Agenda of Finance and Council Controlled Organisations Committee

Notice of Meeting:

I hereby give notice that an ordinary meeting of the Finance and Council Controlled Organisations Committee will be held on:

Date: Tuesday 10 May 2022

Time: 1.00 pm

Venue: Edinburgh Room, Municipal Chambers, The Octagon, Dunedin

The meeting will be live streamed on the Council’s YouTube channel: https://youtu.be/eBfj2ej-pJE

Sandy Graham

Chief Executive Officer

Finance and Council Controlled Organisations Committee

PUBLIC AGENDA

MEMBERSHIP

Chairperson	Cr Mike Lord
Deputy Chairperson	Cr Doug Hall
Members	Cr Sophie Barker	Cr David Benson-Pope
	Cr Rachel Elder	Cr Christine Garey
	Mayor Aaron Hawkins	Cr Carmen Houlahan
	Cr Marie Laufiso	Cr Jim O’Malley
	Cr Jules Radich	Cr Chris Staynes
	Cr Lee Vandervis	Cr Steve Walker
	Cr Andrew Whiley

Senior Officer Gavin Logie, Chief Financial Officer

Governance Support Officer Lynne Adamson

Lynne Adamson

Governance Support Officer

Telephone: 03 477 4000

Lynne.Adamson@dcc.govt.nz

www.dunedin.govt.nz

Note: Reports and recommendations contained in this agenda are not to be considered as Council policy until adopted.

Finance and Council Controlled Organisations Committee

10 May 2022

Finance and Council Controlled Organisations Committee

MINUTES

Minutes of an ordinary meeting of the Finance and Council Controlled Organisations Committee held in the Via Audio Visual Link on Tuesday 08 March 2022, commencing at 1.04 pm

PRESENT

Chairperson	Cr Mike Lord
Deputy Chairperson	Cr Doug Hall
Members	Cr Sophie Barker	Cr David Benson-Pope
	Cr Rachel Elder	Cr Christine Garey
	Mayor Aaron Hawkins	Cr Carmen Houlahan
	Cr Marie Laufiso	Cr Jim O’Malley
	Cr Jules Radich	Cr Chris Staynes
	Cr Lee Vandervis	Cr Steve Walker
	Cr Andrew Whiley

IN ATTENDANCE

Sandy Graham (Chief Executive Officer), Gavin Logie (Chief Financial Officer), Clare Sullivan (Manager, Governance), Keith Cooper (Chairperson, Dunedin City Holdings Limited) and Jemma Adams (General Manager, Dunedin City Holdings Limited Group)

Governance Support Officer Wendy Collard

Moved Cr Mike Lord/Cr David Benson-Pope:

That the Committee:

Adjourned the meeting

Motion carried

The meeting adjourned at 1.04 pm and reconvened at 1.13 pm

1 Public Forum

There was no Public Forum.

2 Apologies

There were no apologies.

3 Confirmation of agenda

Moved (Cr Mike Lord/Cr David Benson-Pope):

That the Committee:

Confirms the agenda without addition or alteration

Motion carried

4 Declarations of interest

Members were reminded of the need to stand aside from decision-making when a conflict arose between their role as an elected representative and any private or other external interest they might have.

Cr Marie Laufiso provided an update to her register of interest.

Moved (Cr Mike Lord/Cr David Benson-Pope):

That the Committee:

a) Amends the Elected Members' Interest Register; and

b) Confirms the proposed management plan for Elected Members' Interests.

Motion carried

5 Confirmation of Minutes

5.1 Finance and Council Controlled Organisations Committee meeting - 9 February 2022

Moved (Cr Mike Lord/Cr Lee Vandervis):

That the Committee:

a) Confirms the public part of the minutes of the Finance and Council Controlled Organisations Committee meeting held on 09 February 2022 as a correct record.

Motion carried (FCCO/2022/002)

Part A Reports

6 Finance and Council Controlled Organisations Committee - Forward Work Programme

A report from Corporate Policy provided the forward work programme for the 2022 year.

The Chief Financial Officer (Gavin Logie) spoke to the report and responded to questions.

Moved (Cr Mike Lord/Cr Andrew Whiley):

That the Committee:

a) Notes the Finance and Council Controlled Organisations Committee forward work programme as shown in Attachment A.

Motion carried (FCCO/2022/003)

7 Financial Result - Period Ended 31 January 2022

A report from Finance provided the financial results for the period ended 31 January 2022 and the financial position as at that date.

The Chief Executive Officer (Sandy Graham) and the Chief Financial Officer (Gavin Logie) spoke to the report and responded to questions.

Moved (Cr Doug Hall/Cr Rachel Elder):

That the Committee:

a) Notes the Financial Performance for the period ended 31 January 2022 and the Financial Position as at that date.

Motion carried (FCCO/2022/004)

1.36 pm

8 2021 Annual Reports for the Dunedin City Holdings Ltd Group

A report from Dunedin City Holdings Limited provided the 2021 Annual Reports of Dunedin City Holdings Ltd (DCHL) Group companies.

The Chairperson, Dunedin City Holdings Limited (Keith Cooper) and the General Manager, Dunedin City Holdings Limited Group (Jemma Adams) spoke to the report and responded to questions.

Moved (Cr Doug Hall/Cr Chris Staynes):

That the Committee:

a) Notes the 2021 Annual Reports of:

- Dunedin City Holdings Limited

- Aurora Energy Ltd

- City Forests Ltd

- Delta Utility Services Ltd

- Dunedin City Treasury Ltd

- Dunedin Stadium Property Ltd

- Dunedin International Airport Ltd

Motion carried

9 Draft 2022/23 Statements of Intent - Dunedin City Holdings Limited Group Companies

A report from Dunedin City Holdings Limited presented the draft 2022/23 Statements of Intent of Dunedin City Holdings Group companies for Council comments and/or noting.

The Chairperson, Dunedin City Holdings Limited (Keith Cooper) and the General Manager, Dunedin City Holdings Limited Group (Jemma Adams) spoke to the report and responded to questions.

Moved (Cr Sophie Barker/Cr Doug Hall):

That the Committee:

a) Notes the draft 2022/23 Statements of Intent of Dunedin City Holdings Group companies.

Motion carried

Moved Cr Mike Lord/Cr Doug Hall:

That the Committee

Adjourns the meeting.

Motion carried

The meeting adjourned at 3.19 pm and reconvened at 3.30 pm.

10 Dunedin City Holdings Limited Parent Financials - Year ended 30 June 2021

A report from Finance provided the financial results for the year ended 30 June 2021 and the financial position as at that date for the Dunedin City Holdings Limited parent company.

The Chief Financial Officer (Gavin Logie) spoke to the report and responded to questions.

Moved (Cr Mike Lord/Cr Andrew Whiley):

That the Committee:

a) Notes the Financial Performance for the year ended 30 June 2021 and the Financial Position as at 30 June 2021 for Dunedin City Holdings Limited Parent Company.

Motion carried

11 Dunedin City Holdings Limited Group Companies - Interim Reports for the Six Months Ended 31 December 2021

A report from Dunedin City Holdings Limited provided the interim reports for the six months ended 31 December 2021 for the Dunedin City Holdings Limited (DCHL) Group Companies.

The Chairperson, Dunedin City Holdings Limited (Keith Cooper) and the General Manager, Dunedin City Holdings Limited Group (Jemma Adams) spoke to the report and responded to questions.

Moved (Cr Doug Hall/Cr Andrew Whiley):

That the Committee:

a) Notes the Dunedin City Holdings Limited Group Companies Interim Reports for the six months ended 31 December 2021.

Motion carried

12 Dunedin City Holdings Limited Group Companies - Quarterly Update

A report from Dunedin City Holdings Limited provided a quarterly update for the period ended 31 December 2021 for the Dunedin City Holdings Limited (DCHL) Group.

The Chief Executive Officer (Sandy Graham), the Chairperson, Dunedin City Holdings Limited (Keith Cooper) and the General Manager, Dunedin City Holdings Limited Group (Jemma Adams) spoke to the report and responded to questions.

Moved (Cr Jules Radich/Cr Doug Hall):

That the Committee:

a) Notes the Dunedin City Holdings Limited Group Quarterly Update for the period ended 31 December 2021.

Motion carried

13 Item for consieration by the Chair

Mayor Hawkins requested that Council and the Council Controlled Organisations give consideration to signing up to the “Mind the Gap Register” and report back to either Council or the relevant Committee.

The meeting concluded at 3.52 pm.

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

CHAIRPERSON

Finance and Council Controlled Organisations Committee

10 May 2022

Financial Result - Period Ended 31 March 2022

Department: Finance

EXECUTIVE SUMMARY

1 This report provides the financial results for the period ended 31 March 2022 and the financial position as at that date.

2 As this is an administrative report only, there are no options or Summary of Considerations.

RECOMMENDATIONS

That Council:

a) Notes the Financial Performance for the period ended 31 March 2022 and the Financial Position as at that date.

BACKGROUND

3 This report provides the financial statements for the period ended 31 March 2022. It includes reports on financial performance, financial position, cashflows and capital expenditure. The operating result is also shown by group, including analysis by revenue and expenditure type.

DISCUSSION

4 Revenue was $245.922 million for the period or $2.813 million greater than budget. Year to date revenue included unbudgeted government grants for Economic Development activity and 3 Waters stimulus projects, as well as increased revenue from resource consents and building services applications and inspections.

5 These favourable variances were partially offset by the impact of the nationwide lockdown earlier in the financial year including Aquatic Services, Property, Parking, Landfill, and commercial water revenue. Other grant revenue was lower than expected due to the lower level of subsidised capital expenditure in Transport and timing of the outstanding funding for the new Mosgiel Aquatic facility. While a significant portion of the budgeted fundraising for this project was received in February, the balance will be paid as agreed project milestones are achieved.

6 Expenditure was $246.150 million for the period or $1.308 million greater than budget. Operational expenditure was greater than expected due to additional roading maintenance expenditure along with monies spent for government funded projects in 3 Waters and Economic Development. Depreciation expenditure was also higher than expected following asset revaluations as at 30 June 2021, impacting both asset replacement cost and asset useful lives.

7 These unfavourable variances were partially offset by savings in personnel costs, delays in project expenditure and favourable interest expenditure due to a lower than forecast floating interest rate. Some expenditure lines were also impacted by Covid19 disruptions including the lockdown period earlier in the year.

8 Equity markets continued to be impacted as current world events create uncertainty. This resulted in negative revaluations across most equity portfolios held by the Waipori Fund. It is worth noting there was a degree of market recovery in the reporting month. There has also been a year-to-date negative revaluation of fixed term investments as wholesale interest rates continue to rise.

9 Capital expenditure was $96.869 million for the period or 98.3% of the year-to-date budget (66.6% of the full year budget). The 3 Waters renewals expenditure continues to track ahead of budget with a number of large water and sewer renewal projects underway. The level of spend in other areas of the organisation reflected project delays including the impact of the Covid19 (in particular the nationwide lockdown in August).

NEXT STEPS

10 Financial Result Reports continue be presented to future meetings of either the Finance and Council Controlled Organisation Committee or Council.

Signatories

Authoriser:

Gavin Logie - Chief Financial Officer

Attachments

	Title	Page
⇩a	Summary Financial Information	35
⇩b	Statement of Financial Performance	36
⇩c	Statement of Financial Position	37
⇩d	Statement of Cashflows	38
⇩e	Capital Expenditure Summary	39
⇩f	Summary of Operating Variances	40
⇩g	Financial Review	41

Finance and Council Controlled Organisations Committee

10 May 2022

Dunedin Railways Limited - update on funding and operations

Department: Executive Leadership Team

EXECUTIVE SUMMARY

1 Dunedin City Holdings Limited (DCHL) and Dunedin Railways Limited (DRL) have provided an update on funding and operations for the financial years 2023 and 2024.

2 The report from DCHL/DRL presents two options for Council to consider – the status quo of continuing a limited service or an option to gear up DRL for the possible return of international visitors.

3 Staff have considered the options and recommend that Council confirm its previous position for a range of reasons outlined in the report.

RECOMMENDATIONS

That the Committee recommends that Council:

a) Confirms its previous decision of November 2021 for DCHL to operate and fund a limited service for Dunedin Railways Limited until June 2024.

b) Notes staff will report back to Council as part of next Annual Plan process on the options for long term operations and governance of Dunedin Railways Limited.

BACKGROUND

4 At its meeting held 23 November 2021, Council resolved the following:

Moved (Cr Sophie Barker/Cr Steve Walker):

That the Council:

a) Directs Dunedin City Holdings Limited to continue to fund up to $2.4M per annum for maintaining and operating Dunedin Railways Limited using the KiwiRail line and Taieri Gorge line to Hindon until 30 June 2024.

b) Approves Dunedin City Holdings Limited incurring a one-off cost of $400k in 2021/22 for developing an alternative storage and workshop facility for Dunedin Railways Limited.

c) Notes that staff would continue supporting the Otago Central Rail Trail Trust to develop a feasibility study on the possible options for the Otago Central Rail Trail between Middlemarch and Wingatui.

d) Notes that staff would report back to Council on options for the long-term operations and governance of Dunedin Railways Limited as part of the 10 year plan 2024-34.

Division

The Council voted by division:

For: Crs Sophie Barker, David Benson-Pope, Rachel Elder, Doug Hall, Carmen Houlahan, Marie Laufiso, Mike Lord, Jim O'Malley, Jules Radich, Chris Staynes, Steve Walker, Andrew Whiley and Mayor Aaron Hawkins (13).

Against: Cr Lee Vandervis (1).

Abstained: Nil

The division was declared CARRIED by 13 votes to 1

Motion carried (CNL/2021/195)

5 The November 2021 resolution enabled DRL to continue to operate a limited service as per the previous two years. DRL have now provided an options paper for Council to consider. The two options presented are to continue to operate DRL on a limited basis or gear up DRL in anticipation of the possible return of international visitors. Both options discussed below.

DISCUSSION

6 DRL are anticipating that cruise ships will return to New Zealand shores for the 2022/2023 summer season. The Board’s view is detailed in Attachment A.

7 There is still a level of uncertainty about what level of cruise ship activity Dunedin will see in 2022/23 but in order to gear up, DRL require significant lead in time.

8 DCHL has provided details around what “gearing up” would mean if DRL is to respond to the return of international visitors.

9 DCHL state that they do not have a mandate or funding for anything other than a limited service in 2022/2023. The report asks for Council to clarify its expectations about what DRL’s role in the tourist market will be and how Council expect that would be funded.

10 DCC staff have reviewed the funding information and associated commentary provided by DCHL. At this stage it is felt the information provided lacks the necessary detail to provide clear staff advice to Council around any decisions to gear up for the 2022/2023 financial year.

11 Detail needing clarification includes the following:

· Level of spend in the current financial year;

· Clear understanding of the indicated one-off re-establishment costs $1.180 million;

· Clear understanding of the additional annual expenses of $748k;

· What services this additional spend would buy (# of services, routes);

· What the level of associated revenue would be and sensitivity of the same;

· Quantify the risks around expanding the operation beyond hibernation;

· The likely impact on local tourism if DRL doesn’t gear up for the return of tourists at least for the upcoming season.

12 There are also other matters that need consideration before staff are able to provide any recommendation to Council including:

· The most appropriate mechanism to fund any additional expenditure over that already committed for 2022/2023,

· The concerns raised by DCHL around their duties under the Companies Act in providing funding to DRL.

13 The DRL report also proposes re-establishing the board of DRL if the company is to move from its limited services. Currently, the board of DCHL acts as the board of DRL.

14 Council staff are working on the report requested in November 2021 on the long-term operations and governance of DRL to inform the next ten year plan. This work is progressing well but is not yet complete.

15 In addition, the Product Development work has progressed as has work on the Destination Management Plan. All three pieces of work will provide information to help Council determine what level of investment is appropriate in DRL.

OPTIONS

Option One – Status Quo – Continue to operate and fund DRL to operate a limited service until 2024

16 The current Council position as stated by the November 2021 resolution is that DCHL continue to fund up to $2.4M per annum for maintaining and operating Dunedin Railways Limited using the KiwiRail line and Taieri Gorge line to Hindon until 30 June 2024

Advantages

· Enables the staff review of the future operations and governance of DRL to be completed

· Provides a limited rail service on both the Hindon and KiwiRail Line that can be targeted towards international tourists

· The costs of this operation have been allowed for by DCHL

Disadvantages

· A limited service may not address all the needs of the international visitor market

Option Two – Gears DRL up for international tourism

17 This option sees DRL brought out of “hibernation mode” and would require additional expenditure, new staff and the appointment of a new DRL board. It is difficult for staff to assess the advantages and disadvantages of this option given the further information that would be required as outlined above.

18 If the committee wished to progress this option, staff could be directed to seek further information from DRL and report back to Council. Given the urgency that DRL have indicated, staff would attempt to do this in time for the Annual Plan deliberations but that timing would be very challenging and a report in June is more likely.

NEXT STEPS

19 If the Committee approves option 1, staff will advise DCHL/DRL. Staff will also continue the work on the report into the future operations and governance options for DRL.

20 If the Committee approves option 2, then staff will meet with DCHL/DRL to gather the additional information required and provide a report to Council as soon as possible.

Signatories

Author:	Gavin Logie - Chief Financial Officer
Authoriser:	Sandy Graham - Chief Executive Officer

Attachments

	Title	Page
⇩a	DRL Update Report from Dunedin City Holdings Limited	60

SUMMARY OF CONSIDERATIONS

Fit with purpose of Local Government

This decision promotes the economic and social well-being of communities in the present and for the future.

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 operation of Dunedin Railways Limited and its assets contributes to the Dunedin 2013-23 Economic Development Strategy theme of a “Compelling Destination” through the tourism service it provides. Dunedin Railways Limited operations also contribute to the Social Wellbeing Strategy by supporting stronger communities.

Māori Impact Statement

There is a future commitment to engage with mana whenua around the feasibility study into the future options for the rail trial.

Sustainability

There is no immediate impact on sustainability from the direction sought in this report.

LTP/Annual Plan / Financial Strategy /Infrastructure Strategy

There are no implications for either the LTP or Annual Plan for the status quo as presented in this report.

Financial considerations

DCHL have estimated the financial support for Dunedin Railways Limited will be up to $2.4M per annum until 30 June 2024. However the funding required to bring DRL out of hibernation will be a consideration for Council and would potentially impact on Annual Plan budgets.

Significance

The decision sough in this report is considered low in terms of Council’s Significance and Engagement Policy. Any decision on the future of DRL may require formal consultation but that will be assessed and reported to Council in the future.

Engagement – external

This report has been prepared on the basis of information received from Dunedin City Holdings Ltd.

Engagement - internal

There has been internal engagement with Legal and Finance.

Risks: Legal / Health and Safety etc.

The attached DCHL report refers at paragraph 41 to DCHL entering into an agreement with DRL. That agreement is to record DCHL’s commitment to fund DRL’s operating costs of up to $2.4 million per annum over FY2023 and FY 2024. This is to protect the Directors of DRL from any liability that might otherwise arise under sections 135 and 136 of the Companies Act.

Council’s solicitors have advised that they see the agreement as being a prudent step, and do not see any liability issues for DCC as a shareholder of DCHL and indirectly of DRL.

Conflict of Interest

There are no known conflicts of interest.

Community Boards

Any decision on the future of Dunedin Railways Limited will be of interest to Mosgiel-Taieri, Strath Taieri, West Harbour and Waikouaiti Coast Community Boards.

	Title	Page
A ⇩	Minutes of Finance and Council Controlled Organisations Committee meeting held on 8 March 2022	17

Author:	Lynne Adamson - Governance Support Officer
Authoriser:	Clare Sullivan - Manager Governance

Author:	Sharon Bodeker - Corporate Planner
Authoriser:	Gavin Logie - Chief Financial Officer

Author:	Richard Davey - Treasury Manager
Authoriser:	Gavin Logie - Chief Financial Officer