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18. 12. 96
STRATEGY AND RESOURCES COMMITTEE
9 DECEMBER 1996
A meeting of the Strategy and Resources Committee
was held on Monday 9 December 1996 at 4.00 pm
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: An apology for absence was received and accepted from Councillor Gordon Freeman.
An apology for lateness was received and accepted from Councillor Alister James.
Councillor O'Rourke arrived at 4.15 pm and was present for all clauses except clause 9.1.
Councillor Alpers temporarily retired at 5.00 pm, returned at 5.20 pm, left the meeting at 6.50 pm and was present for clauses 1, 2, 6, 7, 9, 12 and 13.
Councillor James arrived at 5.00 pm and was present for clauses 3, 8, 10, 11, 12, 13 and 14.
The Mayor retired at 5.15 pm and was present for clauses 1, 2, 3, 5, 6, 7, 8, 9 and 10.
Councillor Moore retired at 6.00 pm and was present for clauses 1, 2, 3, 5, 6, 7, 8, 9, 10 and part of the discussion on clauses 12 and 13.
The Committee reports that:
PART A - MATTERS REQUIRING A COUNCIL DECISION
1. REPORT FROM CHRISTCHURCH CITY HOLDINGS LIMITED RR 4305
| Officer responsible | Author |
| Chairman of the Board, Christchurch City Holdings Limited (Alister James) | Bob Lineham |
| Corporate Plan Output: Monitoring of Trading Enterprises Volume I Table 2 |
The purpose of this report is to provide information to the Council on the activities of Christchurch City Holdings Limited.
1. Christchurch International Airport Limited - Dividend Projections
The Board commissioned Ernst & Young to provide advice on the appropriate level of dividends which should be receivable from Christchurch International Airport Limited. The research looked at the capital requirements of the company and modelled a variety of scenarios before making recommendations to the Board.
The Board discussed this information in detail with representatives of CIAL and have established a policy as follows:
"That a base policy be set for dividends of 60% of tax paid profit to apply from 1996/97 but that in recognition of the capital development, from 1997/98 to 2000/01 the policy will be 50% of tax paid profit with a minimum of $6m. From 2001 to 2002 the base policy will resume at 60%."
This policy has been conveyed to CIAL and will be reflected in future Statements of Corporate Intent.
It is recognised that there are financial prerequisites to the application of this policy namely:
2. Review of Quarterly Reports
During the last month the Board has reviewed the Quarterly Reports for Christchurch Transport Limited and Christchurch International Airport Limited for the three months to 30 September 1996. In addition, it has also reviewed the six monthly report for Selwyn Plantation Board Limited to 30 September 1996.
The results for Christchurch Transport Limited indicate that the company is operating ahead of budget for the quarter and this has been achieved by a combination of factors ranging from growth in patronage to a reduction in variable operating costs. A critical issue facing the company in the next few weeks is the next tender round for routes being tendered by CRC.
Christchurch International Airport Limited is reporting an operating surplus after tax below budget primarily due to one off operating expenses which are expected to bring about savings for the remainder of the year and on into future years. The Board is confident that given careful control of costs and coupled with the growth in revenue arising from increasing international passengers, the company will report an overall result for the year much in line with budget.
The six monthly report from Selwyn Plantation Board Limited indicates a result ahead of budget although below that achieved for the same period last year. Currently the forest produce markets are somewhat depressed both locally and in the export market. Nevertheless the company expects to achieve its budget established at the beginning of the year.
Recommendation: That the information be received.
2. FOUR MONTHLY REVIEW OF BUSINESS UNIT RESULTS
to 31 october 1996 RR 4312
| Officer responsible | Author |
| Accounting Services Manager | Ian Hay |
| Corporate Plan Output: Overview |
The purpose of this report is to provide information on Business Unit estimated surpluses and over-expenditure for the year to enable reallocation of resources as required. This report is an interim one to enable early reallocation decisions to be made with a full Council overview to be prepared at the half year on 31 December 1996.
SAVINGS AND OVER-EXPENDITURE IDENTIFIED
1. Capital Savings
| Water Services | - Water Metering | 300,000 | |
| Property | - Hospital Car Park | 3,998,780 | |
| City Streets | - See attached, projects reprogrammed to 1997/98 | 3,534,000 | 7,832,780 |
| Additional Capital Required | |||
| Major Projects | - Convention Centre F and E | 865,000 | |
| City Streets | - See attached, project funding increases | 1,342,000 | |
| - Project alterations/new projects | 95,000 | ||
| Oxford Terrace Redevelopment |
- Additional funding Council resolution of 6 December 1996 | 90,000 | 2,392,000 |
| Surplus Capital | $5,440,780 |
2. Operational Savings and Revenue Increases
| Special Fund | - No longer required | 940,000 | |
| Water Services | - River Maintenance | 150,000 | |
| Parking Operations | - Net Additional Revenue | 50,000 | |
| Corporate | - Interest Savings on Reprogrammed Capital | 125,000 | 1,265,000 |
| Operational Over-expenditure and Shortfalls | |||
| City Streets | - See attached, due mainly to loss of Transfund Revenue with Reprogrammed Capital | 365,410 | |
| Waste Management | - Net Additional Expenditure on Plant for the Transfer Stations and Additional Compost Operating Costs | 150,000 | |
| Wigram Project | - Additional Funding Council Resolution 23.10.96 | 250,000 | |
| Youth Workers | - Council Resolution 25.9.96 | 95,000 | |
| Convention Centre Opening/Promotion | - See comments below | 80,000 | 940,410 |
| Surplus Operating | $325,590 |
DISCUSSION
The reprogramming of projects in City Streets and the alternative arrangements for the Hospital Car Park has resulted in a reduction in borrowing of $5.5M for the year after the additional funds for the Convention Centre and City Streets are taken into account. This reduced borrowing will help ensure more flexibility with key ratios and also provide a reduction in interest costs to the Council of approximately $125,000 for the year.
At the meeting the Committee added $65,000 for an opening event and $15,000 for promotional initiatives for the new Convention Centre to the above schedule. The Committee seeks the Council's support for this expenditure. The Communications and Promotions Unit has put together an exciting programme for a two day event to celebrate the opening of this major new facility. A range of activities designed to appeal to all ages are proposed. The purpose of the event is to "showcase" the new facility to the local community, demonstrate its versatility and engender a sense of civic pride.
Taking into account the special fund provided for in 1995 which is no longer required, it is estimated the Council will have an operating surplus of $325,590. However, we are currently undergoing a routine IRD tax investigation and it may be prudent to allow a contingency sum for this.
The Director of Finance commented:
"The reduction in capital expenditure which has been identified should be applied to a reduction in borrowing for the current financial year in view of the fact that this project is not going ahead and there is going to be pressure on borrowing in the forthcoming budget round.
My recommendation in regard to the residual surplus operating funds is that this be transferred to the Capital Development Reserve. The surplus has arisen from the appropriation of the surplus special fund which is no longer required and was not created in the current period. As a matter of Council policy, the Capital Development Reserve is intended to be maintained at a minimum level of $5M as a source of funds to support disaster recovery insurance for infrastructural assets. This fund has been temporarily drawn down to approximately $2.8M this year to provide short term funding for the Art Gallery site pending progressive receipt of the Trust Bank Canterbury Trust sponsorship for that project. I am concerned that the Fund is below the policy level and by transferring this surplus to the Fund the pressure to provide the resources from next year's budget will be reduced."
Recommendation: 1. That the Council reduce 1996/97 borrowing by the identified $5.5M.
2. That the requested additional operating expenditure be approved and the surplus be applied to the Capital Development Reserve.
3. AUDIT TENDER PROCESS RR 4325
| Officer responsible | Author |
| Accounting Services Manager | Ian Hay |
| Corporate Plan Output: Volume 1, 5.3.10 |
The purpose of this report is to review the options available for the future audits of the Christchurch City Council. The office of the Auditor-General has advised that from 1997 the Council has the option of going to tender for audit services or negotiating fees directly with Audit New Zealand for the next three years. This has been an ongoing process over the last couple of years with 23 local authorities participating to date. Of the 23, 10 elected to negotiate direct and 13 went to tender. Of the 13 tendered 12 were won by Audit New Zealand and one by BDO Hogg Young Cathie.
DISCUSSION
The Auditor-General has decided that the audit process for local authorities should be contestable and has given each local authority the option to pursue the issue. The Christchurch City Council has a very good relationship with the Christchurch office of Audit New Zealand who have over the years gained a very good understanding of our total business. They work with Council officers to continually improve content of our accounts and also have input into and review all Council operations. The Internal Audit Unit of the Council also works closely with Audit New Zealand who rely on the results of work performed. This provides us with a cost saving of approximately $30,000 pa. In reality, the fees have been discussed and agreed each year and have shown a steady decline, for example:
The reduction is as a result of working together to achieve economies and also the detailed understanding of our business that comes from continuity of people involved. Council officers believe this trend can continue and that the benefits of continuing with the current auditors, Audit New Zealand, are significant, both in terms of cost and value added to the Council.
Recommendation: That the Council take the option of negotiating fees direct with Audit New Zealand for the years 1997, 1998 and 1999.
4. COMMUNITY REPRESENTATION OF THE
METROPOLITAN FUNDING SUB-COMMITTEE RR 4323
| Officer responsible | Author |
| Leisure and Community Services Manager | Dennis Morgan, Committee Secretary |
| Corporate Plan Output: Public Accountability |
The purpose of this report is to convey the recommendations for community representation on the Metropolitan Funding Sub-Committee to the Council.
Community representatives are appointed for a term of three years on a voluntary basis.
Nominations received were reviewed by the Councillor members of the Sub-Committee.
Recommendation: 1. That the representatives for the recreation and sport area be Douglas Cain, Phil Humpreys and a representative to be nominated by Sport Canterbury.
2. That the representatives for the community development area be Cara Bailey, Ariki Hamilton, Jim Lamb, Sione Lei and Maria Tait.
5. MEETINGS SCHEDULE FOR 1997 RR 4310
| Officer responsible | Author |
| Council Secretary | Julie Sadler |
| Corporate Plan Output: Elected Member Representation |
The purpose of this report is to present the 1997 meetings schedule for the Council's approval.
The schedule is attached.
The clash between Parks and Recreation Committee and Environmental Committee meetings has been resolved following consultation with the Chairmen concerned. The Environmental Committee will now meet on the second Thursday of each month while the first of the two monthly meetings of the Projects and Property Committee has been transferred to the second Friday of the month. The Parks and Recreation Committee will continue to meet on the second Wednesday.
Because of the workload the Annual Plan meetings will impose on Councillors, no seminar meetings have been scheduled in February.
Recommendation: That the 1997 meetings schedule be approved.
6. ORDERS FOR SUPPLIES EXCEEDING 50%
OF DELEGATED AUTHORITY RR 4288
| Officer responsible | Author |
| Director of Finance | Bob Lineham |
| Corporate Plan Output: Financial Advice Volume I Page 4.5.2 |
The purpose of this report is to comply with Section 4 of the Public Bodies Contracts Act which requires that a schedule of orders for supplies and works approved under delegated authority and exceeding 50% of that authority be reported to the next meeting of the Council. The following schedule lists items in that category since the last report:
| Name of Supplier | Description | Amount | Delegated Authority |
|---|---|---|---|
| Project Q Ltd | Consulting Services for Project Mapping | $82,500.00 | Systems and Quality Manager |
| Steel & Tube NZ Ltd | Structural Steel 96/97-105 |
$265,606.88 | Director of Operations/ Director of Finance |
| Timarsh Contractors | North Hagley Park entrance improvements | $52,028.20 | City Design Manager |
| Telecom | Replacement of PABX at Milton Street Depot and Upgrade Components for Civic Offices PABX | $56,577.00 | MIS Manager |
| Technology Leasing and Computers | 28 Digital IBM Compatible Personal Computers | $74,910.00 | Acting Libraries Manager |
| Dave Gutry Construction | Vagues Road Sewer Renewal 96/97-114 |
$98,966.00 | City Design Manager |
| Bitumix Ltd | Carriageway Repairs 96/97-142 |
$95,169.00 | Acting City Design Manager |
| Waddell Holdings | Cadogan Street Reconstruction 96/97-144 |
$223,167.40 | Director of Operations/ Director of Finance |
| Gerry Pidgeon | Footpaths - City Parks and Reserves 96/97-145 |
$75,241.05 | Acting City Design Manager |
| Fulton Hogan Ltd | Major Carriageway Repairs - Fitzgerald Avenue 96/97-150 |
$91,188.00 | City Streets Manager |
| Works Operations Unit | Cranmer Square West Reconstruction 96/97-151 |
$188,371.20 | Director of Operations/ Director of Finance |
| Francis Construction Ltd | Bridle Path Road Reconstruction 96/97-152 |
$282,783.50 | Director of Operations/ Director of Finance |
Recommendation: That the information be received.
7. SUPPLEMENTARY ITEMS
The Chairman sought the leave of the Committee to introduce supplementary reports on the following topics:
1. Audit Tender Process.
2. Report of the Metropolitan Funding Sub-Committee (open and public excluded).
3. Science Alive (public excluded).
The Chairman explained the reasons why the items were not included on the main agenda and why they could not wait for the next meeting of the Committee.
The Committee resolved that the reports be received and considered at the present meeting.
PART B - ITEMS DEALT WITH BY THE COMMITTEE AND
REPORTED FOR INFORMATION ONLY
8. ITEMS RECEIVED
The Committee received the following reports/information:
8.1 Metropolitan Funding Sub-Committee
Requests for Events Seeding Grants RR 4322
Details of the grants approved by the Metropolitan Funding Sub-Committee at its meeting on 16 December 1996 were submitted for the Committee's information.
8.2 Capital Programmes - 1997/98 Corporate Plan
The Committee noted the information that the capital programmes will be reviewed in February 1997 in conjunction with the operating budgets.
9. ITEM WITHDRAWN
9.1 Rating Sale - Denise Christina Bourke, 71 Gardiners Road -
Reference No 1913/611/4 RR 4279
This clause was withdrawn.
10. RESOLUTION TO EXCLUDE THE PUBLIC
The Committee resolved that the draft resolutions to exclude the public set out on page 9 of the main agenda and page 3 of the supplementary agenda, be adopted.
CONSIDERED THIS 18TH DAY OF DECEMBER 1996
MAYOR