Governing Body and Budget Committee Agenda’s Out

Action Packed and a few Budget Blow Outs

 

budget

 

Council have released the agendas to both the Governing Body and Budget Committee for this Thursday. You can read the agendas below:

Governing Body

 

Budget Committee

 

Of significant note coming from the Governing Body:

  • The Regional Immensities Funding Plan
  • Funding for the Auckland War Memorial Museum, and MOTAT (who has been in the news recently)
  • Part Two of the CCO Review
  • The Local Government New Zealand Conference (which has caused stirrings before when Local Boards sent more than one person down)

 

Of significant note coming from the Budget Committee

  • Budget shortfalls
  • Funding for the Unitary Plan Independent Hearings Panel
  • Reduction in CAPEX spending by $80 million for the 2014/2015 year

 

Looking at the Budget Committee Agenda on page 7 – item 9:

The budget refresh also identified approximately $25 million of operating cost pressures not provided for in the draft annual plan. This includes:

  • A budget shortfall for Auckland Transport with a rates impact of $10.1 million. In part, this budget shortfall is driven by lower projections of public transport revenue as a result of lower than expected patronage
  • Additional expenditure requirements relating to the Proposed Auckland Unitary Plan as detailed in a separate report on this agenda
  • A budget shortfall and new funding requests of $7.6 million for Auckland Tourism, Events and Economic Development (ATEED).

 

From Item 18 – page 9:

The Long-term Plan 2012-2022 (LTP) set out a programme of significant investment in Auckland, with an average of $1.15 billion to be spent on new assets for the first three years.
18. Some of the key capital project budgets included over the three year period were:

  • $528 million for local activities, including local parks, libraries and cultural, community,and recreation facilities
  • $461 million for the City Rail Link 
  • $323 million to purchase electric trains
  • $184 million for the Panmure transport corridor as part of the Auckland-Manukau Eastern Transport Initiative (AMETI)
  • $58 million to upgrade the Albany Highway 
  • $31 million to develop cycleways
  • $154 million for the Hunua Number 4 water supply scheme 
  • $49 million for North Shore trunk sewer upgrades
  • $35 million for strategic property developments.

 Also noted that Council assets increased by $6 billion while “net debt” increased by $2.7 billion and will at a total level of $7.5 billion by end of June 2015.

 

In regards to Annual Plan submissions:

A total of 1,944 public submissions were received on the draft annual plan. While these submissions have yet to be analysed in detail, the coding of submissions has identified that:

  • 84 submissions commented on the council’s financial strategy, with 37 of these specifically commenting that the proposed expenditure was too high
  • 47 submissions commented on rates, with 23 specifically commenting that the proposed rates increase was too high
  • 24 submissions opposed the proposed 5 per cent increase in charges for social housing on the basis of affordability
  • 51 submissions requested annual funding for Massive Theatre Company and funding to assist them with finding a home
  • 31 submissions requested funding for other various arts, culture, community and sports organisations.

 

 In regards to the CAPEX Budget for the 2014/15 Annual Plan

Capital budgets and debt levels
37. The budget refresh process has resulted in projected 2014/2015 capital expenditure for the group of about $1.70 billion, which is about $80 million lower than the $1.78 billion in the draft plan. This is primarily the result of:

  • Colin Maiden Park being acquired in 2013/2014 rather than 2014/2015
  • deferral of land acquisitions for the City Rail Link
  • capital expenditure deferrals for Watercare and Waterfront Auckland. 
  • These reductions were partially offset by:
    • $57 million of proposed additional capex for Ports of Auckland’s commercial operations
    • $10 million of proposed new capex for integrated bylaw implementation
    • $7 million of proposed new capex to co-locate and in-house some animal management services to deliver enhanced operational efficiencies
    • $6 million proposed bring forward for ACPL’s Yard 37 development 
    • $1.5 million of proposed additional capex for ATEED’s fit out of the Wynyard Quarter Innovation Precinct.

38. In addition to the net reduction in projected capex for 2014/2015, the group’s borrowing requirement has also reduced due to:

  • deferral of city rail link property acquisitions from 2013/2014
  • the return of capital from Auckland Airport 
  • lower projections for weathertightness claims.

39. Overall, if all the proposed additional capital expenditure is approved, the closing net debt balance for 2014/2015 would now be about $7.28 billion, which is about $150 million lower
than the $7.43 billion in the draft plan.

 

In regards to the OPEX Budget for the 2014/15 Annual Plan

Operating budgets

  •  Overall the budget refresh has identified approximately $25 million of cost pressures not provided for in the draft annual plan.
  • This includes the Auckland Transport funding shortfall, which has been now been revised down from a rates impact of $18 million to a rates impact of $10.1 million.
  • Other major items include the additional expenditure required in relation to the Proposed Auckland Unitary Plan as detailed in a separate report on this agenda, and new funding requests from Auckland Tourism, Events and Economic Development (ATEED).

 Breakdown of OPEX “cost pressures”

Organisation Budget request

 

Rates requirement: $000

 

Auckland Council Unitary Plan Independent Hearing Panel 3,140
  Unitary Plan geographical information systems 730
  Democracy services support for advisory panels 365
  Decisions of the Finance and Performance committee

-primarily the interest impact of decisions to spend

additional operating expenditure in 2013/2014

 

400
Auckland Transport Budget shortfall 10,100
ATEED Budget shortfall and new funding requests 7,600
ACPL Budget shortfall 1,800
RFA Budget shortfall 1,100
  Total 25,385

 

These cost pressures are partially mitigated by the following items that have not yet been included in the annual plan budgets:

Organisation

 

Budget contribution Rates requirement

$000

Auckland Council Investments Limited Interest savings from Auckland Airport capital return 4,750
  Enhanced dividends from Ports of Auckland, net of

reduced 2014/2015 dividend from Auckland Airport

 

4,700
  Total 9,450

 

To help further reduce cost pressures the following was cited from the Budget Committee Agenda – Page 12 – Item 45:

Further mitigating budget movement of about $16 million would need to be identified over the next six weeks to achieve the average rates increase of 2.4 per cent proposed in the draft annual plan.
45. The range of options for mitigating the projected cost pressures include:

  • deferring consideration of some or all of ATEED’s funding request to the Long-Term Plan 2015-2025
  • holding further discussions with the board and senior staff of Auckland Transport on a range of cost and revenue issues, including parking volumes, prices and penalties. A Budget Committee workshop on this matter has been scheduled for 10 April 
  • reviewing the approach to funding the future replacement of Auckland Transport’s Electric Motor Units to better align this with the approach to replacing other assets 
  • holding discussions with the board and senior staff of Auckland Council Investments Limited on the dividend projections for Auckland Airport and Ports of Auckland.

46. Following the annual plan hearings, staff will report back to this committee on 8 May 2014 on progress with these and other cost mitigating options to further inform the mayoral-led process of deciding on the final budgets for 2014/2015.

47. The council also has the option of a higher rates increase, reducing some service levels,significantly reducing or deferring capital expenditure and/or requesting further efficiency savings. These options are not recommended at this stage given that public consultation on the annual plan has already been completed and work on these kinds of options has now commenced as part of the Long-term Plan 2015-2025 process.

 

Just to highlight the pressure heading back to AT on their $10m budget shortfall:

  • holding further discussions with the board and senior staff of Auckland Transport on a range of cost and revenue issues, including parking volumes, prices and penalties. A Budget Committee workshop on this matter has been scheduled for 10 April 

That on top of this from Transport Blog: Combating Fare evasion and Should Auckland Transport get out of the parking business? I am wondering if Auckland Transport need to have a serious rethink around their revenue verses cost situation. I know AT keep saying rail fare evasion is at 11% “officially” but I have always pondered and said that it is more likely to be at 25%. This estimate is further reinforced by Transport Blog’s fare evasion post and AT not fully acknowledging that it will be that high when factoring in all considerations.

 

Before I move to the Unitary Plan funding requests the agenda also points out non-costed budget pressures that might apply further to the Annual Plan:

Other potential budget issues
48. At this stage the following potential budget issues have been excluded from the annual plan projections:

  • the funding requests from public submissions outlined above
  • local board advocacy items 
  • additional funding for the development of the Maunga and other reserves under new cogovernance arrangements 
  • additional funding for the Auckland Regional Rescue Helicopter Trust 
  • the cost of inspecting and strengthening of any council owned earthquake-prone buildings
  • the possible outcomes of the CCO review.

 

The Unitary Plan Independent Hearings Panel Budget Requests

 

Part Two of the Executive Summary on page 15 outlines the budget requirements for the Unitary Plan Independent Hearings Panel:

In September 2013 the Local Government (Auckland Transitional Provision) Amendment Act 2013 was passed providing for the establishment and operation of an Independent Hearings Panel for the Auckland Unitary Plan. Under the legislation the Independent Hearings Panel sets its own processes for undertaking the hearing of submissions. The panel must provide a report making recommendations to Auckland Council on the Proposed Auckland Unitary Plan by August 2016 (unless an extension is formally requested). The Act provides that Auckland Council is responsible for all costs and activities incurred by the hearings panel including remuneration of the members of the hearings panel, the administration costs of each hearing session, and remuneration of any experts or mediators requested by the panel.

….

August 16, 2016 is the final date for the Panel to make its recommendations to the Council on the Unitary Plan. Thus there could have never been an extension in the first feedback round as some Councillors were wrongly asking for – not when legislation clearly sets the time frame out.

 

Budget wise these are the costs estimated so far:

The current placeholder figures for the operation of the Independent Hearings Panel in the draft annual plan is currently $12,621,300 spread over 2014/2015 ($3,121,000) and 2015/2016 ($9,500,000). This was based on early discussions with the Ministry for the Environment (MFE) staff before the appointment of the panel chair and members.

Their determinations on how the panel will operate and particularly early emphasis on frequency and number of mediations, while decreasing the original total placeholder funding required by $181,687 now spreads the costs over three years (rather than two) and significantly increases the funding required in 2014/2015 from $3,121,000 to $6,261,989.

 

Auckland Unitary Plan Independent Hearings Panel (AUPIHP)

 

  2014/2015 2015/2016 2016/2017 Total
Draft Annual Plan placeholder 3,121,000 9,500,300 0 12,621,300
Rephasing of placeholder amounts 3,140,898 -4,088,301 765,625 -182,687
AUPIHP funding approval required 6,261,989 5,411,999 765,625 12,439,613

 

Unrelated directly to the operation of the Independent Hearings Panel the current Long-term Plan contains funding for $1,518,000 each year for professional services as well as funding for the planning staff in the Unitary Plan Team (37 FTE with salary costs of $3,081,931). A planning manager and four will be specifically allocated from this team to work within the hearings panel office. During the development of the Proposed Auckland Unitary Plan (PAUP), a dedicated team of Geospatial Analysts worked in a highly collaborative manner with staff in the Policy and Planning Division which, at its peak, numbered approximately 12 full time staff but was disestablished shortly after the notification of the PAUP on 30 September 2013. A team of four permanently assigned geospatial staff supported by other specialist geospatial roles is required for the next three years with an annual cost of $727,000 each year (2014/2015, 2015/2016 and 2016/2017).  here is currently no funding or resources set aside for this purpose and further funding is required for the three years.

————-

 

A lot to digest and a lot of numbers and funding requests going around.

I will flesh out the AT budget deficits over the next few days as well as any other budget lines that draw my attention. A reminder rates are forecast to rise on average 2.6% for the 2014/15 Annual Plan cycle.

debt