfavourable winter weather conditions impacted on revenue for Moana. In addition gym revenue was less than budget, partly due to promotions being run by other gyms. Changes to the Learn to Swim programme also contributed to the reduced revenue.

Grants

Actual $18.707 million, Budget $20.823 million, Unfavourable variance $2.116 million

Transport grants and subsidy revenue was unfavourable by $2.254 million. The delayed timing of capital projects (Peninsula and Cycleways) resulted in an unfavourable variance in capital subsidy revenue ($5.990 million), partly offset by greater than budgeted operating subsidies ($3.755 million) largely due to expenditure in response to the July 2017 flooding event.

Contributions

Actual $1.232 million, Budget $318k, Favourable variance $914k

This variance related to higher than expected development contributions invoiced in the current year, primarily related to developments in Mosgiel.

Expenditure

The total expenditure for the period was $216.640 million or $9.714 million greater than budget.

The major variances were as follows:

Personnel Costs

Actual $42.673 million, Budget $41.317 million, Unfavourable variance $1.356 million

Personnel costs were unfavourable year to date due mainly to budgets in Property and Aquatic Services not covering current staff levels.

Asset Operations and Maintenance Costs

Actual $43.639 million, Budget $37.816 million, Unfavourable variance $5.823 million

Transport costs were unfavourable $6.017 million primarily due to July 2017 rain event resulting in unbudgeted emergency work.

Waste and Environmental Solutions costs were unfavourable $799k. ETS costs were unfavourable reflecting the additional landfill activity discussed above. This unfavourable variance was partially offset by savings being achieved with the new contract and lower than expected kerbside collection costs with a lower volume of bags collected by the contractor.

Property costs were unfavourable $654k mainly due to unbudgeted reactive maintenance costs.

Parks costs were favourable $885k due to delays in programmed maintenance (buildings and trees), lower than expected reactive maintenance and improved oversight associated with the Green Space and Ecological contracts and lower than expected Ocean Beach holding pattern costs.

Materials Supplies and Services

Actual $6.924 million, Budget $6.217 million, Unfavourable variance $707k

Property costs were unfavourable $743k due to unbudgeted contracted services expenditure to support the operation of the department pending the appointment of permanent staff.

Civic and Administration Services costs were unfavourable $331k due to costs associated with the 2GP and flood relief expenditure.

Fees and Levies

Actual $9.953 million, Budget $6.936 million, Unfavourable variance $3.017 million

Property costs were unfavourable $1.017 million due to the high number of consultants currently working in the Property Services department. This variance will increase through the financial year as a result of both consultants covering vacant positions and a high volume of survey and inspection work being undertaken to inform maintenance and renewal programmes.

Transport costs were unfavourable $619 k due to consultant’s costs for health and safety and other audits, and professional services scoping costs for City Cluster Schools safety work.

Recreation Planning costs were unfavourable $491k due to consultant costs relating to the Logan Park Precinct Plan and recreation planner secondment costs.

Waste and Environmental Solutions costs were unfavourable $317k due to Ministry levies being greater than budget due to the higher volumes of waste received at the Green Island landfill.

Regulatory Services costs were unfavourable $274k due mainly to higher consultancy costs for building consents work being processed by third parties.

Resource Consents costs were unfavourable $195k due to unbudgeted litigation costs and planning costs associated with processing resource consent applications.

Three Waters costs were unfavourable $302k due to consultant support for procurement advisory and system reviews.

Corporate Management costs were unfavourable $144k due mainly to procurement consultancy advice.

Grants and Subsidies

Actual $7.466 million, Budget $8.110 million, Favourable variance $644k

Recreation Planning costs were favourable $619k primarily due to the budgeted grant for the Kings hockey turf not yet being required due to project delays.

Interest

Actual $9.408 million, Budget $10.590 million, Favourable variance $1.182 million

Interest expenditure was less than budget due to the lower level of borrowing and a favourable floating interest rate applied to the non-fixed interest borrowing.

WAIPORI FUND NET OPERATING RESULT

Actual $2.699 million, Budget $2.455 million, Favourable variance $244k

The Waipori Fund net operating result was favourable for the year due to unrealised gains across a number of investment portfolios. In particular international equities have been favourably impacted by the weaker NZD. The current month has however seen a decline in the equities markets both domestically and international.

Statement of Financial Position

A Statement of Financial Position is provided as Attachment C.

Short term investments of $5.113 million relate to the Waipori Fund.

Statement of Cashflows

A Statement of Cashflows is provided as Attachment D.

Cash outflows from investing activities were less than budgeted due to the delayed capital expenditure discussed below.

Capital Expenditure

A summary of the capital expenditure programme by Activity is provided as Attachment E.

Total capital expenditure for the period to 31 March 2018 was $26.060 million or 39.7% of the full year budget of $65.681 million.

Community and Planning Group capital expenditure was $1.052 million underspent

This variance was due to delayed progress with the Citywide Amenities upgrade work. The project will continue into the 2018/19 financial year.

Corporate Services capital expenditure was $1.963 million underspent

This variance was due to delayed timing of the Electronic Document and Records Management system replacement project.

Property capital expenditure was $1.867 million underspent

Project prioritisation and final scoping continues to be a focus within the Property group prior to the commencement of any significant works.

The South Dunedin Complex project was under budget $800k. The project is in the planning stage with physical work expected to commence in 2019/20.

Housing upgrades were under budget $542k. Building consents are being sought for bathroom upgrades, with work expected to occur this financial year.

Other projects at the scoping stage include utility upgrades at the Gas Works Museum and skylight replacements at the Edgar Centre.

Parks and Recreation capital expenditure was $1.207 million underspent

A number of projects have been delayed while assets assessments are completed to allow appropriate programming of work.

Tenders for Playground improvements work have been awarded with work to start in April.

Contracts for changing room refurbishment at Mosgiel and the Caledonian Gym have been awarded with a start date to be confirmed. The Chingford Stable re-roofing project is at the tender negotiation stage.

The Mosgiel East (Highland Park) reserve development project is nearing completion.

There has been no expenditure to date on the Logan Park Artificial Turf project ($1 million favourable). This budget is unlikely to be spent this financial year with construction not expected to commence until October 2018.

Customer and Regulatory capital expenditure was $346k underspent

The budget for parking meter upgrades (FY $300k) will not be required for 2017/18 due to all meters being upgraded in the 2016/17 financial year in order to comply with new credit card protocols.

Transport capital expenditure was $10.485 million underspent

The Peninsula road widening project was under budget by $6.344 million. There has been a delay in commencing the physical works with full year expenditure likely to be in the order of $2.000 million (full year budget of $10.800 million).

Cycleway expenditure is tracking behind budget $2.569 million with full year budget of $6.000 million likely to carry over to the 2018/19 financial year.

Renewals capital was under budget by $3.083 million due to timing. Contracts have been recently awarded for carriageway resurfacing, kerb and channelling and footpath resurfacing.

These under spends were partially offset by:

Minor safety improvements were over budget $1.798 million and included the Highcliff Road and South Dunedin safety works.

The year to date expenditure also included unbudgeted slip repairs resulting from the July 2017 rain event totalling $566k.

Three Waters capital expenditure was $4.192 million underspent

General network renewals were tracking behind budget, partially offset by on-going expenditure on the Ross Creek Dam project, Waikouaiti water renewals and the treatment site switchboard replacement programme.

Debt

Refer to Attachments F and G.

Attachment F provides a summary of the debt servicing ratios for the year to date.

All three targets were within policy.

No new loans were required year to date.

Comments from group activities

Attachment H, the Summary of Operating Variances, shows by Group Activity the overall net surplus or deficit variance for the eight months ended 31 March 2018. It also shows the variances by revenue and expenditure type.

Community and Planning - $533k Unfavourable

Staff costs were unfavourable $511k reflecting additional costs associated with the 2GP and the Task Force Green response to the July 2017 flood event. The Task Force Green expenditure has been recovered from Central Government.

Operating costs were unfavourable $151k due mainly to unbudgeted litigation costs relating to Environment Court appeals, additional consultant resource to cope with the number of resource consent applications and legal support and planning consultant costs associated with the Filleul St hotel application.

Enterprise Dunedin - $702k Favourable

External revenue was favourable $317k due to the timing of budgeted revenue from Regional Business Partners and Education New Zealand. This variance is expected to disappear by year-end. There was also some unbudgeted revenue relating to the Business Events activity.

Operating expenditure was favourable $404k due largely to the delayed timing of various marketing and project activities.

Property - $3.561 million Unfavourable

External revenue was unfavourable $368k due to some vacancies in Investment properties and reduced rent in the miscellaneous property portfolio while building improvement work was done.

Staff costs were unfavourable $485k due to unbudgeted recruitment fees and new positions being filled.

Property operating costs were unfavourable $2.655 million. Fees and levies expenditure was unfavourable $1.017 million due to the high number of consultants currently working in the Property Services department. This variance will increase through the financial year as a result of both consultants covering positions yet to be filled and a high volume of survey and inspection work being undertaken to inform maintenance and renewal programmes.

Repairs & maintenance expenses were unfavourable $1.397 million mainly due to unbudgeted reactive works and contractor costs across the Property portfolios and unbudgeted costs around tenancy changeovers, largely in the Housing portfolio.

Premises costs were greater than budget $258k largely due to the costs associated with Building WOF compliance monitoring.

Investment Account – $1.907 million Favourable

Interest costs were favourable $1.182 million due to the lower level of borrowing and a favourable floating interest rate applied to the non-fixed interest borrowing.

Parks & Recreation - $289k Favourable

Parks and Recreation operating expenditure was favourable ($822k) due to delays in programmed maintenance (buildings and trees), lower than expected reactive maintenance and improved oversight associated with the Green Space and Ecological contracts. In addition grants expenditure was lower than budget primarily due to the Kings Hockey Turf ground still to be paid out.

These favourable variances were partially offset by additional staff costs in Aquatics relating to increased overtime and rosters required to resource unplanned illness and leave.

Transport - $8.627 million Unfavourable

External revenue was unfavourable $1.831 million. Capital subsidies were $5.990 million less than budget due to delays in capital projects (Peninsula widening, LED lighting upgrade and the central city cycling projects). Operating subsidies were higher than expected due to increased operating expenditure, including costs incurred in response to the July 2017 flood event.

Transport operating expenditure was unfavourable $6.339 million to due to greater than budgeted costs of subsidised emergency work and road maintenance as a result of the July 2017 rainfall event.

Waste and Environmental Solutions – $1.461 million Favourable

This variance reflects the net impact of the higher volumes of waste received at the Green Island landfill to date.

Three Waters – $384k Favourable

External revenue was favourable $795k due mainly to greater than budgeted external recoveries and development contribution revenue. Water consumption charges and Trade Waste charges were favourable $215k due to the timing of the closure of the Cadbury factory. External recoveries were favourable $147k due to unbudgeted recoveries relating to a capital project.

Operating expenditure was $209k unfavourable in part reflecting costs associated with the July 2017 flood event and the boil water notification which included system flushing and supply of bulk tanker water for residents and affected businesses.

Finance and Council Controlled Organisations Committee

22 May 2018

Waipori Fund - Quarter Ending March 2018

Department: Finance

EXECUTIVE SUMMARY

1 The attached report from Dunedin City Treasury Limited provides information on the results of the Waipori Fund for the quarter ending 31 March 2018.

RECOMMENDATIONS

That the Committee:

a) Notes the report from Dunedin City Treasury Limited on the Waipori Fund for the quarter ending 31 March 2018.

BACKGROUND

2 Not applicable.

DISCUSSION

3 Not applicable.

OPTIONS

4 Not applicable.

NEXT STEPS

5 Not applicable.

Signatories

Author:	Richard Davey - Treasury Manager
Authoriser:	Dave Tombs - General Manager Finance and Commercial

Attachments

Title

Page

Waipori Fund - March 2018 Quarter

SUMMARY OF CONSIDERATIONS

Fit with purpose of Local Government

This report relates to providing local infrastructure, public services and regulatory functions for the community.

Fit with strategic framework

	Contributes	Detracts	Not applicable
Social Wellbeing Strategy	☐	☐	☒
Economic Development Strategy	☐	☐	☒
Environment Strategy	☐	☐	☒
Arts and Culture Strategy	☐	☐	☒
3 Waters Strategy	☐	☐	☒
Spatial Plan	☐	☐	☒
Integrated Transport Strategy	☐	☐	☒
Parks and Recreation Strategy	☐	☐	☒
Other strategic projects/policies/plans	☐	☐	☒

This report has no direct contribution to the Strategic Framework.

Māori Impact Statement

There are no known impacts on tangata whenua.

Sustainability

There are no known implications for sustainability.

LTP/Annual Plan / Financial Strategy /Infrastructure Strategy

The report fulfils the financial reporting requirements for Council.

Financial considerations

Not applicable – reporting only.

Significance

Not applicable – reporting only.

Engagement – external

This report has been prepared for and approved by the Board of Dunedin City Treasury Limited.

Engagement - internal

This report has been prepared for the Board of Dunedin City Treasury Limited.

Risks: Legal / Health and Safety etc.

There are no known risks.

Conflict of Interest

There are no known conflicts of interest.

Community Boards

There are no known implications for Community Boards.

Chairperson	Mike Lord
Deputy Chairperson	Doug Hall
Members	David Benson-Pope	Dave Cull
	Rachel Elder	Christine Garey
	Aaron Hawkins	Marie Laufiso
	Damian Newell	Jim O'Malley
	Chris Staynes	Conrad Stedman
	Lee Vandervis	Andrew Whiley
	Kate Wilson