10-Year Budget 2018-2028 (Long-term Plan) Other budget and policy - - PowerPoint PPT Presentation

10-Year Budget 2018-2028

(Long-term Plan) Other budget and policy issues

18 October 2017

Agenda for today’s workshop

1. Introduction 2. Strategic and financial context 3. Draft Tupuna Maunga Authority Operational Plan 4. Natural Environment 5. Coastal assets 6. ACIL review 7. CCO Accountability Policy 8. Core cost reduction 9. Budget Book

• 10. Sum up

Process reminder

Mayor’s intent Infrastructure funding Infrastructure investment Other budget items Revaluations & rating policy Local board projects & funding Mayor’s proposal 26 September Today 26 October 2 November 30 November 7 September

• Local community

& culture programmes

• Local Board One

Initiatives

• Environmental

programmes

• Other items

requiring consultation

• Funding scenarios
• Funding levers

Links to other workstreams

Agree consultation items Adopt consultation document Submission process Consideration

• f

submissions and budget items Local Board advocacy Decision on final LTP content Adoption of LTP 11 December 7 February 28 Feb – 28 Mar May 17-18 May 31 May 27 June

Purpose for today’s workshop

• Items required for consultation under legislation
• Understand and discuss key environmental budget and policy

issues

High population growth

Auckland is growing fast. We need a plan for where and how people live and how they access jobs , facilities and services.

Greater environmental pressure

The natural environment is one of the most valued part of Auckland’s identity. The way we grow must protect, sustain and enhance our environment.

Key challenges over next 30 years

Sharing prosperity amongst all

Auckland’s success is dependent on how everyone fairly shares in Auckland’s prosperity.

Auckland Plan

30 years

Reviewed every 6 years it is the 30-year growth strategy for Auckland. A plan for Auckland, not just Council.

Plan for Auckland

Development Strategy

Timing and sequencing of how Auckland will grow and change over time

Outcomes we want in 2050

• Belonging and

participation

• Māori identity and

wellbeing

• Environment and cultural

heritage

• Homes and places
• Access and connectivity
• Opportunity and

prosperity

The pathway to achieve the outcomes we want in 30 years

Context | What are we planning for

Long-Term Plan

10 years

Reviewed every 3 years it is the 10-year budget of Council. Identifies Council’s investments to achieve Auckland Plan

• utcomes.

Plan for Auckland Council

Accelerate transport Housing & urban renewal Protect environment and respond to climate change

The immediate issues we will focus on

Inclusive city Funding for growth Water Quality in our harbours and streams Investment across the region

Financial framework

• XXX Infrastructure Funding
• Cash operating surplus
• Capital revenue
• Asset disposal
• Debt
• Partnerships

Operational Revenue

• Rates
• Fees & charges
• NZTA operating subsidies
• Dividends

Operational Costs

• Direct costs
• Interest
• Depreciation (non-cash)

Capital Costs

• Renewals
• Growth
• Service improvement

Funding tools Costs of providing services & assets Consequential

• pex

Debt to revenue <265% Cost recovery Cash surplus Capex Funding

Financial context

Capital costs

• Indicative infrastructure demand of $30b over next 10 years significantly

higher than current capacity of $20b

• Hard decisions will be need on both funding and prioritisation

Operational costs

• Significant savings targets already built into operating budgets
• Key levers to accommodate new service initiatives include:
• Higher general rates increase
• Increasing existing fees and charges
• Introducing a new revenue source (e.g. targeted rate)
• Reprioritisation of currently planned services & initiatives

Tūpuna Maunga Operational Plan FY 18-19 / Long Term Plan

18 October 2017

• Plan agreed by Tūpuna Maunga Authority and Council
• Council undertakes routine management under direction of

TMA

• Management ready to implement plan

Draft Operational Plan 2018/19

Objectives

• Deliver improved open spaces (across 8 local board areas)
• Heal Tūpuna Maunga for all
• Support future UNESCO World Heritage bid

Draft 10 Year Budget (LTP) 2018-28

g g q Tūpuna Maunga Authority

Existing Existing Existing Existing Existing Existing Existing New LTP Year New LTP Year New LTP Year

Funding Envelope

2018/19 $000's 2019/20 $000's 2020/21 $000's 2021/22 $000's 2022/23 $000's 2023/24 $000's 2024/25 $000's 2025/26 $000's 2026/27 $000's 2027/28 $000's

Net Operating expenditure: Proposed Net Operating expenditure 2018-2028 3,318 3,284 3,293 3,639 3,642 3,742 3,967 3,967 3,967 3,967 Current Net Operating expenditure budget 3,053 3,003 3,196 3,005 3,055 3,107 3,159 Additional Net Operating expenditure funding requirement 266 281 97 635 587 636 808 Capital expenditure: Proposed Capital expenditure 2018-2028 5,093 7,008 7,110 6,925 8,875 9,086 9,395 9,820 12,780 12,800 Current Capital expenditure budget 3,681 3,716 3,824 3,938 8,796 9,086 9,395 Additional Capital expenditure funding requirement 1,412 3,292 3,286 2,987 79 Total Funding: *Proposed Total LTP Funding 2018-2028 8,411 10,292 10,403 10,564 12,517 12,828 13,362 13,787 16,747 16,767 Current Total LTP Funding 2018-2028 6,733 6,719 7,019 6,943 11,851 12,193 12,554 Total Additional funding requirement for LTP 2018-2028 1,678 3,573 3,383 3,621 666 636 808

Notes: * Figures in 2017/18 year values - no inflation adjustments * Net operating expenditure excludes depreciation

Additional funding request

Additional operational funding Years 1-3: ● rabbit eradication Years 4 on: ● maintaining infrastructure

• management of Maungauika / North Head
• On-site management

Additional capital funding Years 1- 4: ● protection and restoration of the tihi (summits) by:

• removing redundant infrastructure
• reinstating open space areas
• developing significant track and viewing platforms, and
• implementing a tree management programme.

Years 4 on: ● develop visitor infrastructure (including information centres).

Natural Environment

Sophie Heighway / Barry Potter

Auckland Plan 30 years

A plan for Auckland, not just council The pathway to achieve the

• utcomes we want in 30 years

Outcomes we want by 2050

• Belonging and participation
• Māori identity and wellbeing
• Environment and cultural heritage
• Homes and places
• Access and connectivity
• Opportunity and prosperity

Towards a world-class city

Key challenges next 30 years

High population growth Sharing prosperity amongst all Greater environmental pressure

Long-term Plan 10 years

Identifies council’s investments to achieve Auckland Plan outcomes The immediate issues we will focus on

Accelerate transport Housing and urban renewal Funding for growth Inclusive city Investment across the region Water quality Protect environment and respond to climate change

Aucklanders value the natural environment

Ecosystem Services

ECONOMY SOCIETY & CULTURE ENVIRONMENT

Auckland is one of the weediest cities in the world (10,000 exotics vs 2,000 native plants) 26 million native birds are killed each year in New Zealand by predators Kauri will disappear within the next 30 years Declining water quality Two-thirds of Auckland’s shore and sea birds are at risk of extinction

Current state: Environmental decline and extinctions

No robust spatial data capture system

Statutory responsibilities

• Resource Management Act
• Biosecurity Act
• National Coastal Policy Statement
• National Policy for Freshwater

Management Related strategies and policies

• Auckland Plan (original and refresh)
• Auckland Growing Greener
• Auckland Biodiversity Strategy
• Regional Pest Management Plan
• Low Carbon Action Plan

Current state – strategy, policy and statutory framework

Green infrastructure Community action and behaviour change Council walking the talk

Investment Scope

Statutory controls Healthy marine ecosystems Healthy parks and native ecosystems Reduced carbon emissions Zero waste Improved Water Quality

In Scope Out of Scope

OPTION A

Environmental decline and extinctions

OPTION C

Slowed decline

OPTION B

Protect and enhance priority areas and species

Investment Options

60% 20% 10% 9%

$97m

RESTORATION (INCL CONTRACTOR & STAFF COSTS) CONTROL EQUIPMENT MANAGEMENT COMMUNITY ENGAGEMENT RESEARCH, MONITORING & EVALUATION

Option A Current State: Environmental Decline and Extinctions

High (>80%) risk of kauri dieback spreading 28% of rural mainland protected from possums No freshwater pest management in lakes 250 community groups supported to a low level 25% of region under community led pest control 30% high value ecological areas on regional and community parks protected Most “pest free islands” maintained No new pest free islands. Reactive marine biosecurity measures Decline in marine ecological health, risk of shorebird /seabird extinction

Partner Contributions = $4m

10 YEARS TOTAL RATES

FIRST 3 YEARS $25m TOTAL

Option B: Protect & Enhance Priority Areas and Species

30% 5% 29% 12% 18%

RESTORATION (INCL CONTRACTOR & STAFF COSTS) TRACKS CONTROL EQUIPMENT MANAGEMENT COMMUNITY ENGAGEMENT RESEARCH, MONITORING & EVALUATION

Partner Contributions = c. $125m

Low (10-20%) risk of kauri dieback spreading 100% rural mainland protected from possums Two highest priority lakes protected from pests 900 community groups well supported 60% of region under community led pest control 100% high value ecological areas on regional and community parkland Kawau and Waiheke “pest- free” Skinks, ants and high priority pest plants eradicated from Gt Barrier Proactive marine biosecurity measures Habitat monitoring and some restoration for high priority shorebird /seabird species (implement SeaChange recommendations)

$453m

10 YEARS TOTAL RATES

FIRST 3 YEARS $150m TOTAL 6%

40% 10% 20% 15% 10%

Option C: Slowed Decline

RESTORATION (INCL CONTRACTOR & STAFF COSTS) TRACKS CONTROL EQUIPMENT MANAGEMENT COMMUNITY ENGAGEMENT RESEARCH, MONITORING & EVALUATION

Partner Contributions = c. $70m

Medium (30-50%) risk of kauri dieback spreading 28% of rural mainland protected from possums No freshwater pest management in lakes 450 community groups with basic support 40% of region under community-led pest control 30% high value ecological areas on community parks protected and 50% on regional parks Reactive marine biosecurity measures Limited marine habitat identification for protection, increased but still ad- hoc monitoring of seabirds Staff support only for ‘pestfree’ Waiheke Skinks, ants and high priority plants eradicated from Gt Barrier

$220m

10 YEARS TOTAL RATES

FIRST 3 YEARS $85m TOTAL 5%

Financial summary

Non-rates contribution

$ 4m $ 125m $ 70m 25%

Risk of kauri dieback spread % of high value ecological areas on parks protected % of region under community-led pest control

60% 40% 30%C 50%R >80% 10-20% 30-50%

OPTION A

Environmental decline and extinctions

OPTION C

Slowed decline

OPTION B

Protect and enhance priority areas and species

100%C 100%R 30%C 30%R

Coastal assets

Sarah Sinclair

Auckland plan 30 years

A plan for Auckland, not just Council The pathway to achieve the outcomes we want in 30 years

Outcomes we want by 2050:

• Belonging and participation
• Māori identity and wellbeing
• Environment and cultural heritage
• Homes and places
• Access and connectivity
• Opportunity and prosperity.

Towards a world-class city

Key challenges next 30 years

High population growth Sharing prosperity with all Greater environmental pressure

Long-term plan 10 years

Identifies Council’s investments to achieve Auckland Plan outcomes The immediate issues we will focus on

Accelerate transport Housing and urban renewal Funding for growth Inclusive city Investment across the region Water quality Protect environment and respond to climate change

Auckland’s coastline

• High amenity and recreation value:
• 3,200 km of coastline (multiple harbours and
• ffshore islands)
• 21,000 km of inland waterways
• Urban coastline is highly modified
• Varying degrees and types of coastal

hazards (erosion, instability and inundation)

• Council main asset owner (land and

infrastructure):

• $250M of hard coastal infrastructure assets
• Green coastal assets (dunes) now being

valued

• High demand for amenity and protective

infrastructure

• High risk of asset damage from storms.

Current state

• Historic ad-hoc management of coastal

assets

• Increasing requirement for renewals and

new assets

• Increasing incidence of failing assets

from natural hazards, e.g. storms and slips

• Insufficient budget to address coastal

management issues

• Existing budget to 2028 will be spent by

2020.

Recommended option

Coastal Management Framework recommends:

• Rapid response to next 3 years in “hot spots” – more

CAPEX investment

• Invest $1.2M OPEX to develop coastal compartment

plans to deliver an Asset Management Plan for Auckland’s Coast by 2020 for future CAPEX and OPEX spend

• Drive a prioritised regional funding approach, and good

decision making for coastal assets

• Develop regulatory and policy approaches to reduce

future risk.

Comparison of options

• Option 1 – No current CAPEX budget post 2020. OPEX budget demand based
• n historic spend
• Option 2 – CAPEX years 19-20 based on renewals and new works. Short-term

increase in OPEX needed to develop AMP to plan future works, based on good decision making and funding prioritisation, plus ongoing technical support

• Option 3 - Without AMP, renewals and new works based on demand. Slight

increase in OPEX for technical support.

2 4 6 8 10 12 14 16 18 19 20 21 22 23 24 25 26 27 28

Current CAPEX Option 2 CAPEX Option 3 CAPEX current OPEX Option 2 OPEX

Summary

• Demand for investment outstrips budget substantially, some $15-20M per

year

• Ad-hoc responses need to change to an approach that allows us to make

decisions about where to prioritise investment to manage risk or maximise amenity value, and develop an AMP and LTP to do this

• We require short-term OPEX investment to enable this long-term CAPEX

saving and risk management option.

ACIL review

Alastair Cameron

Context

• ACIL current state
• Options available:

Options 1

Status Quo

2

AIAL shares transferred to Council treasury, POAL transferred to alternative CCO

3

AIAL shares transferred to Council treasury, POAL transferred to Council parent

4

ACIL’s portfolio expanded

ACIL current state

ACIL’s Scope

• Established on amalgamation with the following objectives:
• a. to bring a strong commercial focus to the ownership and governance
• f Auckland Council's major investment assets; and
• b. to provide an efficient structure for the ownership of those assets.
• As a CCO, ACIL must achieve the objectives of Auckland Council as

specified in its Statement of Intent.

• ACIL is subject to CCO accountability requirements

ACIL’s Responsibilities and Costs

• 22.3% shareholding in Auckland International Airport Limited
• 100% shareholding in Ports of Auckland Limited

Directors Fees 142,000 Staff Costs 399,000 Audit Fees 150,000 Professional Services 325,000 Shared Services Fees 15,000 Other opex 37,000 Total $1,069,000

ACIL Review Context

Mayoral Intent to LTP:

• Last week Auckland Council resolved to progress scoping for the future of POAL and

waterfront land.

• The ACIL review will not affect these decisions.

Legislative Considerations

POAL is subject to the following legislative provisions:

• Port Companies Act 1988, s 5: the principal objective of every port

company shall be to operate as a successful business

• Local Government Act 2002, s 6(4)(c): a port company is not a

Council-controlled Organisation

Comparison of Options

Comparison of Options

Options 1

Status Quo

2

AIAL shares transferred to Council treasury, POAL transferred to alternative CCO

3

AIAL shares transferred to Council treasury, POAL transferred to Council parent

4

ACIL’s portfolio expanded

CCO Accountability Policy

Alastair Cameron

Structure of this presentation

• Introduction: background, how the policy works as an accountability

mechanism and part of the framework Proposed content for the accountability policy:

• Part 1: The council’s expectations of CCOs – suggestions for revised

content

• Part 2: Further reporting and planning requirements
• Part 3: Management of strategic assets – is this still fit for purpose?

Context

The accountability policy is:

• Unique to Auckland Council (s90 LGACA)
• A foundation for accountability to the council
• Part of the Long-term Plan
• SOI is complementary as an accountability measure
• Prepared by the council and CCOs must ‘give effect to’ it
• More enduring; three yearly update vs annual
• Changing it requires an amendment to the Long-term Plan
• Supported by performance measures

Long-term plan: Accountability policy Performance measures

Accountability framework

Auckland Plan Statement of intent: Objectives Activities and intentions Asset management plan Financial plan Other strategies e.g: AUP, FULSS “Give effect to” (a legal obligation)

Scope of the review

• Not a fundamental review of the role of CCOs
• This is an update to:
• Reflect council’s current objectives and priorities
• Check whether the other requirements are still fit for purpose
• Some work currently in progress will affect this

Part 1 Council’s expectations of CCOs

Proposed general approach:

• Reflect current strategies and policies and the Auckland Plan refresh
• Refine drafting and use a common structure:
• Purpose of CCO (from constitution or legislation)
• Expectations
• Behaviours
• Common expectations for all:
• Māori responsiveness
• Working together
• Understanding wider council policy issues in decision-making

Proposed specific expectations - ACIL

• Propose to retain the status quo until the cost benefit analysis of options

for carrying out ACIL functions differently has been completed

Proposed specific expectations - Auckland Transport

• ATAP priorities agreed with central government
• Draft Auckland Plan outcomes (and focus areas):
• Integrated transport system
• Increase real travel choices
• Minimise harm on people and the environment
• The development strategy – how Auckland should grow and develop

Proposed specific expectations - ATEED

• Existing policy closely follows the Economic Development Strategy
• Two reviews currently in progress may impact the council’s

expectations:

• Review by ATEED CE
• s17A review of investment attraction

Proposed specific expectations - Panuku

• Panuku expectations were written in 2015 when it was established
• Propose to retain the status quo as these are still current
• The focus for Panuku is on delivery

Proposed specific expectations - Regional Facilities Auckland

• Existing expectations focus on:
• The equitable provision of cultural, heritage and lifestyle opportunities
• A focus on regional facilities rather than local ones
• Propose to retain the status quo

Proposed specific expectations - Watercare

• Proposed Auckland Plan outcomes:
• Value, protect and enhance environment for future and current Aucklanders
• Future-proof infrastructure for a changing and future Auckland
• Utilise growth to restore degraded environments
• The development strategy – how Auckland should grow and develop
• s17A review findings (to be adopted in November) could result in

different expectations for Watercare:

• Further integration of the three waters
• Three waters strategy should be developed

Part 2 Planning and reporting

• Current planning requirements are:
• AMPs and activity plans
• Māori responsiveness plans
• Current reporting requirements are:
• Half-yearly and annual reports (statutory)
• The council requires quarterly reports against SOI
• Proposed further requirements to:
• Provide information if required to by resolution of committee
• Comply with NZX obligations
• Comply with requirements on audit and risk reporting
• Prepare local board engagement plans

Part 3 Oversight of strategic assets

• Strategic assets are: (LGA 02)
• “an asset or group of assets that the local authority needs to retain if the local

authority is to maintain the local authority’s capacity to achieve or promote any

• utcome that the local authority determines to be important to the current or

future well-being of the community”

• Currently, CCOs must manage the assets to:
• Maximise their long-term benefit to Aucklanders
• Enable it to meet its SOI objectives
• ‘Major transactions’ require approval from the council (different to major

transactions requirements under Companies Act 1993)

CCO Strategic assets owned and managed by the CCO Owned by council ACIL

• 100% shareholding in Ports of Auckland Limited
• Shares held in Auckland International Airport Limited
• Freehold interests in waterfront land held by Ports of

Auckland Limited None AT

• Public transport network including Britomart

Roading network PDA

• Freehold interests in waterfront land

None RFA

• Auckland Art Gallery (including the arts collections
• wned by Regional Facilities Auckland)
• Auckland Zoo
• Aotea Centre
• Civic Theatre
• Viaduct Events Centre
• Mt Smart
• The council’s contractual rights and interest in Auckland

City Arena (known as Vector Arena) None Watercare

• Wastewater network
• Water network

None

Issues with status quo

• The definition of ‘major transaction’ is both:
• Unclear, especially for network assets - under the current policy, some

decisions arguably were required to be approved by the council

• Too rigid – may pick up too many minor decisions
• No prescribed process for approval where it is required

Options for change

• The policy should be used to ensure that strategic assets are being

managed in accordance with the council’s priorities

• Proposed changes to:
• Refine the definition of ‘major transaction’ to make it more clear – ensure that

important issues come to the shareholder but avoid picking up operational decisions

• Where approval is required by the council, provide a process and criteria

Core cost reduction

Robert Irvine Christine Watson / Sara Hay Aaron Donaldson

10-year budget core cost reduction

Approach:

• Maintain annual increases in core

expenses under 2.5% for the first three years of the 10-year budget

• Indicative core cost reduction of at

least an additional $50 million by 2021

• Targeted tangible programme of
• pportunities
• May 2018 workshops

10-year budget core cost reduction

Group shared services Procurement Value for money

Key focus areas:

• Mayoral Intent - Officers have been requested to “present a group-wide shared services

strategy to identify opportunities for the Council group, with priority areas that can be delivered in the next three years to increase efficiency and effectiveness and reduce costs

• f the back office and other services.”
• Group Shared Services Programme will identify other professional and transactional
• pportunities to reduce duplication of common back office functions being:
• Transactional activities – payroll, finance and treasury;
• Professional support services – legal, procurement, HR; and
• Technology (ICT) – software, technical support, hardware platforms
• Integrated programme considering other complementary workstreams i.e. Section 17A

(value for money reviews), Group policies – Procurement, Insurance, Treasury etc.

Group Shared Services

Group Shared Services Prioritization

Value ($) Ease of implementation

L H $50m $100m

IT Finance HR Corporate Other Customer Services Procurement Legal

• Auckland Transport is going to market for a new Asset management system
• Watercare is in the market for replacement of their systems landscape covering Customer

management, Billing and Asset Management

• Auckland Council has already deployed a common asset management system across all of

its Asset classes. This was built with a view to accommodating any asset type.

• Auckland Council has developed sophisticated asset management analytical capabilities.

These capabilities are just starting to deliver critical insights to inform major investment decisions.

• Both the Auckland Transport and Watercare initiatives will involve significant investments

and create a huge opportunity for capturing cross-group synergies OR lock us out of that

• pportunity until a replacement cycle occurs (likely 10-15 years)
• This is a key opportunity to take advantage of the SAP contract renegotiations aimed at

securing Council Group economies of scale.

Optimised Group-wide Asset Management

Enterprise Asset Management

Procurement

• Group sourced procurement activity (Electricity Supply, ICT,

Mobile)

• Innovative procurement strategies (Project 17, Legal Services)
• Capture innovation and savings through Supplier Relationship

Management

• Forward work planning and group procurement strategies to make

the most of our size and scale

Value for money

• Section 17A reviews
• Duplication
• Benefits realisation
• Quality decision making
• Core cost control

Budget Book

Robert Irvine / Ramari Slattery

Reporting and disclosure

Statutory reporting Enterprise accountability Business accountability

• Legislative reporting
• Higher level based off GOA structure
• Political / public reporting
• Designed to drive enterprise wide accountability
• Ability to tailor to focus areas
• Multi-tiered level reporting
• Budget Book /Quarterly Reporting /SOIs
• Move to online reporting
• Business plans
• Business monthly reporting

• More detailed information on activities and services
• Shows:
• What is delivered
• How it is measured
• How much it costs
• Who pays
• Who makes budget decisions
• Currently has actual 2016/17 and budget 2017/18
• Will be updated with LTP numbers and improved performance

measures next year

• Designed to give elected members the opportunity to review and

question offline

Budget Book

Sum up

Robert Irvine