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Council member and meetings
Finance and Strategy Committee
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OPEN AGENDA

I hereby give notice that a meeting of the

FINANCE AND STRATEGY COMMITTEE

to discuss Council controlled organisations will be held as follows:

DATE: Wednesday, 23 September 2009
TIME: 9:30am
VENUE: Committee Room, Level 15
  Civic Administration Building
  1 Greys Avenue
  Auckland
Mike Giddey
DEMOCRACY ADVISOR

Members:

Cr Douglas Armstrong, QSO [Chairperson]
Cr Paul Goldsmith [Deputy Chairperson]
Cr Aaron Bhatnagar
Cr Dr Cathy Casey
Cr Mark Donnelly
Cr Peseta Sam Lotu-Iiga, MP
Cr Richard Northey, ONZM

Ex Officio:

His Worship the Mayor, Hon John Banks, QSO
Deputy Mayor, David Hay, JP

  1. Top APOLOGIES

    At the close of the agenda no apologies had been received.

  2. Top CONFIRMATION OF MINUTES

    The minutes of the Finance and Strategy Committee meeting held on Wednesday, 16 September 2009 to be confirmed as a true and correct record.

  3. Top 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."

  4. Top PUBLIC FORUM

    A period of time (approximately 20 minutes) is set aside for members of the public to address the meeting on matters within its delegated authority. A maximum of 5 minutes per item is allowed, following which there may be questions from members.

    At the close of the agenda no requests to speak had been received.

  5. Top REVIEW OF METROWATER'S PERFORMANCE FOR THE FOURTH QUARTER - 2008/09

    Kris Munday  
    Policy Analyst, Treasury 19 August 2009

    Reporting on Metro Water Limited's (Metrowater) performance report for the quarter ending 30 June 2009. Metrowater has reported that the surplus available for the charitable payment is $11.8 million for 2008/09, 30 per cent below the budgeted $16.9 million. The lower than expected surplus is primarily due to a significant reduction in consumption by non-residential customers, which is likely to be associated with the current economic downturn.

    Metrowater has met three of its four statement of intent targets for the year: cost to serve per capita, staff turnover and unaccounted for water. The service performance index target was not met due to an unexpected increase in dry weather overflows, though performance on the nine other component measure was acceptable or better.

    Recommending that the Committee receives Metrowater's performance report for the quarter ending 30 June 2009 and notes its financial results, performance against statement of intent targets and long-term measures of environmental, conservation and affordability.

    [ATTACHMENT 5 and 5A]  

  6. Top REVIEW OF WATERCARE'S PERFORMANCE FOR THE FOURTH QUARTER - 2008/09

    Kris Munday  
    Policy Analyst 7 September 2009

    Reporting that Watercare Services Limited (Watercare) has submitted its management report for the fourth quarter and its statement of service performance (SSP) for 2008/09. At its 16 September 2009 meeting, the Watercare shareholders' representative group (SRG) reviewed the company's performance and discussed it with the Watercare board. This report summarises Watercare's financial performance and tables officers' questions about the quarterly report and Watercare's responses.

    Watercare has produced a good operating result for the year, achieving a surplus of $14.2 million, $4.4 million over budget. After tax profit was affected by write-off of redundant property, plant and equipment as well as the revaluation of financial instruments; Watercare therefore recorded a loss after tax of $10.4 million.

    Watercare's SSP shows that the company met 29 of its 32 performance targets for the year. None of the targets not met are of concern; these included a longer-term target due to be completed by 2011, as well as targets that the company and shareholders agreed were unnecessary given the imminent reorganisation of the water industry in Auckland.

    1. Recommending that the Committee notes Watercare's financial and non- financial performance for 2008/09, in particular that:
    2. the company reported a loss after tax of $10.4 million, primarily due to the revaluation of financial instruments
    3. the company reported an operating surplus of $14.2 million, ahead of its budget of $9.9 million
    4. a funds from operations interest cover ratio of 2.9 was achieved, against a budget target of 2.6
    5. capital expenditure for the year was $122.5 million, 31.1 per cent below budget.
    [ATTACHMENT 6, 6A and 6B]  

  7. Top AUCKLAND INTERNATIONAL AIRPORT LTD 2008/09 RESULT

    Kris Munday  
    Policy Analyst 31 August 2009

    Providing a report on Auckland International Airport Ltd (AIAL) results for the 2008/09 financial year summarising the company's financial and non-financial performance, the dividend payment and its outlook.

    The company achieved a surplus after tax of $105.9 million (adjusted for non-cash revaluations of investment properties and other extraordinary items), up 2.1 per cent over 2007/08. The final dividend payment for the year will be 4.45 cents per share and council will receive $6.9 million, which will form part of council's 2009/10 receipt as it is paid in October.

    Recommending that the Committee notes that AIAL has performed well in 2008/09 despite challenging economic conditions, that the council will receive a final dividend payment of $6.9 million and that the company is projecting lower earnings in 2009/10.

    [ATTACHMENT 7]  

  8. Top THE EDGE® 2008/09 ANNUAL REPORT

    Neil Huang  
    Advisor, Business Performance and Reporting 20 August 2009

    Providing a report that reviews the performance of THE EDGE® for the 2008/09 financial year, based on its annual report attached. It details the financial results and compares the performance against the key performance targets set out in the 2008/09 statement of intent.

    THE EDGE® disclosed a $2.8 million loss in the 2008/09 annual report, after receiving from Auckland City Council a budgeted $5.48 million annual contribution and an additional $851,000 from the council's production fund. This result was in line with the forecasts THE EDGE® signalled during the fourth quarter. It is attributed mainly to:

    1. a general operating deficit driven mainly by its ticketing service and entertainment stream
    2. the loss associated with the commercial musical My Fair Lady
    3. the higher than budgeted cost of the International Arts Season (predominantly the Bridge Project).

    Recommending that the Committee notes that THE EDGE® reported a loss of $2.8 million for the 2008/09 financial year, after receiving the council's annual contribution and production fund and THE EDGE® achieved all but two key performance targets in the 2008/09 statement of intent.

    [ATTACHMENT 8, 8A and 8B]  

  9. Top THE EDGE® WORKING CAPITAL REVIEW

    Neil Huang  
    Advisor, Business Performance and Reporting 31 August 2009

    Reporting that THE EDGE® has reviewed of its working capital position in light of the financial loss in 2008/09, and has requested $1.5 million working capital assistance from the council to enable the organisation to meet its short to medium term financial obligations, and to allow it to return to its cash position pre 2008/09 losses. THE EDGE® has also sought clarification from the council regarding the treatment of the inter-entity account maintained between THE EDGE® and the council, as the treatment may affect the working capital level of THE EDGE®. This report deals with these two issues.

    Recommending that the Committee approves the provision of a further $650,000 working capital to THE EDGE® though increasing the outstanding $1.4 million interest-bearing loan to THE EDGE® to $2.05 million and approves extending the term of the outstanding interest-bearing loan to 30 September 2010, to address THE EDGE®'s working capital deficit issue, delegating authority to the General Manager Finance to agree to the terms and conditions for the variation of the loan.

    [ATTACHMENT 9]  

  10. Top THE EDGE® THEATRICAL RISK POLICY REVIEW

    Neil Huang  
    Advisor, Business Performance and Reporting 31 August 2009

    Reporting that THE EDGE® has submitted its revised theatrical risk policy following an extensive review led by its risk and assurance team. This report summarises the key changes, based on a comparison to the previous policy and a discussion with the Risk and Assurance Manager of THE EDGE®.

    The policy framework is now formalised. In particular, the risk evaluation criteria have been re-defined to ensure greater emphasis on market and economic conditions. A newly established risk register is intended to document risks and mitigation measures as a reference for ongoing review of the policy.

    Overall, substantive amendments have been made to strengthen the policy. The revised policy is now in line with the AS/NZS 4360:2004 risk management standard. THE EDGE® considers this policy is a work in progress, and commits to regular review and refinement.

    Recommending that the Committee notes that THE EDGE® has strengthened its theatrical risk policy though an enhanced policy framework and an improved evaluation process, and has significantly reduced its risk tolerance level going forward, which should result in minimal risk exposure in the future and that THE EDGE® is committed to ongoing review and development of the theatrical risk policy in the future though biennial reviews.

    [ATTACHMENT 10 and 10A]  

  11. Top EXCLUSION OF THE PUBLIC : LOCAL GOVERNMENT OFFICIAL INFORMATION AND MEETINGS ACT 1987

    Mike Giddey  
    Democracy Advisor 17 September 2009
    Section 48, Local Government Official Information and Meetings Act 1987:

    The following motion is submitted for consideration:

    That the public be excluded 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.

    Item No.

    General subject of each matter to be considered

    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
    C1. The Edge® Ticketing Service Performance Review 2008/2009 Public conduct of matter would be likely to result in disclosure of information for which good reason to withhold exists under section 7. Section 7(2)(h)

    The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

    In particular, THE EDGE's ticketing service operates in a competitive market. Disclosure of sensitive information in this report could disadvantage this commercial activity.

    		Section 48(1)(a)

    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.

    C2. Review Of The Property Enterprise Board's Performance For The Year Ending 30 June 2009 Public conduct of matter would be likely to result in disclosure of information for which good reason to withhold exists under section 7. Section 7(2)(h)

    The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

    In particular, the report contains information about potential property transactions that would place council at a disadvantage in carrying out commercial activities if released to the public.

    		Section 48(1)(a)

    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.

    C3. Review Of The Parking Advisory Board's Performance For 2008/2009 Public conduct of matter would be likely to result in disclosure of information for which good reason to withhold exists under section 7. Section 7(2)(h)

    The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

    In particular, the report contains material that in a competitive environment, competing with privately owned car parks, and disclosure of strategic intent could have an adverse impact on the market.

    		Section 48(1)(a)

    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.

    C4. City Parks Services Financial Year End Report 2008/2009 Public conduct of matter would be likely to result in disclosure of information for which good reason to withhold exists under section 7. Section 7(2)(b)(ii)

    The withholding of the information is necessary to protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information.

    Section 7(2)(h)

    The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

    In particular, the report contains information relating to the overall operating performance of City Parks Services, which if released to the public, would disadvantage Auckland City's position against competitors.

    		Section 48(1)(a)

    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.