STRATEGY AND RESOURCES ANNUAL PLAN WORKING PARTY

MEETINGS OF 4, 5, 6, 7, 8, 11 AND 13 MARCH AND

STRATEGY AND RESOURCES COMMITTEE SPECIAL MEETING

OF 18 APRIL 1996

PRESENT: Councillor David Close (Chairman),

The Mayor,

Councillors Oscar Alpers, Carole Evans,

Pat Harrow, Ian Howell, Alister James,

Garry Moore, Margaret Murray,

Denis O'Rourke and Ron Wright. APOLOGIES: Councillor Garry Moore (6/3/96 and 11/3/96),

Councillor Alister James (7/3/96 and 8/3/96)

and Councillor Margaret Murray (13/3/96). 1. DRAFT ANNUAL PLAN FOR THE 1996/97

FINANCIAL YEAR

INTRODUCTION

At a series of meetings held on 4, 5, 6, 7, 8, 11 and 13 March 1996 the working party gave consideration to: * An overview report by the Financial Planning Manager on the Annual Plan process. * Service add-ons totalling more than $17M recommended by the Standing Committees and Community Boards for inclusion in the 1996/97 Annual Plan. * The draft Corporate Plan volumes. * An update report by the Financial Planning Manager on the major projects. In the course of its deliberations, the working party reviewed the budgets for all business units. The working party reported to the 3 April meeting of the Council. At that meeting the Council resolved: "That the Draft Annual Plan be referred to the City Manager who will report to the Strategy and Resources Committee on reducing the budget increase. The City Manager will focus on all areas of expenditure, with particular emphasis on: 1. All areas of expenditure which exceed 2% increase. 2. Any major projects which are exceeding budget and may have to be rescheduled in later years. 3. That the envisaged borrowing of $51.51M for 1996/97 is too high and that the City Manager have the figure reanalysed for a more appropriate level."

1 Cont'd

The City Manager reported to a special meeting of the Strategy and Resources Committee on 18 April 1996 on the options for further reducing the rates increase. The report also addressed in some depth the concerns raised at the 3 April meeting regarding the level of borrowing in 1996/97 and the cost increases in the enhancement programme. The agenda for the Committee's 18 April meeting was circulated to all Councillors. PROPOSED AMENDMENTS TO THE DRAFT ANNUAL PLAN

A schedule detailing the changes identified at the Committee's 18 April meeting is attached as Appendix I (pink paper). A schedule of the operating and capital changes recommended by the working party at its March series of meetings is attached as Appendix II (blue paper). At the working party's final meeting on 13 March staff were requested to submit to the Council's 3 April meeting further operational savings to reduce the 1996/97 rates increase below 4%. These changes are also included in Appendix I for both operating and capital under the heading "Adjustments Made by Staff Subsequent to Meeting". The new initiatives listed in Appendix II have been included in the draft Annual Plan circulated to Councillors with the agenda for the 3 April meeting. (Note: Councillors are requested to bring the draft Annual Plan (pink covered book) with them to the meeting.) In summary, the draft plan provides for: * The delivery of services to the community at their current level. * The delivery of additional services to cater for increased demand arising from city growth. * The progression of the enhancement projects. It will be noted from the draft Plan and the accompanying schedules that some significant additional/enhanced services and initiatives are proposed for the 1996/97 year, including: * The introduction of an inner city shuttle bus service. * Additional community recreation and development initiatives. * Additional tourism initiatives. * Expansion of the festival programme. * Additional resources for improved cemetery maintenance and foreshore improvements. * New road safety initiatives.

1 Cont'd * Water conservation initiatives. * Increased funding for new reserve purchases. * Improvements to the events area in North Hagley Park. * Provision of car parking facilities for Christchurch Hospital. * Additional public transport initiatives, including the provision of a bus lane in Riccarton Road. * Abolition of ground rental charges for children's sports competitions. * The introduction of a city-wide kerbside recycling scheme in the 1997/98 year. Canterbury Tourism Council

Ms Jeanette Elliott, Chief Executive, Canterbury Tourism Council, addressed the working party in support of CTC's request for increased funding of $123,850 to implement a range of additional initiatives. Included among these new initiatives were the following: * Campaign Targeting Domestic Market $50,000 * Christchurch's participation in Television New Zealand's

Holiday Programme $5,000 * Australian joint venture with Southern Region $10,000 * Australian joint venture participation at Australian Travel Show $16,000 * Korean Mission, August 1996 $5,000 In addition, a further $8,850 was sought to cover the increased rental with charges for the building the CTC leases from the Council. Recommendation: 1. That additional provision of $50,000 be made in 1996/97 towards CTC's new initiatives and increased rental costs. 2. That CTC be requested to explore alternative ways of funding the balance, including the use of internal reserves or private sector contributions. Canterbury Museum Draft Budget

The Canterbury Museum Trust Board has submitted its 1996/97 draft budget which provides for a 4.39% increase in the Council's general levy. Significant activities programmed for 1996/97 include: * Continuation of installation of new galleries - complete and open European Decorative Arts (Mountfort Gallery); design and prepare Christchurch Street.

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* Complete commissioning of the new building including relocation of collections into appropriate storage units within a climate controlled environment. * Develop and maintain an interactive educational programme for younger visitors. * Significant factors affecting the budget (increase) include: * Establishment of the Museum's Education Service, following loss of funding from the Ministry of Education. * A new management structure, incorporating a manager of corporate services. * Operational costs associated with the new building. Recommendation: 1. That the budget be approved. 2. That the Museum Trust Board be requested to extend the operating hours of the Museum and to develop more experiential types of displays within the existing budget. Riccarton Bush Levy

It is recommended that the Riccarton Bush levy be fixed at $135,000, (the level provided in the draft Annual Plan). Metropolitan Grants - 1996/97

The schedule of 1996/97 grants recommended by the Metropolitan Grants Subcommittee is contained on page 54 of the draft Annual Plan. It is recommended that the recommendations of the Grants Subcommittee be adopted subject to ongoing discussions with the Christchurch Symphony Orchestra regarding the conditions of the Council's grant. Public Rental Housing In the course of reviewing expenditure on the Council's public rental housing programme the working party noted that no specific provision had been made in 1996/97 for the construction of new units. The working party resolved that the Community Services Committee be requested to produce an indicative capital development programme for inclusion in the draft Annual Plan. This question was considered at the 9 April 1996 meeting of the Community Services Committee and also at the seminar session on housing held by the Committee on Wednesday 17 April 1996. Detailed ten year cash projections for the Housing Development Fund were considered by the Committee. On the basis of these projections the Committee recommends: 1 Cont'd

"That the amount of $2 million for public rental/urban renewal and other housing initiatives be retained for the 1996/97 financial year, and the amount of $2 million provided in the 1998/99 financial year be deleted." Enhancement Projects

Reports containing updates on the enhancement project budgets and assessing the impact of the revised projections on the long term financial model were presented in March and again to the 18 April meeting. Many of the enhancement projects in the 1995/96 Annual Plan were budgeted at their original costings which were prepared in 1994/95. In the case of the Entertainment Centre, there was a need to provide for the increased specification necessary for the World Netball Championships. In addition provision has been made for future inflation in line with the revised method of presenting the overall financial model. It should also be borne in mind that some of the projects (especially the later ones) were included as "ball park" provisions and these are being updated as more detailed planning takes place. In particular, the provision for the New Art Museum in 2000/01 to 2003/03 is a case in point. The following summary indicates the principal factors in the increase in net cost of the projects: Net Cost as per 1995/96 Annual Plan 83,261,867

plus Additional costs due to 1996/97 re-estimation 6,944,238

Additional Costs of Art Museum 13,825,000

Provision for inflation in future years 4,383,500

less Additional revenue/sponsorship/land sales etc. -12,294,000

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New Net Cost Total 96,120,605

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All associated financing costs have been factored into the long term financial model. It should be noted that the increases have been made subject to the sale of assets or other sources of revenue of $20M. A schedule reflecting the adjusted enhancement project costings (including provision for inflation) is attached as Appendix III (green paper). Art Museum

In noting that the new estimate for the project was $28.825M, an increase of $13.825M on the previous "ball park" costing which was included in the 1995/96 Annual Plan, the working party explored possible opportunities for alternative funding sources. The following suggestions emerged from that discussion: 1. The Art Museum could be designated the flag project for the city's sesqui-centennial celebrations and a public appeal launched inviting contributions from both individuals and the corporate sector. 2. Given its scale, the project should attract significant Lottery Board grants. 1 Cont'd

3. A national lottery, along the lines of the former art union lottery, could be organised. 4. The project was likely to attract bequests from local patrons of the arts and the artistic community. 5. Corporate sponsorship could produce significant revenue. 6. Proceeds from asset sales could be channelled into the project, as well as one- off special dividends or capital payments from trading enterprises. The City Manager's recommendation that professional advice be sought on the options for funding the project was endorsed by the working party. Recommendation: 1. That the Art Museum project be brought forward to 2000-01, subject to other funding sources being identified for this project, including sale of land, sale of assets, special dividends and capital payments. 2. That provision be made in the appropriate years for revenue of $8M from such sources as sponsorship, donations, grants etc. Cash in Lieu of Reserves Contributions

The Environmental Services Manager reported that, as part of the City Plan process, development levies were being reviewed in order to address the current inequity in respect of cross lease subdivisions. At present these subdivisions do not attract reserve contributions. The new levies cannot be commenced under the City Plan until all submissions and appeals have been dealt with and the Plan becomes operative. It was advised, however, that a report was being prepared for the Environmental Committee which will recommend charging a reserve contribution for cross lease subdivisions (under the Transitional District Plan) beginning from 1 July 1996. This has become possible because a recent Planning Tribunal decision makes it possible to require a reserve contribution for such subdivisions under the Transitional Plan. The report was considered at the April meeting of the Environmental Committee. The Committee reported to the 24 April Council meeting recommending that the current Council policy be amended to provide for the imposition of reserve contribution on all forms of subdivisions creating additional allotments from 1 July 1996. As this report was distributed prior to the April Council meeting the final decision on the proposed policy change was not known. The Director of Finance advised that to be consistent with accounting requirements all cash in lieu of reserves contributions must be treated as revenue. These would need to be applied to deficit reduction in order for funds to be available for appropriation to capital financing. In light of the above, it is recommended: 1 Cont'd

1. That an additional $1.250M per annum be budgeted for cash in lieu of reserves contributions for the next three years and an additional $2 million per annum thereafter. 2. That all cash in lieu contributions be applied to reduction of the operating deficit so that the funding can be appropriated to fund capital expenditure. 3. That half the additional revenue be used to fund budgeted reserve development works and the balance for the purchase of new reserves. Undergrounding

The undergrounding programme was considered in some depth by the working party from two perspectives: firstly, the method of funding the present programme, and secondly, the amount of undergrounding the Council should be funding. With regard to the first issue the working party concluded that the present funding arrangements should be reviewed and that the allocation of financial resources for the undergrounding programme should be dealt with as part of the Annual Plan process to enable this expenditure to be prioritised against other major works. Discussion on the second issue focussed largely on the question of whether the Council should be funding any undergrounding at present given the technological advances taking place in the telecommunications industry. The working party considered it would be prudent to place a moratorium on the undergrounding programme until this and other issues have been clarified. The working party resolved: 1. That staff report back on the way the whole undergrounding programme is to be managed, including: * Providing for new technologies, such as cable TV.

* Contributions by other authorities.

* Ownership of networks.

* Resource Management Act considerations.

* Total amount being spent on undergrounding programmes.

* The consequences of the Council not being involved in any way in undergrounding programmes.

* The implications on the roading programme.

* Realistic time scale for an accelerated combined undergrounding programme. 2. That the Environmental Committee be asked to explore how the City Plan (or other appropriate instruments) may be amended to accommodate new and existing supply networks. 3. That Southpower be requested to define the level of funding required for non- discretionary undergrounding. 4. That CCHL be asked to recognise the fact that the amount to be spent on undergrounding will be dealt with through the Council's Annual Plan process; CCHL to accommodate this arrangement as part of the Statement of Corporate Intent negotiations. 1 Cont'd

5. That provision be made from 1996/97 onwards for additional dividend income of $2.5M from Southpower in lieu of undergrounding. The Director of Finance is reporting separately to the present meeting on the outcome of discussions between CCHL and Southpower and the impact now incorporated in the Annual Plan. Turning Point 2000

An additional $40,000 has been allocated in 1996/97 to the Turning Point 2000 project to bring the year 1 provision up to $100,000 (the level of provision for years 2, 3 and 4). In discussing the funding support for this event, concern was expressed that the Council could receive many requests for financial assistance for events and projects being organised by outside organisations to celebrate the Year 2000. It is recommended that the Turning Point 2000 Executive Committee be advised that the Council, in providing funding for the project will not accept responsibility for events organised by community groups, trusts or institutions subject to an assurance that the Council may give consideration to funding a major event. Riccarton Service Centre

In March, during discussion on the service centre outputs and, in particular, the level of business transacted in the year ended 31 December 1995 at the Riccarton Service Centre, the working party agreed that other options should be explored for delivering this service to the Riccarton community. The Community Manager, Riccarton/Wigram was requested to initiate these investigations and to report back to the Strategy and Resources Committee prior to the expiry of the lease. At its 18 April meeting the Committee reviewed this issue and concluded that the most cost-effective alternative would be to establish an agency in Riccarton which is similar to the New Brighton agency. This would retain a service delivery point within the Riccarton community and at the same time produce cost savings of $90,400 per annum. At the expiry of the present Service Centre lease on 1 October 1996 an agency could be established in the Riccarton community. The saving for 1996/97 would be $60,000, allowing for some transitional costs. It is recommended that an agency be established in Riccarton to deliver the services currently provided by the Riccarton Sub-Centre. Water Charges

The Committee supported the Water Services Manager's recommendation that water consumption charges be increased from 27c per cubic metre to 28c per cubic metre and for non rateable consumers from 32c per cubic metre to 33c per cubic metre subject to the impact of the increases on non profit organisations being assessed by the City Services Committee. These increases would generate $50,000 more revenue but from 1997/98 onwards. 1 Cont'd

It is recommended that the proposed increases in water consumption charges be approved and that a statement be included in the draft Annual Plan advising that an increase in water consumption charges is planned from 1 July 1997 subject to a policy on possible exemptions being considered by the Council. Extension of Metered Parking

At the 18 April meeting it was resolved: 1. That the City Services Committee be requested to consider the extension of parking meters within the city and within suburban shopping areas; the report to consider the impact of such a move on adjacent residential streets. 2. That the public be alerted to this study by way of a statement in the draft Annual Plan. Vision Statement and Statement of Strategic Objectives

As its February meeting the Committee appointed a subcommittee comprising the Chairman, Councillors Alpers, Evans, Murray and O'Rourke to redraft the Vision Statement/Statement of Strategic Objectives proposed for inclusion in the draft Annual Plan. The Subcommittee met on 1 April and unanimously agreed to retain the 1995/96 Statement of Strategic Objectives (with one or two minor amendments) and to include a short Vision Statement defining the Council's aspirations for Christchurch in the draft 1996/97 plan. Both statements are attached as Appendix IV (buff paper). The Subcommittee intends to reconsider both statements in light of the submissions received on this part of the draft Plan and to produce amended versions for final approval at the Annual Plan meeting on 31 July 1996. Recommendation: That the draft Vision Statement and Statement of Strategic Objectives be included in the draft Annual Plan and public submissions be sought on both statements as part of the Annual Plan process. Use of Redundant Reserve Funds

The Council has a number of Special Funds for which no specific project use is in immediate view. Also with the shift from cash to accrual accounting and with the development of long term financial planning all projects can be programmed for without the need to earmark special reserves on a project by project basis. This method is considered to be a more efficient use of funding. A schedule of such reserve funds which were set up by the former local authorities is attached as Appendix V (lemon paper). After 1 November 1996 the Council will be able to utilise these for other than the designated purpose. These funds total $1.47 and it is recommended that the Council budget to utilise these funds in lieu of borrowing in the 1996/97 year. 1 Cont'd

Projected Rates Increase The Committee recommends that a 2.92% rate increase be approved for 1996/97. This is marginally higher than the increase required to fund the 1996/97 activities programme but still some 0.88% lower than the 3.80% increase foreshadowed in the 1995/96 Annual Plan. The Committee recommends, further, that the difference together with the additional savings identified by staff and listed in Appendix I be used to reduce the deficit and thus decrease the 1997/98 rates increase. Note: That the financial projections in the Annual Plan for future years now include a provision for 2% inflation. Inflation was not included in the forward projections in previous years. The Financial Planning Model for 1996/97 is attached at Appendix VI (pink paper). Attached at Appendix VII (blue paper) is an analysis of the revised rates allocation to sectors and the impact of the rate change on a range of capital values for each of residential, commercial/industrial and rural. Also attached is a sample of commercial/industrial and rural properties disclosing some specific rate changes. Borrowing Levels As a result of an alteration to the funding mechanisms for enhancement projects during 1995/96 the ordinary capital programme as well the enhancements were funded from repayment of subordinated debt by CCHL. Because of this, the Council had borrowed very little in its own right in the current year. As there is no subordinated debt to be repaid in 1996/97 and later, the Council will need to borrow direct from external sources for both its ordinary capital programme and for the enhancement programmes. In 1996/97 this borrowing will total $48.53 million. Of this amount $25.11M will be for enhancement projects and the remaining $23.42M for the ordinary capital programme. Councillors are reminded that the Council established four key ratios as parameters to control the level of debt as part of it Financial Management Policy adopted in 1994/95. The ratios for the next six years are illustrated on page 8 of the draft Annual Plan. Also illustrated on page 9 of the draft Annual Plan is the peak level reached for these ratios within the next 20 years. The fact that the Council can project an ability to live within these ratios is a clear indication that debt levels are well within prudent limits on a long term basis. In his report to the Committee the City Manager stressed the importance of evaluating debt levels on a long term basis rather than as individual years in isolation.

OTHER ISSUES

Communications and Promotions Unit - Monitoring Arrangements

During discussion on the Communications and Promotions Unit's sub budget the working party noted that the unit's outputs were monitored by four Standing Committees as follows:

1 Cont'd

output                                              committee                 
                                                                              
Events SummerTimes Event Marketing         ) ) )     Parks and Recreation     
                                                                              
City Promotion (includes sister cities     ) )      Community Services        
and civic receptions and ceremonies)                                          
                                                                              
Central City Activities Central Retail     ) )      Central City              
Marketing                                                                     
                                                                              
Communications Advice                      ) )      Strategy and Resources    

The working party considered that some streamlining of the above monitoring/reporting arrangements was desirable and requested the City Manager to look at the options for achieving this. Levels of Service Following a discussion on the need for an indepth review of Council activities, it was resolved that the City Manager bring a report on the procedures and timetable for a review of service levels to the June meeting of the Strategy and Resources Committee. Recommendation: 1. That the Council adopt the adjustments listed in Appendices I, II and III and the recommendations contained in the foregoing report. 2. That the Council approve a 2.92% overall rate increase and borrowing of $48.53M for 1996/97. 3. That the Uniform Annual General Charge and existing Differential Rating Scheme be retained without alteration for 1996/97. 4. That the draft 1996/97 Annual Plan (pink covered book), incorporating the adjustments listed in Appendices I, II and III be approved as the Draft Annual Report to the public, in terms of section 223D of the Local Government Act 1974. 5. That the City Manager publish the draft Annual Plan and that, pursuant to section 716A(1)(b) of the Local Government Act 1974 he give public notice on Tuesday 21 May 1996 calling for submissions from interested persons in accordance with section 716A; such submissions to close on Friday 21 June 1996. 6. That the members of the Strategy and Resources Committee be appointed to hear public submissions on the draft Annual Plan on Monday 15, Tuesday 16, Wednesday 17, Thursday 18 and Friday 19 July 1996 and to report thereon to the Council at its meeting on Wednesday 31 July 1996.

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7. That pursuant to section 716A(1)(a) of the Local Government Act 1974 notice be given that the Council's Annual Plan will be considered by the Council at its meeting to be held on Wednesday 31 July 1996. 8. That in terms of section 223D of the Local Government Act the Annual Plan be available to the public free of charge. Copies to be available at the Civic Offices, Service Centres, the Central Library and community libraries. 9. That the draft 1996/97 Corporate Plan as amended which provides the detail of Business Unit plans be approved by the Council and be made available for public inspection at the Civic Offices and Service Centres.

CONSIDERED THIS 30TH DAY OF APRIL 1996

MAYOR

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