Finance and Performance Committee 04.14

Note: The reports contained within this agenda are for consideration and should not be construed as Council policy

unless and until adopted. Should Members require further information relating to any reports, please contact the relevant manager, Chairperson or Deputy Chairperson.

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

Date: Time: Meeting Room: Venue:

Wednesday, 16 April 2014

9.30am

Reception Lounge Auckland Town Hall 301-305 Queen Street Auckland

Finance and Performance Committee

OPEN AGENDA

MEMBERSHIP Chairperson Cr Penny Webster Deputy Chairperson Cr Ross Clow Members Cr Anae Arthur Anae Cr Calum Penrose Cr Cameron Brewer Cr Dick Quax Mayor Len Brown, JP Cr Sharon Stewart, QSM Cr Dr Cathy Casey Member David Taipari Cr Bill Cashmore Member John Tamihere Cr Linda Cooper, JP Cr Sir John Walker, KNZM, CBE Cr Chris Darby Cr Wayne Walker Cr Alf Filipaina Cr John Watson Cr Hon Chris Fletcher, QSO Cr George Wood, CNZM Cr Penny Hulse Cr Denise Krum Cr Mike Lee (Quorum 11 members) Crispian Franklin

Democracy Advisor 11 April 2014 Contact Telephone: (09) 373 6205 Email: [email protected] Website: www.aucklandcouncil.govt.nz

TERMS OF REFERENCE

Responsibilities This committee will be responsible for monitoring overall financial management and the performance of the council parent organisation and the financial monitoring of the Auckland Council Group. It will also make financial decisions required outside of the annual budgeting processes. Key responsibilities include:

Financial management

Approval of non-budgeted expenditure

Write-offs

Acquisition and disposal of property relating to the Committee’s responsibilities

Monitoring achievement of financial and other measures of performance and service levels

Recommending the Annual Report to the Governing Body Powers (i) All powers necessary to perform the committee’s responsibilities.

Except:

(a) powers that the Governing Body cannot delegate or has retained to itself (see Governing Body responsibilities)

(b) where the committee’s responsibility is limited to making a recommendation only

(ii) Approval of a submission to an external body

(iii) Powers belonging to another committee, where it is necessary to make a decision prior to the next meeting of that other committee.

(iv) Power to establish subcommittees.


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ITEM TABLE OF CONTENTS PAGE

1 Apologies 5

2 Declaration of Interest 5

3 Confirmation of Minutes 5

4 Petitions 5

5 Public Input 5

5.1 Bruce Pulman Park Trust - Marie Stechman MNZM and Bruce

Pulman 5

6 Local Board Input 5

7 Extraordinary Business 6

8 Notices of Motion 6

9 Bruce Pulman Park Trust - Request for $4M Community Loan 7

10 Disposal Recommendation Report

This report will be distributed under a separate cover.

11 27 Normanby Road, Mt Eden 55

12 Albany Stadium Pool - Funding for Programmable Pool 123

13 Civic Administration Building


14 Efficiency Savings Update 131

15 New Local Government (Financial Reporting and Prudence) Regulations 2014


16 Consideration of Extraordinary Items

PUBLIC EXCLUDED

17 Procedural Motion to Exclude the Public 141

C1 Flat Bush Potential Land Acquisition 141

C2 Monthly Budget Update 141


16 April 2014

1 Apologies

An apology from Member David Taipari has been received. 2 Declaration of Interest

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

3 Confirmation of Minutes

That the Finance and Performance Committee:

a) confirm the ordinary minutes of its meeting, held on Thursday, 13 March 2014, including the confidential section, as a true and correct record.

4 Petitions

At the close of the agenda no requests to present petitions had been received. 5 Public Input

Standing Order 3.21 provides for Public Input. Applications to speak must be made to the Committee Secretary, in writing, no later than two (2) working days prior to the meeting and must include the subject matter. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders. A maximum of thirty (30) minutes is allocated to the period for public input with five (5) minutes speaking time for each speaker. 5.1 Bruce Pulman Park Trust - Marie Stechman MNZM and Bruce Pulman

Purpose

Marie Stechman, MNZM and Bruce Pulman will be in attendance to speak to the committee in support of the Bruce Pulman Park Trust report.

Recommendation/s


a) Thank Marie Stechman, MNZM and Bruce Pulman for their support on the Bruce Pulman Park Trust report.

6 Local Board Input

Standing Order 3.22 provides for Local Board Input. The Chairperson (or nominee of that Chairperson) is entitled to speak for up to five (5) minutes during this time. The Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical, give two (2) days notice of their wish to speak. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.


16 April 2014

This right is in addition to the right under Standing Order 3.9.14 to speak to matters on the agenda. At the close of the agenda no requests for local board input had been received.

7 Extraordinary Business

Section 46A(7) of the Local Government Official Information and Meetings Act 1987 (as amended) states: “An item that is not on the agenda for a meeting may be dealt with at that meeting if- (a) The local authority by resolution so decides; and (b) The presiding member explains at the meeting, at a time when it is open to the

public,- (i) The reason why the item is not on the agenda; and

(ii) The reason why the discussion of the item cannot be delayed until a

subsequent meeting.” Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as amended) states: “Where an item is not on the agenda for a meeting,- (a) That item may be discussed at that meeting if-

(i) That item is a minor matter relating to the general business of the local authority; and

(ii) the presiding member explains at the beginning of the meeting, at a time

when it is open to the public, that the item will be discussed at the meeting; but

(b) no resolution, decision or recommendation may be made in respect of that item

except to refer that item to a subsequent meeting of the local authority for further discussion.”

8 Notices of Motion

At the close of the agenda no requests for notices of motion had been received.

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Bruce Pulman Park Trust - Request for $4M Community Loan


File No.: CP2014/04693

Purpose 1. To obtain the decision of the Committee on whether to approve a community loan of up to

$4 million to the Bruce Pulman Park Trust (BPPT) for the purpose of completing the Indoor Courts Centre at Bruce Pulman Park, Walters Road, Papakura.

Executive Summary 2. The Bruce Pulman Park Trust leases Bruce Pulman Park from Auckland Council. The park

is located on Walters Road, Papakura and covers an area of 64 hectares, and consists of facilities catering to football, rugby, netball, tennis, cricket, gymnastics, together with supporting ancillary services. Over 650,000 people visited the park in 2013, and with further developments planned, this is likely to increase to in excess of 1.3 million visits in future years.

3. The former Papakura District Council approved a grant of $3.9 million to the Bruce Pulman Park Trust as a contribution towards the $10.5 million cost of constructing the Indoor Courts Centre at the park. This decision was subsequently endorsed by Auckland Council and recorded in a funding agreement.

4. As a result of design enhancements, increased scope of works and cost increases, the enlarged facility has a revised construction cost of $17 million. Construction of the complex has commenced and is well advanced. The trust is seeking funding to ensure the building is completed in a timely manner.

5. The BPPT is seeking an Auckland Council interest-free community loan of up to $4 million, repayable over a 5 year term.

6. A review of the trading results of the BPPT and the entity that provides most of the funding to the trust, the Manukau Counties Community Facilities Community Trust (MCCFCT), indicate strong trading results over the last years, coupled with strong balance sheets. The BPPT is the single largest recipient of annual grant distributions from the MCCFCT. The two trust share several trustees in common, including Mr Bruce Pulman himself.

7. Security for the loan will be by way of cross-default provisions in the loan and lease documents as Council already owns the underlying land.

8. The lease agreements contain provisions that enable the BPPT to seek assistance from Auckland Council to enable the construction to be completed should there be a shortfall in funding.

9. As the lease agreements were executed prior to the formation of the larger Auckland Council, it is recommended that discussions commence with the BPPT to determine whether the lease arrangements a can be modified to better reflect the role and status of Bruce Pulman Park in the greater Auckland Council parks network.

10. It is recommended that a loan of up to $4 million, for a maximum period of 5 years be approved at the interest rate payable by Auckland Council, currently 5.66% p.a.

Recommendation/s That the Finance and Performance Committee:

a) Acknowledges and records its support for the development of Bruce Pulman Park and acknowledges the contribution that the Indoor Court Centre will make to the sports facilities located both at the park, Auckland and at a national level.

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b) Approves a community loan of up to $4 million to the Bruce Pulman Park Trust for a period of 5 years; at an interest rate equivalent to the cost of borrowing for Auckland Council (circa 5.66%); with interest only payable for the first three years, and interest and principal repaid over the final two years; other terms and conditions are to be in accordance with Auckland Council’s normal lending terms and conditions in respect of community loans.

c) Delegates approval for the final terms and conditions of the loan agreement to the Manager Finance and Manager Regional and Local Planning.

d) Approves varying the leases between Auckland Council and Bruce Pulman Park Trust in respect of 90 and 138 Walters Road Papakura to provide for cross-default in respect of the loan, noting that these variations must be executed prior to the release of any funds.

e) Requests that Council staff meet with representatives of the Bruce Pulman Park Trust to discuss whether the lease arrangements between the Council and Trust can be modified to reflect the direction and vision of Auckland Council versus the previous focus of the Papakura district.

Discussion Background on Bruce Pulman Park

11. The Bruce Pulman Park Trust leases Bruce Pulman Park from Auckland Council. The park covers an area of 64 hectares and is located on Walters Road, Papakura and consists of:

• 15 sports fields

• indoor sport, recreation and administration facilities

• a purpose-built indoor gymnastics and trampoline facility

• 21 outdoor netball courts

• 6 outdoor tennis courts

• 2 cricket ovals

• an all-weather sprint strip

• open space

• an adjoining training and accommodation facility (the Lodge)

12. The Trust expects there to have been over 650,000 visits to Bruce Pulman Park in 2013, up from approximately 600,000 in 2010. Further developments either under way or planned allow for upwards of a further 700,000 visits to the park, giving an annual total visitation in excess of 1.3 million.

13. There are currently a large number of sports and community groups using the park, including Papakura Netball, Ardmore Marist Rugby Club, Counties Manukau Gymnastics, Counties Manukau Cricket, numerous schools, Netball New Zealand, NZ Academy of Sport and Auckland University of Technology. A number of individual passive recreation users also frequent the park. The sports fields comprise a significant part of the Papakura community’s recreation network. Attachment A lists the 2013 users of the park.

14. The former Papakura District Council historically supported the park in a number of ways. In 2006, the Papakura District Council joined the Bruce Pulman Park Trust, Netball Counties Manukau and Papakura Netball Centre on a Working Party to plan for the construction of an indoor court centre on Bruce Pulman Park. In 2007, Papakura District Council allocated $2 million to the construction of the Indoor Courts Centre and a further $1,900,000 in 2009.

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15. Resource consent was originally granted for 4 indoor courts, however following completion of a feasibility study for the Indoor Courts Centre in 2009, this was revised to include 6 indoor courts, built to Netball NZ and Auckland Volleyball’s specifications for national championships. Both the Auckland Regional Netball Facilities Report and the Auckland Regional Physical Activity and Sport Strategy supported the feasibility study. In particular, the Auckland Regional Netball Facilities Report identified the development of indoor court facilities as its highest priority and states that the most significant gap in the Auckland region is in Counties Manukau.

16. Since the completion of the Indoor Courts Centre feasibility study, the Bruce Pulman Park Comprehensive Development Plan has also been completed, and was formally endorsed by the Papakura District Council in 2010. This Plan outlines proposed capital development at the park, including:

• the Indoor Courts Centre

• a golf centre

• a sport development centre

• sports office and resource centre

• cricket pavilion

• children’s adventure playground

• a multi-purpose sports centre

• field floodlights and goalposts

• fitness cycle trail and exersites

17. Approximately $30 million has been invested in the development of Bruce Pulman Park (excluding current work in progress). An estimated further $98 million will be required to complete the planned improvements detailed in the Comprehensive Development Plan.

18. To date, Council has provided a $439,000 per annum operational subsidy; funded the Comprehensive Development Plan; financially contributed to the construction of a public toilet in July 2010; and has allocated $3.9 million to the development of the Indoor Courts Centre. The Comprehensive Development Plan confirms that most of the large development projects on the park will require feasibility studies. Several of these have now been completed, with the balance still to be undertaken.

19. Bruce Pulman Park Trust has a Memorandum of Understanding with Auckland University of

Technology that provides certainty of use and contributes to the long-term sustainability of the park; in turn, this provides opportunities for coaching and exercise science, improving health outcomes through physical activity.

20. A significant amount of development has already occurred at the park and construction of the Indoor Courts Centre is well underway.

Organisational Structure

21. There are a number of organisations involved in enabling the Indoor Court Centre to be constructed. The key organisations include:

Bruce Pulman Park Trust

Manukau Counties Community Facilities Charitable Trust

HEB Construction Ltd

Staff have identified and worked through the nature of the trusts and delivery entities and have a number of concerns that need to be addressed.

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Lease

21. There are two leases in respect of Bruce Pulman Park. These effectively mirror each other regarding terms and conditions. The agreements were entered into by the former Papakura District Council and extend a larger than normal number of rights to the lessee (i.e. BPPT).

The basic terms of the agreement are as follows:

a. Thirty-three year term commencing from 1 August 2001 with a right of renewal for a minimum of a further 33 years, on essentially the same terms and conditions.

b. $1 per annum rent, with no rent reviews.

c. The trust will not pay any land rates on the leased area.

d. The trust would undertake a certain minimum level of improvements at the park. However in approving this, the Council in its capacity as lessor (not regulatory), pre-approved all matters relating to the improvements (including alterations, additions and renewal), giving the Trust full and unfettered discretion to decide all matters relating to the improvements.

e. If, for any reason, the Trust is unable to complete the work on the improvements within a reasonable period of time the Trust is permitted to advise the Council, following which the Council (although under no obligation to do so) can either complete the work itself, or provide funding to the Trust to complete the works. Any amount advanced shall be a debt owing to the council, unless agreed otherwise.

22. The effect of these clauses is that provided the improvements are consistent with the stated “Permitted Use of the Land” the Trust has the ability to develop the park as it wishes, produce and amend plans for improvements as it desires, and should there be any funding shortfall, it can request Council to assist to remedy the situation (which by implication means provide funding), although Council is under no obligation to do so.

23. Of further concern for Council is the potential for dis-connect between the proposed and actual development of the park (facilities), and the obligations this places on Council by way of infrastructure development and consequential opex as provided for under the leases.

24. Ideally, major facilities developments at the park should be discussed with the Papakura Local Board and/or Auckland Council prior to the Trust committing to progressing the project. This will allow the Local Board and Council time to consider, agree, plan and budget for any obligations that may arise from the proposed development.

25. Auckland Council needs to be in a position where it can properly consider the ‘cost’ of the developments at Bruce Pulman Park and its obligation to provide funding for these and weigh this up against other projects and demands for funding across other areas of Council’s operations.

26. Coupled with this discussion is the need to determine where Bruce Pulman Park sits within the wider Council network of parks. Although the park was originally conceived as of local significance for Papakura and its immediate environs, the park is developing into regional importance due to the activities that are being undertaken there, and the nature of the lease agreement means that many decisions relating to Councils obligations under the lease will be considered by committees of the whole, or the Governing Body.

27. It is acknowledged however that this particular arrangement at Bruce Pulman Park represents a precedent and was the first Public/Private/Partnership (PPP) arrangement for the new Auckland Council to deal with.

28. Given the planned future development of the park by the BPPT, it may be appropriate for Council and the BPPT to enter discussions regarding the terms and conditions of the leases to determine whether the agreements need to be modified to reflect the nature of Auckland Council and its plans for the future development of greater Auckland and where the park sits within the great Auckland Council parks network. This acknowledges the different priorities

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that exist within Auckland Council versus what existed at the time the original agreements were entered into under the former Papakura District Council.

Nature of Works Being Undertaken – Indoor Court Centre

29. As noted earlier, work has commenced on the construction of the Indoor Courts Centre, and Council has already approved grants totalling $3.9 million towards the construction costs that (at the time) were estimated to be circa $10 million. Since construction has started, the scope of works has expanded significantly as a result of enhancements agreed between the BPPT and interested user groups of the facility. The improvements will greatly enhance the usability and appeal of the facility, creating a high-quality facility with greater user appeal.

30. Aerial and other photographs of the development are attached as Attachment B. Plans of the facility are shown at Attachment C.

31. The extent of the enhancements and additional costs is detailed below in an explanation provided by the BPPT:

“The planned expenditure for the construction of the Indoor Courts Centre on Bruce Pulman Park has increased by $6.161m due to a major redesign, enhancements and soil conditions (see below). The enhancements are the result of:

Further consultation with the community resulting in additional information and needs unaccounted for in the original Feasibility Study.

Further consultation with Netball NZ, Auckland Basketball and Manukau Auckland Volleyball.

At the request of Netball NZ, consultation and planning with SKYTV to accommodate live television coverage of major events.

Following assessment of Auckland Council/NSO’s Sports Strategies, BPP Trust reassessed the usage of the Indoor Courts Centre. Originally designed as a training centre, there was reconsideration and enhancement of the designs to accommodate major events including National and National Secondary Schools for all three key sports codes and possibility of ANZ Netball events. BPP is a training centre and this move in our philosophy was taken to cater for the needs of the community, sports organisations and the Auckland South demographics including a large netball following and the non-capability of the Manukau based Vodafone Events Centre to host major court sport events.”

Design Enhancements and Variations:

1. Increase in overall size of 2,601m²

2. Site Works and Overall

a. An increase of 13 piles (from 70 to 83) was needed due to the increase in loads, and increase in building size, plus pile depth extensions.

b. Associated additional site works including excavations, foundations, drainage, concrete etc.

c. Eco-friendly projects for ventilation and collection of grey water storage tank installation.

3. Ground Floor

a. Increase in the size of the foyer to provide for better access and egress additional for supporters and spectators including a café, with an emphasis to minimise outdoor and wet shoe traffic on the international FIBA Level 1 sprung sports floor.

b. Addition of a canopy to provide for wet weather shelter for transport vehicles and foot traffic (south westerly wind and rain). Access shifted to northern side of building.

c. Building extension on both western and eastern ends of the stadium to provide for storage (outdoor access), increase in size of electrical services room, access to SKY Deck (level 3), pre-school children’s play room with viewing and access onto sports arena floor to provide parent child-care facilities for mid-week daytime sports leagues.

d. Major extension to northern and southern side of the stadium to accommodate level 2 mezzanine seating.

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e. Under floor and in column services cabling, including provisions for television production, LCD logistics and score display boards.

f. Courtside fixed team seating.

g. Provision for indoor/outdoor access between indoor and outdoor netball courts.

h. Redesign to increase team rooms, ablutions, showers, cold pools from two to four and additional storage.

4. Mezzanine Floor/Level 2

a. Extensions to accommodate additional access, stairwells and up to 1,000 seats based on National Sports Organisations requirements for both regional and national events. Status quo remains in the design to provide for a single major event court and provide strengthened floor space for organisers to install 4,000 temporary seats.

b. Addition of balconies; increase in size of Control Room and Plant Room; increase in meeting rooms to replace Ground floor rooms converted into Team Rooms; re- layout for offices etc.

c. Reinstatement of suspended ceilings.

5. 3rd Level, SKY Deck

a. Installation of a goods lift to meet SKY TV specifications and control rooms; access from ground level to 3rd level and construction of the television deck.

6. Preliminary & Design

a. Costs associated with designing, project management, amendments to both Resource and Building Consents, Fire Engineers and sub-contractor advisory consultations.

b. Future proofing and construction for wireless connectivity scoring and LCD displays.

32. The additional costs can be attributed not only to the expanded scope of the facility, but also to other unforeseen factors arising during the early part of construction, despite comprehensive investigative work.

33. The lease contains provisions that enable the BPPT to make alterations to the designs as it wishes, and there is no provision for Auckland Council as lessor to challenge these.

34. The table below provides an overview of where the additional costs have been attributed to:

(Information supplied by Bruce Pulman Park Trust)

Cost variations

Original Tendered Costs August 2010 10,858,656

Enhancements including variations 6,160,849

Current Construction Costs September 2013 $17,019,505

Additional Design, Certification, Supervision and Consents 615,764

Variations Piling, Excavations 659,850

Enhancements Mezzanine Seating 1,231,989

Balustrades, Walkways, Glazing 922,700

Canopy 550,000

Storage at each end, Play Area 490,094

Foyer, Mezzanine Offices, TV requirements, Lift 490,987

Suspended Ceilings, Outdoor Viewing, Conference Room, Electrical, Graffiti Guard

819,840

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Miscellaneous, Structural Steel Alternations 379,625

Total $6,160,849

35. The BPPT had advised that the value of the additional building costs has been verified by the Trust’s quantity surveyor Mr Peter Booker (PB Booker Ltd).

Request Received from the BPPT

36. In order to cover the additional costs, the BPPT is continuing to seek grant funding from a variety of sources, but in the meantime is seeking to complete the construction of the facility in a timely manner.

37. BPPT is seeking a concessionary community loan of up to $4 million from Auckland Council for a term of 5 years. This will enable the Indoor Court Centre to be completed in the near future while fund-raising continues.

38. A further driver for the Trust to complete the complex in the immediate future centres around obligations the Trust has entered into with Netball New Zealand for the National Championships to be held at the centre in September 2015. The Trust is also fielding enquiries regards the Worlds Master Games in 2017, and while the interest is focussed primarily on the actual facility, events such as basketball, netball and archery are being contemplated.

39. The Trust is requesting that, if approved, the loan be interest free for the duration of the term.

40. In addition, and in order to assist cashflow for the project, the Trust is seeking drawdown of the loan over a 1 year period, with repayments commencing at the beginning of year 4, and being concluded within the 5 year period (i.e. actually repaid over the last 2 year period of the 5 years).

41. It is estimated that the cost of interest over the 5-year lifetime of the loan would be in the vicinity of $860,000 (Attachment D). Currently there is no budget provision to cover these costs. If the decision is made to charge interest on the loan, whether at a concessionary rate, or at a rate sufficient to cover the cost to Council, the BPPT has indicated this cost could be covered, however, its preference is for the loan to be interest-free.

42. If the loan is approved, and should the decision be made for the loan to be interest free, or at a rate less than the cost to Council, the value of this benefit will be recognised by the BPPT.

Trust Sources of Funding

43. The reason for the 2 year repayment holiday (years 2 and 3 of the loan) relates to the flow of cash from the largest donor to the BPPT, viz: Manukau Counties Community Facilities Charitable Trust (MCCFCT). Correspondingly, the BPPT is the largest single recipient of funding from the MCCFCT.

44. The intention is that grants in years 2 and 3 from MCCFCT will be used to finance the project, and then the grants received from MCCFCT in years 4 and 5 would be used to repay the loan.

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45. The following table illustrates the donations received by BPPT from MCCRCT since 2009: (Source: Annual reports of the MCCFCT lodged with the Charities Commission)

Year Donation

2013 $3,158,995

2012 $3,110,474

2011 $2,717,691

2010 $1,853,353

2009 $1,589,513

46. The financial reports of the BPPT indicate very healthy trading results for the 6 years ended 31 March 2013. Accumulated surpluses exceed $13 million, with the vast majority of this funding being redirected back into the development of the park and facilities. A summary of the trading results for each of the BPPT and MCCFCT is included at Attachment E.

47. Apart from the $3.9 million grant from Auckland Council referred to above, the bulk of the revenue for the BPPT over the last six years has been derived from MCCFCT.

48. The BPPT shares two trustees in common with MCCFCT, including Bruce Pulman himself. The significance of this being that there is probably a reasonable expectation that the BPPT will continue to be a significant beneficiary of the MCCFCT into the foreseeable future, ensuring that the BPPT has sufficient funding to undertake and complete the Indoor Courts Centre development at Bruce Pulman Park, and then to repay the loan in the last two years of the proposed term.

49. A copy of a Grants Distribution Policy dated 31 October 2013 has been provided. This has been prepared in accordance with the provisions of the Gaming Act 2003. The authorised purposes of the Trust include the following items:

o Grants for the provision, maintenance and development of facilities and activities at Bruce

Pulman Park, including additions to the park by way of land purchase;

o Funds for the charitable purposes of the Bruce Pulman Park Trust for community sporting

and other community activities;

The full list is available as Attachment F.

50. The forecasted budgets for 2014-2015 and the subsequent 4 years show budgeted surpluses totalling $10.640 million. In the first three years ended 31 March 2017 these surpluses ($6.395 million) will be used to finalise the Indoor Court Centre, and in the next two years (2018 and 2019), the surpluses ($4.425 million) would be directed to repaying the Council loan at the rate of $500,000 per quarter.

51. Based on the historic financial information together with the forecasted trading results out to 2019, it would appear that the BPPT will be in a strong position to repay the loan, if approved.

Security for the Loan

52. Traditionally security for loans that are made to organisations leasing land and/or premises from Auckland Council is for the lease to contain provisions that provide that should there be default under the loan agreement, this would be deemed to be a default under the lease, meaning that Council could enforce termination provisions in the lease and effectively take control of the facilities.

53. The existing leases do not contain provisions of this nature. It will be necessary to vary the leases to include cross-default provisions under the two agreements.

54. The Trust has confirmed that it is willing to amend the lease to allow for cross-default provisions with the loan agreement.

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55. A General Security Agreement will also be required as further security.

Risks

56. There are a number of risks associated with this proposal that should be considered by Council.

57. Given the provisions of the lease agreements that give wide reaching powers to the trust to amend the plans without reference to Council (in its capacity as lessor), it is possible that there could be further enhancements included in the project which put further strains on the budgets for the project.

58. Despite best intentions, costs could increase to a level beyond current levels of available funding.

59. The BPPT could commence other projects that divert funds away from completing the Indoor Court Centre facility.

60. If a community loan is approved, approval of the loan could be made conditional on ensuring there are clauses in the loan agreement that place conditions on the release of the funding in place to minimise the possibility of these situations occurring.

Consideration

61. Bruce Pulman Park is considered a strategic asset on both a local and Auckland-wide scale. The proposed capital improvements will encourage national events and wider usage of the park. The Bruce Pulman Park Trust is committed to providing accessible, world-class infrastructure for the community.

62. Bruce Pulman Park aligns with the Auckland Regional Physical Activity and Sport Strategy and the Papakura Draft Physical Activity Strategy. The Papakura Local Board Plan states a commitment to the “… continued development of Bruce Pulman Park and its surrounding facilities”.

63. If this arrangements was being considered today (i.e. 2014), council may not be willing to provide as many concessions as are contained in the agreements that have been entered into. The agreements are weighed heavily in favour of the lessee, although this reflects the significant level of investment that the trust is making into the park.

Options for the Community Loan

64. There are a number of options available to Auckland Council in respect of this request for a loan. These include:

a) Not approving the loan request

b) Approve the request for a community loan in its entirety (i.e. as requested)

c) Approve the request, but on modified terms and conditions

65. In all instances the major difference relates to the amount of the loan, the length of the term, interest rate and when draw down can occur and repayments commence.

66. All other terms and conditions would be based on the format of community loan agreements previously developed by Legal Services. These include ensuring that the loans are drawn down against certificates issued by the project manager, or quantity surveyors who certify the value and quantum of work completed to date. i.e. there is no provision for draw down of the loan as a lump sum quantity.

Not Approve the Loan

67. Not approving the loan is likely to place strain on the project and jeopardise the viability of this particular piece of work at the park. Completion of the wooden floor is necessary to enable the facility to be enclosed and weather-proofed.

68. In addition, should the BPPT wish to borrow funds from others sources, it is likely that any lender will require security for the loan. As the underlying land is owned by Council, it will

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not be possible for BPPT to offer mortgage security to a third-party lender. Instead, BPPT may request that Council act as guarantor for the loan arrangement in which case further legal arrangements would need to be implemented and Council would be under contractual arrangements to the bank and have to rely on the Trust fulfilling its obligations under the contracts.

Approve the Loan as Requested

69. The BPPT has requested an interest free loan of up to $4M, repayable over a 5 year period. Based on the proposed drawdown and repayment schedule supplied by BPPT, the estimated cost of interest over the 5 year period is $860,000 for which there are currently no budgets held at either a corporate or local board level.

70. If an interest free loan is approved, it will be necessary to provide an additional budget allowance to cover the annual cost of the interest.

71. Adequate and suitable security for the loan must be provided by the Trust, although this is likely to be limited to cross-default provisions in the loan and lease agreements.

Approve the Loan – but on modified terms and conditions

72. A further alternative is for Council to consider and approve a loan arrangement on alternate terms and conditions, for instance, a lesser sum, different period of time, different repayment terms, and whether or not interest is charged, and at what rate.

73. A number of options are available regards the interest rate payable. The Council could opt to:

1. carry the cost of providing the loan as interest free to the BPPT;

2. on-charge interest at the same rate that Council borrow the funds; or

3. elect to charge interest on the basis of cost plus a margin (typically a small margin to cover overheads and other costs).

4. defer interest payments until the end of the 5 year period, and in the interim, through the Annual Plan and Long Term Plan processes determine whether to on-charge the full cost of the interest to the Trust, or come to some other arrangement regarding the interest.

74. Existing community loans are on many varied basis relating to terms (length) and interest rates, and are reflective of the organisation’s ability to repay, legacy council policy prevailing at the time, as well as the perceived value of the community benefits arising from the development.

75. Adequate and suitable security for the loan must be provided by the Trust.

76. These options have been discussed with the Mr Pulman who has indicated that the Trust would be willing to consider alternative arrangements if that was the wish of Council.

Local Board Views

77. The Papakura Local Board Plan states:

“Bruce Pulman Park has high-quality facilities and caters for such a wide range of activities that it has the makings of a complex of sub-regional importance. The development is ongoing. The trust undertaking the project needs to be supported both through funding and assistance in land acquisition to ensure that this developing world-class centre fulfils its potential.”

78. Details of the loan request were reported to the Papakura Local Board. A copy of the Papakura Local Board resolutions supporting this loan application are attached as Attachment H.

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Maori Impact Statement

79. A loan to the BPPT will have little direct impact on Maori. However the demographic make up of users of Bruce Pulman Park and its facilities would suggest that a large number of the Maori community would be users of the park and would therefore benefit from the completion of the various facilities at the park.

Implementation Issues

80. If the request for a loan is approved, there are a number of legal matters arising that will need to be comprehensively documented. Legal Services are currently providing advice on this matter and will maintain a watching brief in this regards. The major matters to consider from a legal perspective are the terms and conditions of the loan, and the security to be taken.

81. In 2011 the BPPT received approval from Council to utilise $2 million of the original $3.9 million grant to assist with cashflow requirements associated with constructing Pulman Lodge. In accordance with the agreement entered into at the time to record this arrangement, the funding has subsequently been ‘repaid’ and used by the trust in respect of the Indoor Courts Centre.

Attachments

No. Title Page

A BPPT - User Groups - 2013 19

B BPPT - Aerial & Other Photos 21

C BPPT - Indoor Court Centre Plans 39

D Indicative Interest Costs - $4 million 43

E BPPT Summary of Trading Results - 6 years to 31 March 2013 45

F MCCFCT Summary of Trading Results - 6 years to 31 March 2013 47

G MCCFCT Grants Distribution Policy - October 2013 49

H Papakura Local Board Resolutions 19 February 2014 53

Signatories

Authors Leigh Redshaw - Strategic Partnerships Advisor

Authorisers Penny Pirrit - Regional & Local Planning Manager

Andrew McKenzie - Chief Finance Officer

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27 Normanby Road, Mt Eden


File No.: CP2014/07428

Purpose 1. This report re-presents the case for approval to sell 27 Normanby Road, Mt Eden, which is a

non-service council owned property that Auckland Council Property Limited (“ACPL”) consider suitable for sale. This site was previously presented to the Strategy & Finance Committee (“S&FC”), but a decision was delayed to allow the three central local boards to find an alternative site for a Community Recycling Centre. This work has now been progressed and the property is being re-presented for consideration of disposal.

Executive Summary 2. ACPL is required to identify properties from within council’s portfolio that may be suitable for

potential sale to a combined value of $12.3 million by 30 June 2014. ACPL and Auckland Council Property Department (“ACPD”) work collaboratively on the comprehensive review process to identify such properties.

3. Capital receipts from the sale of the surplus properties will contribute to all Auckland Plan outcomes by providing the council with an efficient use of capital and prioritisation of funds to achieve its activities and projects.

4. 27 Normanby Road is a 7,756m² mixed-use property located in a high-value, city fringe area (refer to the images in Attachment A). The anticipated market value of this property is significantly in excess of its $5 million rating value. Its market value is currently being reassessed but will exceed $11 million. This site was acquired by Auckland City Council and Mt Eden Borough Council as tenants in common in equal shares in 1980 for use as a works depot. This primary service use ceased in approximately 2005; however the site has subsequently been used in part for other council requirements. The site has also been leased in part on a commercial basis. This site is currently zoned Mixed Use. The proposed Unitary Plan zoning is Business – Mixed Use.

5. 27 Normanby Road has been through the agreed consultative process including organisation wide internal officer consultation, local board and Iwi engagement. The officer feedback has been supportive of the proposed disposal of 27 Normanby Road

6. The rationalisation process commenced in early 2013 and ACPL’s standard rationalisation process was followed. No EOIs were received but the Solid Waste Business Unit submitted a business case (outside of the consultation process timeframes) to retain this site for Solid Waste activities.

7. The EOI process provided the Maori and Strategy Relations team the opportunity to flag any issue that is of particular relevance to Maori. The Heritage Unit was also invited through the EOI process to flag any particular archaeological merit. Neither party has raised any relevant issues.

8. When ACPL initially engaged with the Albert-Eden Local Board (“AELB”) about the potential disposal of 27 Normanby Road, it advocated retaining this site for use as a Community Recycling Centre (“CRC”) in conjunction with the Puketapapa and Waitemata Local Boards The boards were strongly in support of the Resource Recovery Network concept in the Waste Management and Minimisation Plan (WMMP) and wished to take immediate action to help achieve the WMMP targets for waste diversion including the funding of a feasibility study and a business case to establish whether a CRC in the central areas would be financially viable.

9. 27 Normanby Road was originally presented to the S&FC in March 2013. The S&FC resolved that action to dispose of this site should be put on hold for up to six months to enable a business case for a CRC on the site to be developed by the Albert-Eden,

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Puketapapa and Waitemata Local Boards (the “central local boards”) and then considered and decided by the Governing Body. ACPL was asked to work with Solid Waste to identify potential alternative sites for a CRC.

10. After a comprehensive search, an alternative site was found for a CRC at 956-990 Great North Road in November 2013. An external consultant was engaged by the Council to prepare an operational business case with a high level review of the advantages and disadvantages of using the two alternative sites for a CRC (see Attachment B).

11. The business case demonstrated that a CRC, if regarded as a community asset (like a library), could be financially viable on both sites if land value was not taken into account. Following receipt of the report the central local boards continue to support using 27 Normanby Road for the CRC as it offered the most potential for the diversion of waste. However if the site were to offer council the maximum overall financial return, the business case clearly indicates a CRC would not offer that level of return. Thus 27 Normanby Road should be cleared for sale and 956-990 Great North Road be used for the CRC. If financial considerations are the priority for Council our recommendation is based on:

A clear indication in the operational business case that a CRC would not be financially

viable if a a market rental were taken into account for 27 Normanby Road;

The lost financial opportunity to council in retaining 27 Normanby Road;

The recent market analysis report indicating a current value for 27 Normanby Road in

excess of $11 million;

The low opportunity cost to council to use the 956-990 Great North Road for a CRC;

956-990 Great North Road is not a site that would be considered for sale by Council and

has limited potential uses except to be used for council purposes. Given this, we would

like to maximise the use of this site to its fullest potential;

956-990 Great North Road is strategically located for a CRC as it is close to MOTAT,

Auckland Zoo and Western Springs, which attract almost one million visitors per year

956-990 Great North Road is also close to several schools, motorway exchanges and

public transport links;

The potential opportunities that 27 Normanby Road offers council and the community

including:

o The potential to increase the housing supply in a high-value, city fringe location;

o Supplying the land required for the provision of quality, compact, urban design that

is envisioned in the Auckland Plan;

o The potential for such a development to encourage other transformational

developments in the immediate area;

o The catalysing effect such a development would have in the regeneration of the

neighbouring area and the strengthening of this city fringe area; and

12. Being well-located near public transport hubs and a planned CRL station.


a) agree that subject to the satisfactory conclusion of any required statutory processes, the Finance and Performance Committee approves the disposal of the land at 27 Normanby Road, Mt Eden comprised of an estate in fee simple containing 7,756m2

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more or less being Lot 1 DP 90570 in certificate of title NA47D/698 to achieve the best overall financial return for the Auckland Council, while acknowledging the availability of a site for the Community Recycling Centre which is suitable at 956-990 Great North Road.

Discussion 13. N/A

Consideration

Local Board Views

14. At ACPL’s first engagement with the AELB about the potential disposal of 27 Normanby

Road, the AELB raised the possibility of using this site as a CRC in conjunction with the

Puketapapa and Waitamata Local Boards. This was explored with the central local boards

and the central local boards indicated that should a less valuable site be located that could

be used as a CRC, it would not necessarily be opposed to divestment of this site for a

mixed-use, well-planned development but remained firmly in support of developing CRCs in

each local Board area, serving the needs of the most densely populated part of the city.

They agreed to concentrate on developing one model CRC with complementary

components over time.

15. Following the S&FC resolution that action to dispose of this site be put on hold, ACPL

worked with Solid Waste and other Council officers to identify alternative sites that would be

suitable for a CRC. An extensive list of sites was considered in discussion with ACPL, CCOs

Council departments and external parties such as UNITEC and NZTA. Although almost all

the sites had potential for a CRC, they were either not available or were being held for

competing uses. Commercial land had higher rentals than a community enterprise could

cover. A potential alternative site was finally identified in November 2013 at 956-990 Great

North Road.

16. The central local boards worked with Solid Waste and an external consultant was engaged

to prepare a business case. The business case focuses on the operational aspects of

running a Community Recycling Centre, and compares and contrasts the running of a CRC

at both of the proposed sites.

17. The business case, whose scope was agreed by the three central boards, was not intended

to provide a robust financial analysis for the retention of 27 Normanby Road. It does not

attempt to quantify the actual costs of using each site, or provide a comparative analysis of

accurate financial information or opportunity costs for each site. The business case regards

a CRC as a community asset, providing public good, and contributing to the targets of the

WMMP and the draft Low Carbon Action Plan. It assumes that a selected site would be

provided by Council at either no or little cost, and that a market rent would not be charged

for the term of the lease. Furthermore, the business case does not attempt to quantify and

compare the opportunity costs that the use of either property would pose to council, and the

rental and capital values it does refer to do not reflect current market values. The business

case simply indicates that a CRC would be financially sustainable on both sites with a

surplus of approximately $115,000 for 27 Normanby Road. 956-990 Great North Rd would

have a surplus of approximately $94,000 and annual lease costs for that site would be

decided once it is clear what organization is operating the CRC. At that time an appropriate

rental would be determined. These figures assume no factoring in of land values.

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18. Having received the business case, the central local boards have each subsequently resolved to support using 27 Normanby Road for the proposed Community Recycling Centre. The boards support the use of that site for its superior potential to achieve social, environmental and economic outcomes and to achieve the targets of the Plan and the outcomes of the draft Low Carbon Action Plan. The central local boards also resolved their support for using 956-990 Great North Road as an additional CRC in the future, and agreed to explore options for an additional CRC at the 956-990 Great North Road site. They are mindful, however, that although that site seems highly suitable for broader environmental educational initiatives, there are potentially competing community uses on the site, and that a resource recovery centre is likely to need a publically notified consent with no certainty of a successful outcome.


19. Thirteen Iwi Authority contacts were contacted regarding the potential sale of 27 Normanby

Road, Mt Eden. Five responded, with feedback as outlined below.

i) Ngai Tai ki Tamaki Tribal Trust

27 Normanby Road, Mt Eden is located in an area of general cultural relevance to

Ngai Tai known as ‘Pukekawa’. Ngai Tai do not oppose the sale of this property

outright, but object at this time in lieu of finding an alternative venue for a community

project run by a Ngai Tai member that is struggling with its current venue. Ngai Tai are

also potentially commercially interested in this site, as well as focused on positive

community outcomes in the region. They have a keen interest in partnering with

Auckland Council to achieve these outcomes.

ii) Pukaki Maori Marae Committee - Te Akitai Iwi Authority

Te Akitai have lodged an expression of interest in potential purchase of 27 Normanby

Road, Mt Eden.

iii) Patukirikiri

Patukirikiri confirm they have no specific links to 27 Normanby Road, Mt Eden.

iv) Te Ara Rangatu o Te Iwi o Ngati Te Ata Waiohua Incorporated

The Ngati Te Ata stakeholder contact indicates they are unhappy with council

process/policies in that council owned properties are considered outside of treaty

settlement processes. He requests some attention be given to redressing treaty

violations, possibly via preferential discounted offers to purchase with right of first

refusal.

v) Ngati Tamaoho Trust

20. Ngati Tamaoho did not have any site specific cultural significance considerations to raise in respect of this property.

General

Comments 21. 27 Normanby Road:

i) 27 Normanby Road is a 7,756 m² site situated in a high value city fringe location near

public transport links and a proposed CRL station. The property is zoned mixed use

and is presently under-developed, with a very low site coverage of 25%. The buildings

are a mixture of 1970s industrial and low quality ancillary offices producing an annual

income of $225,000 per annum. Some additional areas are used by Parks and the Art

Gallery free of charge. This site is currently under-utilised given its size, location and

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mixed use zoning. Our view is that the highest value use of this site would be for a

high density residential development, perhaps with some retail content. The market

value of this site will be driven by the underlying value of the land for redevelopment

purposes. The site is relatively constrained by its existing shape and size. A recent

market analysis report by Telfer Young indicated a current value for this site in excess

of $10 million. A full market valuation of this site has been commissioned and will

encompass a review of the site as part of a larger development with the adjoining

property at 25 Normanby Road.

ii) The adjoining site at 25 Normanby Road is owned by Bic Biro (NZ) Ltd and is currently

on the market. The sale of the adjoining property presents an opportunity for the two

sites to be combined to create a significant and important development opportunity.

Amalgamation of the two sites could provide the necessary scale to create

development outcomes aligned with the objectives of the Auckland Plan and

encourage other transformational developments in the immediate area. We are also

of the view that such a development would have a catalysing effect in the regeneration

of the neighbouring area.

22. 956-990 Great North Road:

956-990 Great North Road is a long narrow site sandwiched between the western

motorway and Great North Road. At the western end the site widens, and existing

improvements include a community hall and another building currently part occupied

by a horticultural society. Historically, restaurant businesses have traded from the site,

but the location has always proved to be a difficult one for commercial business to

trade from and we understand the buildings are now used for community uses.

We have not undertaken a valuation or estimate of the rental or capital value of the

part of the land which is proposed for the CRC. The rental value of the part of the land

considered for the business would be a fraction of the current rating valuation. The

market value of the land would likely be low due to its open space zoning.

Furthermore, this site it is unlikely to be considered for disposal by council.

The opportunity cost to council of holding this site without income will be relatively low

as the current costs of maintenance and engagement may only just be covered by the

income generated by casual usage. 956-990 Great North Road appears to have a low

opportunity cost to Council if it were to be used for the Community Recycling Centre.

The business case states in section 4.3 (Multi Criteria Site Assessment) that the 956-

990 Great North Road site is the better site option as it has strong social and cultural

aspects but comments that Normanby Rd performs better on the economic and

environmental criteria and was the preferred site (as indicated in section 7.1.) because

it had a better financial return and was lower risk. This analysis did not address the

financial opportunity cost to Council as it was out of scope. If this cost had been

factored into the business case, this would have reinforced the suitability of 956-990

Great North Road for the Community Recycling Centre.

Feedback has been sought from Regional & Local Planning (“R&LP”) about using 956-

990 Great North Road for the Community Recycling Centre. R&LP are supportive of

using 956-990 Great North Road over the site at 27 Normanby Road. R&LP advise

that 956-990 Great North Road has an open space zoning in both the Operative

District Plan and the Unitary Plan, which means there will be resource consent

requirements to locate a CRC on the site. These are likely to be publically notified,

whereas 27 Normanby Road site would also require resource consent but is situated

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in the middle of a light industrial area, albeit an area targeted for change and

redevelopment due to its central location and proximity to a planned CRL station

R&LP consider 956-990 Great North Road to be strategically located as it is adjacent

to Western Springs, MOTAT, the zoo and a number of schools. A CRC, which would

involve a significant educational and workshop aspect, would be well-located within

this existing ‘educational/destination’ hub. This location serves a wide residential

catchment, and is easy to get to given its proximity to motorway exchanges and public

transport links. R&LP consider a CRC to be an efficient and community-focused use

for this site, and that it would have potential to be very successful.

23. The subject site is subject to s40 Public Works Act 1981 offer back requirements.

24. This property is not one of council’s strategic assets to which the significance policy would apply.

25. Capital receipts from the sale and redevelopment of this property will contribute towards council’s budget for asset sales that is incorporated into the council’s debt and interest projections. If the council’s asset sales budgets are not met, then debt and interest costs will increase relative to budget.

Implementation Issues 26. N/A

Attachments

No. Title Page

A Property Images 61

B Business case for Community Recycling Centre 65

Signatories

Authors Letitia McColl, Senior Engagement Advisor, Portfolio Review, Auckland Council Property Limited

John Dragicevich, Manager Infrastructure & Environmental Services, Auckland Council

Authorisers David Rankin, Chief Executive, Auckland Council Property Limited

John Dragicevich - Manager Infrastructure and Environmental Services


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Albany Stadium Pool - Funding for Programmable Pool

Albany Stadium Pool - Funding for Programmable Pool File No.: CP2014/07477

Purpose 1. That the Parks, Recreation and Sport Committee recommend and request the Finance &

Performance Committee consider reallocation of $2M of regional capital funding held for unspecified “City Wide Pool Development” in future years of the current Long Term Plan to the Albany Stadium Pool project to fund the development of a programmable pool as part of the current project.

Executive Summary 2. The Albany Stadium Pool is in the concept and preliminary design phase, with physical

works expected to start October this year and be completed by early 2016.

3. A legacy budget of $19.27M has been allocated to the project which has been revised a number of times with the final budget set in 2012 as part of the last LTP round.

4. During the concept design phase and using recent costing from the Otahuhu pool development, an estimated Gross Floor Area (GFA) of between 3,300 and 3,400 sqm was identified as being achievable within the budget allocated.

5. When all elements of the facility have been considered including the project brief to create a community pool with a point of difference, a concept plan based on a 3,400 GFA was confirmed by the Local Board which included a large leisure based aquatic space and member fitness centre.

6. The design team also presented a 4,000 GFA concept which was based on the same design but included a separate programmable pool which was felt would ‘complete’ the facility in that it would provide for a more diverse range and support a financially sustainable operating model but was acknowledged that it was currently out of budget but if it could be funded would have a positive return on investment of between 4 to 5 years.

7. Staff presented a report to the Parks, Sport and Recreation Committee on the 11th of December 2013 and the committee passed a resolution supporting a recommendation to the Finance and Performance Committee to reallocate some unspecified regionally held funds to enable this programmable pool to be delivered as part of the existing project.

8. It is proposed that up to $2M of capital funding held for unspecified “City Wide Pool Development within the current Long Term Plan be bought forward from FY17 to FY16 and applied to the Albany Pool Project to fund the programmable pool.

9. The reason for this request outside of the LTP process is because the project is currently in the implementation phase and a decision to include the programmable pool is fundamental to the detailed design progressed through consenting, procurement and execution commencing October 2014.


a) $2M of capital funding held within unspecified “City Wide Pool Development” within the Long Term Plan be brought forward from FY17 to FY16 and applied to the Albany Pool Project if required to complete the programmable pool space.

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Discussion 10. The Albany Stadium Pool project is a legacy project from North Shore City Council with a

long history.

11. Auckland Council approved a budget of $19.27M in 2012 as part of the last LTP phase. This was prior to the finalization of site location, needs analysis of projected demand and the project’s functional brief. This was also prior to the introduction of the 16 years and under free swimming initiative that has had an effect on the financial and operational profile of pools across the regional network.

12. The Albany Stadium Pool project will fill a long-standing gap in leisure, education and fun pool provision. The implementation of universal free casual swimming for 16 years and under has increased demand for leisure water where children and young people can play. Facilities such as West Wave have seen significant increases in use after school, during the weekends and in particular during school holidays, whereas those with limited or no leisure water have seen minimal changes. This has also however seen greater tension between user groups and highlighted the need for a certain degree of separation to ensure the diverse range of users have a positive experience.

13. The project is in its planning and execution phases and at a critical juncture of what design option to carry through to the detailed design and execution phases. Physical works are planned to commence in October 2014 and due for completion April 2016.

14. The project budget has combined contingency and escalation allowances of $1.8M. This provision relates to the existing scope of the project and does not provide for additional service levels. The project structure has value management and value engineering mechanisms, plus progressive budget reviews to mitigate risk and drive efficiency.

15. Political direction from the Local Board has reinforced the philosophy of “doing it once” and “doing it right”. This approach influences asset specification, service provision and financial sustainability so that the facility is not an ongoing operational burden on the network. The current design direction is to take a long-term position and design for growth as the facility will sit within a dynamic growth node which according to the latest census data is the fastest growing Local Board area in Auckland and likely to be targeted as a destination facility from the wider catchment of the North Shore due to the limited provision of leisure water in other facilities.

16. A facility of this nature has a gross floor area (GFA) which includes all built elements from basement and roof plant rooms to pool halls, fitness suites, change rooms, circulation areas, administration, utility and service areas, entry and reception. Everything that is built contributes to the GFA calculation and hence cost and project feasibility.

17. Considerable effort has gone into the design process of this project to maximise innovation and efficiency to keep the GFA as low as possible.

18. Options analysis through the design phase presents two leading options (see Attachment 1).

19. Option One provides a GFA of 4,000 sqm and delivers on every element of the functional brief, but is potentially $2M beyond budget.

20. Option Two provides for a GFA of 3,400 sqm, is affordable given the existing budget but is missing an education/ programmable pool that supports the financial profile, operational flexibility, community opportunities and growth.

21. Option Two, the smaller 3,400 sqm design could have the programmable pool as a later stage, however this could incur an estimated additional cost in the order of $650K to $850K if deferred as a separate contract increasing the estimated cost to approximately $2.75M to $2.95M excluding escalation costs.

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Return on Investment

22. The programmable pool component has a strong standalone business case to support investment up front with a payback period of between 4 to 5 years (see Attachment 2) for the possible $2M investment.

23. Learn to swim activities are in demand across the region with lengthy waiting lists at West Wave and Glenfield for entry level classes in particular. A purpose built facility that is separate from the main leisure pool and specifically designed for learn to swim enhances the customer experience for both the children and their parents and makes it an attractive offering at an affordable rate.

24. The pool can also be used outside of the peak Learn to Swim times of 3.30pm till 6pm Monday to Friday and Saturday/Sunday morning, by other users such as water walkers, lane swimming, sports groups and others for rehabilitation and recovery sessions. This gives the overall facility a more diverse customer base and greater flexibility in how the facility can be set to operate at different times of the day and throughout the weekend.

25. As a function of the facility itself, the addition of the programmable pool in conjunction with the fitness centre will provide the revenue base to ensure this facility is cost neutral, reducing the ongoing cost to the ratepayer. Without the programmable pool the facility is reliant on only one core revenue base as pool admissions only make up on average approximately 15% of total revenue, whilst fitness is approximately 45% and Learn to Swim is about 30% in a standard aquatic centre.

Community Facilities Network Plan

26. The Community Facilities Network Plan (the Network Plan) which includes a specific focus on aquatic and leisure facilities is due to be completed by October 2014. The Network Plan will identify potential gaps in provision, facilities that need major upgrade and areas/facilities which need to be investigated for potential over/under-utilisation. Prioritization criteria will be developed to assist the governing body in establishing priorities.

27. The draft Network Plan will include an action plan with recommendations (list of projects) for potential new facilities and upgrades required to meet community needs over the next 10 years.

28. The intention is to apply to the LTP process for a “regional bucket” of capital and operational funding to fund the community facility projects over the next 10 years. The GB will be able to determine the size of the bucket and the priorities within the bucket.

29. Once the network plan is completed and list of projects has been prioritised by the governing body, then each project will require further in-depth and localised planning and assessment to determine the actual need and scope of the project (in accordance with the community facilities development process guidelines). The detailed analysis will determine the amount of capital funding that will be allocated from the overall bucket to individual facility projects and any on-going operational funding to run the facility.

Planning for the LTP

30. Council’s current Long Term Plan (LTP) provides a total of $7.467M within an unspecified regional CAPEX budget called Citywide Pool Development in FY17 and FY18 of the LTP.

31. This budget is untagged, in that it has not been aligned to a particular project, but rather a budget line to fund future pool development across the city.

32. The directive from the LTP is to undertake a full review of budgets and that the assumptions and programmes of the legacy organisations can no longer be the basis of the forward work programme.

33. There are currently two new aquatic facilities (Otahuhu and Albany) that have approved business cases and are now either in the design or construction phase.

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Otahuhu Pool development.

o This is a clustered facility with a new Library and is currently in construction with

an expected completion date of mid-2015.

Albany Stadium Pool

o Currently in design phase with an ‘in budget’ concept ready to move into detailed

design with expected completion date of April 2016.

34. It is expected that all other legacy budgets outside of these two committed projects, including the unspecified regional “Citywide Pool Development” fund of $7.467M, will be reallocated through the LTP process and could form part of the funding solution being recommended as part of the Network Plan.

Consideration

Local Board Views

35. The Upper Harbour Local Board have identified the Albany Stadium Pool as their top project priority and they have constituted a working party and enabling mechanisms to expedite its delivery to their community.

36. After reviewing the concept report and feasibility, the Local Board has a strong preference for Option One, the 4000 sqm facility, if it can be afforded as it delivers on the design and functional brief, has the best financial and operational profile and provides for demand and growth.


37. A Hui was convened in May 2012 to review the project with interested Iwi. The project was universally supported and ongoing engagement continues with Iwi and a wider stakeholder grouping.

General

38. N/a

Implementation Issues 39. Should this recommendation not be supported, Option Two, the smaller 3,400 sqm proposal

will be progressed and implemented. This option will enable the development of a separate programmable pool at a later stage.

Attachments

No. Title Page

A Albany Stadium Pool Concept 127

B Albany Stadium Pool Programmable Pool Payback Analysis 129

Signatories

Authors Rob McGee - Manager Leisure – Parks, Sports and Recreation

Authorisers Ian Maxwell - Manager Parks, Sports & Recreation

Dean Kimpton - Chief Operating Officer


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Efficiency Savings Update


File No.: CP2014/07317

Purpose 1. To provide an update on efficiency savings to inform discussion on the next Long-Term

Plan.

Executive Summary 2. Efficiency means doing the same or more for less. Since merging eight councils into one, we

have delivered more new assets and services than ever before while spending less money than anticipated by the legacy councils.

3. We do this knowing that the better and smarter we work, the less need we will have for difficult trade-off discussions with our community.

4. Some of the ways in which we have done this include:

simpler and better information technology

better procurement and tendering processes

bringing more work in-house to reduce our reliance on external providers

reducing the number of office buildings we occupy.

5. Staying on track to deliver the efficiency savings included in the Long-term Plan 2012-2022 remains a challenge. Strong leadership and concerted management effort will be required to deliver the increasing savings each year for the next four years.

6. The efficiency savings delivered to date are at the upper end of the expectations set during the early discussion on the benefits of regional amalgamation for Auckland. Without these savings, either:

i. general rates and/or user charges would need to be significantly higher, or ii. significant cuts would be required to both the capital programme and service levels.

7. Staff are currently reviewing future targets for efficiency savings as part of the development of the next Long-term Plan. While there is potential for further savings over the next ten years, there also a range of longer-term cost pressures that may need to be addressed.


a) Receive the report.

Discussion

Scope / Definition

8. For the purpose of this report, “efficiency” refers to delivering the same level of service for a lower cost than budgeted. Therefore the efficiency savings discussed in this report exclude:

cost savings associated with reduced service levels

increases in user charges, the introduction of new revenue sources and/or benefits from PPP structures

operational cost savings resulting from the disposals of surplus assets.

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Background

Amalgamation expectations 9. Amalgamation of the eight former councils into the new Auckland Council established an

expectation of significant efficiency gains from centralising procurement, consolidating IT systems and streamlining both internal and external facing business processes. A report produced for the Royal Commission on Auckland Governance by independent consultants in 2009 addressed the level of efficiency benefits that could be expected through amalgamation1.

10. Based on financial information applicable to the eight individual former councils in 2008/2009, the report concluded that operating expenditure efficiency gains were estimated to lie in the range $67 million to $96 million per annum representing some 5-7 per cent of the costs amenable to efficiencies and 3.5-5 per cent of the total annual operating expenditure undertaken by the Auckland councils. The same report also concluded that capital expenditure efficiency gains range from $28 million to $46 million per annum representing 2-4 per cent of the total annual capital expenditure programmes of the Auckland councils at the time.

11. Financial analysis in that report concluded that the financial savings from amalgamation were expected to significantly outweigh the financial costs of amalgamation, even under the most pessimistic of scenarios. In preparing their financial analysis, the authors assumed that 80% of the potential savings would be realised.

Long-term Plan efficiency savings 12. Building on $81 million of cost savings achieved for the new council’s first full year of

operation, the Long-term Plan 2012-2022 (LTP) included $50 million of additional savings for 2012/2013 taking total savings for that year to $131 million. These savings were budgeted to increase to $188 million by 2017/2018.

13. As shown in the following table, these savings in operating budgets were at the upper end of the 3.5-5 per cent range identified by the 2009 consulting report.

Financial year ending 30 June ($ million)

2013

2014

2015

2016

2017

2018

Operating expenditure before savings 3,146 3,366 3,557 3,760 3,911 4,119

Efficiency savings -131 -145 -159 -173 -181 -188

Operating expenditure 3,015 3,221 3,398 3,587 3,730 3,931

Efficiency savings percentage 4.2% 4.3% 4.5% 4.6% 4.6% 4.6%

14. Detailed annual budget reviews undertaken for each of the first three financial years of the

LTP have confirmed the achievement of these efficiency savings, despite the need to accommodate additional cost pressures.

15. For example, the Draft Annual Plan 2014/2015 not only confirmed $159 million of LTP efficiency savings for that year, but also included $24 million of additional efficiency savings. Along with lower inflation projections, these additional savings allowed the rates requirement to be reduced from the 3.5 per cent projected in the Pre-election Report to 2.4 per cent, while also absorbing $17 million of new cost pressures including:

$3.3 million for alcohol licensing reform

$2 million for additional operating costs associated with additional land acquisition

$1.8 million of additional legal resources to support the Unitary Plan, alcohol licensing reform and the Housing Accord

$1.6 million for additional Democracy Services support staff

$1 million for marae development and Maori housing initiatives.

1 Taylor Duignan Barry, 9 February 2009 - “Financial Analysis: Re-organisation of the Councils in the Auckland Region”.

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16. The LTP also included efficiency savings for capital expenditure of 3 per cent from

2013/2014 onwards for regional activities. This reflected procurement opportunities arising from greater scale following amalgamation, and the opportunity to optimise resources and better manage contingencies across larger capital programmes. These savings represented the middle of the 2-4 per cent range identified by the 2009 consulting report.

Financial strategy 17. Along with running balanced operating budgets, maintaining prudential treasury ratios and

moving to fully fund depreciation by 2025, ensuring that all spending is as efficient as possible is a core component of the council’s financial management strategy.

18. The inclusion of the efficiency savings in the LTP was critical for enabling a $20 billion capital investment programme over ten years, while simultaneously limiting the average annual rates increase to 4.9 per cent.

19. Over the first three years of the LTP, depreciation was projected to grow at an average rate of 7 per cent per annum while interest expense was projected to grow by an average rate of 16 per cent per annum.

20. This means that the capital investment programme is placing considerable pressure on operating budgets, and that efficiency savings have been playing a key role in achieving affordable progress for Auckland. Without these savings, either:

iii. general rates and/or user charges would need to be significantly higher, or iv. significant cuts would be required to both the capital programme and service levels.

Source of savings achieved to date

21. A range of initiatives have contributed to achieving the LTP efficiency savings. Over the last three years these initiatives have focused on

simpler and better information technology

better procurement and tendering processes

bringing more work in-house to reduce our reliance on expensive outsiders

reducing the number of office buildings we occupy.

22. Technology changes have allowed us to improve and streamline some of our back office processing areas. This includes the use of scanning technology to improve invoice processing and GPS tracking of fleet vehicles to enable more efficient use of council vehicles.

23. While simpler and better technology has delivered significant savings to date, the full implementation and delivery of benefits associated with consolidating IT platforms and applications has yet to be achieved. That consolidation, with the most significant element to be delivered through the New Core project, will enable the radical transformation of key customer-facing services while reducing the cost to serve each customer.

24. Significant procurement savings have been achieved through the consolidation of suppliers and contracts, particularly for property maintenance, parks maintenance and office consumables.

25. More generally management have also applied widespread targeting of savings in combined staff and consultancy budgets to encourage departments and CCOs to identify more streamlined solutions, primarily for back office support functions. As shown in the following table, planned expenditure on professional services has significantly reduced since 2011 through a combination of:

a) price reduction through more competitive tendering and rate negotiation, and b) a trend of recruiting internal specialist staff to do work previously contracted out.

Financial year ending 30 June ($ millions)

Actual 2012

Budget 2013

Budget 2014

Budget 2015

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Professional services 110.7 97.4 89.3 82.2

26. Cost savings have also been achieved in relation to corporate accommodation as we move

from seven buildings to three.

27. Some initiatives have delivered savings that mitigate inherited and new cost pressures, rather than achieving savings relative to budget. For example, the project to consolidate the council’s data centres and move data storage to “the cloud” was estimated to be $5.4 million per annum cheaper than next best option for meeting the council’s data storage needs. However, because the baseline budget had not adequately provided for these storage needs, the $5.4 million benefit from this project and related initiatives was required to just achieve the existing budget and therefore not available to contribute to delivering the LTP efficiency savings. This project will also provide other benefits in terms of business continuity, lower operational risk and a stronger platform for future technology enhancement projects.

28. Achieving efficiency gains within council’s capital expenditure budgets has tended to focus on maximising value for money on individual projects and programmes, rather than across the board efficiency initiatives. Work is progressing to improve the visibility and consistency of capital expenditure efficiencies. Focus has also been applied to efficient management of interest expenditure through executing step change procurement initiatives such as establishing the Local Government Funding Agency and accessing offshore funding.

29. A detailed schedule of the efficiency savings initiatives we have pursued to date is included as Attachment 1.

Planned future savings

30. Staying on track to delivering the LTP efficiency savings remains a constant challenge. Strong leadership and concerted management effort will be required to deliver the incremental savings in each of the next four years to achieve the $188 million per annum budgeted efficiency savings by 2017/2018.

31. In time, changes to the organisation’s culture through “The Way We Work” will foster an environment of continuous improvement that will see staff at all levels of the organisation actively engaged in delivering greater value for money on a day-to-day basis.

32. In the meantime, a range of specific initiatives are in place to enable us to meet the immediate financial challenge. Key initiatives include:

continued enhancement and streamlining of our back office processing areas

delivery of the New Core project to transform our key customer-facing services

bringing more work in-house, such as the proposed development of an in-house design studio as part of the Communications and Engagement Review, and proposed changes to delivery of some animal management services

continued consolidation of corporate office accommodation.

33. In addition, work on benchmarking a number of council support services is expected to reveal that the size and cost base for some functions can be reduced once core systems and processes have been consolidated and transition-related peak workloads have been worked through.

34. A detailed schedule of planned future efficiency savings initiatives is included as Attachment 2.

Looking ahead to the next LTP 35. Staff are currently reviewing future targets for efficiency savings as part of the development

of the next Long-term Plan. While there is potential for further savings over the next ten years, there are also a range of longer-term cost pressures that may need to be addressed.

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36. As part of the LTP review programme, a budget committee workshop will be scheduled for late May to review the council’s Governance and Support activities. At this workshop, staff will share the outcome of their review of efficiency savings targets for the Long-term Plan 2015-2025 and enable councillors to input into the process.

37. At this stage, staff are expecting to retain the current targets and are looking for opportunities to increase these targets. In addition to the areas discussed above, further efficiency savings might also come from preliminary work on looking for shared service opportunities as part of the CCO review.

38. If further efficiency savings can be identified and achieved, this would create additional capacity within council budgets to either reduce increases in rates and other council charges, or to fund additional operating or capital programmes.

39. However, whether or not extra funding capacity can be generated through additional efficiency savings is in part dependant on other cost and revenue assumptions. As part of developing the next LTP, there is further work underway at present to test underlying assumptions in a number of areas. Some areas of particular concern are:

future public transport patronage and revenue projections

consequential maintenance and operating costs associated with council’s expanding asset base, particularly for transport, parks and community facilities assets

new legislative requirements, such as those relating to food safety and earthquake prone buildings.

Consideration

Local Board Views

40. Efficiency savings budgets apply to both local and regional budgets. As efficiency savings are identified at a detailed level, local board budgets may reduce. However, by definition, efficiency savings will not affect local service levels.


41. The achievement of efficiency savings may reduce some budgets relating to Maori outcomes, but will not impact the associated service levels or actual outcomes.

General

42. Budget changes related to efficiency savings could be significant under the council’s significance policy, although this is unlikely given that service levels are not impacted. Any decisions on these matters are considered to be within the scope of the statutory decision-making process for the Long-term Plan 2015-2025.

Implementation Issues 43. Decisions will need to be made on the Long-term Plan efficiency saving budgets for the draft

LTP by November 2014.

Attachments

No. Title Page

A Efficiency savings intitatives pursued to date 137

B Future efficiency savings initiatives 139

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Signatories

Authors Ross Tucker - Team Leader Capital Planning

Authorisers Matthew Walker - Manager Financial Plan Policy and Budgeting


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Attachment One: Efficiency savings initiatives pursued to date

Technology and processes

Enhanced information technology to improve and streamline back-office processes

Use of scanning technology to improve invoice processing

GPS tracking of fleet vehicles to enable more efficient use of council vehicles

Streamlined ticketing processes for Regional Facilities Auckland

Procurement

Consolidation of suppliers and contracts for property maintenance, parks maintenance and office consumables

Property management savings resulting from the movement to outcome based contracts

Improved procurement and tendering process for roading contracts

Auckland Transport and Watercare taking a coordinated approach to electricity procurement

Renegotiation of contracts for property valuations for rating purposes

Negotiation of reduced insurance premiums and bank charges

Reducing the price paid for professional services through more competitive tendering and rate negotiation

Organisation structure

Remove duplication of specialist business functions

Create a more efficient organisation structure by increasing management spans of control

Creating organisational structures that are better aligned to service delivery and customer needs

Amalgamation of CCO subsidiaries to reduce management overhead

Productivity

Recruiting internal specialist staff to do work previously contracted out, particularly for legal services, stormwater and Auckland Transport

Establishment of an in-house design studio for Auckland Transport

Improved workforce planning and removal of budget for long-term vacant positions

Improved levels of performance for the council’s regulatory functions

Asset utilisation

Rationalising the number of corporate accommodation buildings

Rationalisation of Auckland Transport’s vehicle fleet

Reduced property and parks maintenance costs as a result of implementing a new asset management system

Improved stormwater asset management systems and processes enabling asset lives to be extended

Treasury management

Reducing borrowing costs by supporting the establishment of the Local Government Funding Agency and accessing offshore funding.

Reducing Watercare’s borrowing costs by moving to issuing new debt through Auckland Council’s treasury function

Optimising the council group’s financial structure

Other

Reduction in solid waste disposal volumes including abandoned vehicles

Additional rental revenue for properties managed by Auckland Council Property Management and greater recovery of property expenses from tenants

Increased consenting revenue by ensuring that all relevant staff time is appropriately captured (e.g. chargeable hours for stormwater engineers)

Removal of unnecessary budget for bus service demand response and emergency contingency

Reductions in power consumption as a result of sustainability initiatives

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Attachment Two: Future efficiency savings initiatives

Technology and processes

Continued enhancement and streamlining of back office processing areas

Delivery of the New Core project to transform key customer-facing services

Establishment of a single online booking system for community facilities with a simplified pricing structure

Procurement

Further enhancement of procurement and tendering processes, with on-going consolidation of suppliers and contracts

Introduction of Procurement Category Managers to provide specialised industry expertise for purchasing specific categories of goods and services (e.g. building materials, information and communication technology)

Improving capital expenditure procurement and tendering

Organisation structure

Restructuring of internal business support activities to right-size, remove duplication, develop centres of excellence and specialisation, and build knowledge sharing communities

Productivity

Changes to the organisation’s culture through “The Way We Work” to foster an environment of continuous improvement that will see staff at all levels of the organisation actively engaged in delivering greater value for money on a day-to-day basis

Development of an in-house design studio as part of the Communications and Engagement Review

In-housing animal management services for the central and southern areas

Investigation of opportunities to extend shared service arrangements as part of the CCO Review

Normalising expenditure budgets once core systems have been consolidated and transition-related peak workloads have been worked through

Adopt a more flexible resource model to reflect the cyclical nature of core planning activities

Productivity benefits associated with a more mobile workforce as a result of greater use of mobile technology

Enhanced productivity following the consolidation of the 158 bylaws inherited from the legacy councils into a single set of new regional bylaws

Asset utilisation

Further rationalisation of corporate accommodation buildings as the council parent moves from seven building to three over time

Other

Investigate opportunities to optimise revenue through greater use of commercial concessions, sponsorships and the sale of naming rights and advertising space

Enhanced capital expenditure efficiencies from improved business case and evaluation processes, improved project and contract management capabilities, design standardisation and smarter management of contingency budgets


16 April 2014

Public Excluded

Exclusion of the Public: Local Government Official Information and Meetings Act 1987


a) exclude the public from the following part(s) of the proceedings of this meeting.

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution follows.

This resolution is made in reliance on section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public, as follows:

C1 Flat Bush Potential Land Acquisition

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

In particular, the report contains.

s7(2)(j) - The withholding of the information is necessary to prevent the disclosure or use of official information for improper gain or improper advantage.

In particular, the report contains.

s48(1)(a)


C2 Monthly Budget Update

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution


s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

In particular, the report contains commercially sensitive information, the disclosure of which could disadvantage the council in negotiation.

s48(1)(a)


Finance and Performance Committee 04.14

Documents

Transcript of Finance and Performance Committee 04.14