AKL Council Accountability and Performance Committee Agenda 16.3.2012

Accountability and Performance Committee 15 March 2012
File No.: CP2012/03178
Executive Summary
On 20th January 2012, I sent a letter and email raising with Auckland Council Investments Limited the significance and implications of the SOI related to the Ports rate of return sought to be achieved in 5 years time. In that message I also raised the potential risks to the Council regarding maintaining good faith bargaining directed towards achieving a satisfactory collective agreement, the potential for disruption and harm to the Auckland economy from the dispute, the potential for a reduced dividend to the Council and the potential for a significant reduction in the level of skills and engagement by the Ports workforce were contracting and to be the outcome of the dispute. The Chief Executive of ACIL responded on 27 January. I have also attached to this report the resolutions from Albert/Eden and Maungakiekie-Tamaki Local Boards regarding the dispute. It is now appropriate for the Committee to be made aware of my correspondence on these issues, to determine whether it agrees with those conclusions I drew on these issues and made a statement on at the last Committee Meeting, and whether the Committee believes it is appropriate and desirable to call for a resumption of collective bargaining and to express a view on whether or not the Ports Boards proposal to make 292 staff redundant and contract out their positions is either inherently undesirable or premature.
Recommendation/s
a) b) That the attached correspondence between the Chair and the Chief Executive of ACIL in January 2012 be received. That the Accountability and Performance Committee endorse the attached statement on the Port dispute made by the chair at its meeting held on 9 February 2012. That the resolutions from the Albert/Eden and Maungakiekie-Tamaki Local Boards be received. That the Accountability and Performance Committee express to the Ports of Auckland and to the Maritime Union: i) its strong desire for an immediate return to good faith bargaining aimed at the achievement of a fair collective agreements that further significantly improves port efficiency, and its opposition to the redundancy and contracting out of 292 port workforce positions as proposed.
c) d)
ii)
Chairman's Report : Ports of Auckland Industrial Dispute
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Attachments
No. A B C D E Title Correspondence from the Chair to CEO ACIL Response from CEO ACIL to the Chair Statement from Chair at 9 February A&P Committee meeting Albert-Eden Local Board resolutions Maungakiekie-Tamaki Local Board Minute Page 109 111 113 115 117
Signatories
Author Councillor Richard Northey Chairperson, Accountability and Performance Committee
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Attachment A
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From: Gary Swift <gary.swift@acinvestments.co.nz> Subject: RE: Some Questions re Ports of Auckland To: "Richard Northey" <northeyr@xtra.co.nz> Date: Friday, 27, January, 2012, 6:02 PM
Dear Richard Thank you for your memo dated 20 January. Unfortunately it was not received until 25 January and as a result this reply has been prepared in haste to meet your deadline. Dealing with each of your questions in turn.
1. ACIL is still optimistic that the ROE target will be met even though the loss of two major customers will make its achievement more difficult.
Your comment that Council has no expectation that all the SOI targets will be met is somewhat surprising. ACIL operates on the basis that it expects all the targets in its SOI to be met. Indeed, the key measure used by the Board to measure my performance is whether they have been met. Im unable to comment on whether the actions to achieve the ROE KPI need to be balanced against other Council KPIs. I assume that the Council takes that into account in setting the targets for departments of Council, ACIL and the other CCOs.
2. Im not exactly sure where the return on equity target of 12% originated. I know that the current rate of return was universally considered to be far too low and I recall discussions with the Mayor along those lines as well. The current rate of return is about 6% and a suitable stretch target was that it be doubled. I think Doug McKay may have suggested 12% when he met with the POAL Board. The origin is less important than whether it was achievable. In discussions with POAL we asked them whether it was possible and what would have to change to achieve it.
They use a slightly different measure of return referred to as Economic Value Added which measures the extent to which a company provides returns in relation to its Weighted Average Cost of Capital (WACC). The EVA measure is used by many companies when considering capital investment. If a project doesnt meet its WACC then any such investment has the impact of reducing the value of the company i.e. shareholder value is destroyed, or EVA is negative. As a minimum, a company should, overall, earn a return at least equal to its WACC. POAL set its return target equal to its WACC as this level of return is required to economically justify any major capacity increase that may be required in five to six years time. A WACC target makes good business sense especially given that at some stage the port will need to increase capacity and this should only be done on a commercially justifiable basis. In the case of POAL they calculate their WACC as approximately 9% which translates to a return on equity of around 12%. POAL do not consider this to be out of line with that achieved by international ports and have developed their plan on the basis that it will be achieved over the five year planning period. It is important to note that POALs plan includes a range of initiatives to achieve this; increasing revenue; organisation redesign; improving productivity through labour flexibility and minimising capital spend. Actions have commenced on all of these initiatives but it is only the labour flexibility initiative that is in the public domain.
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Accountability and Performance Committee 15 March 2012 You raise the point that POAL land is included in the asset base on which the return is set. We believe this is correct as POAL should achieve the appropriate return on all its assets. If it doesnt, EVA is negative and the assets should be put to an alternative use. However POAL is confident it can achieve this return. Although the SCI for POAL does not incorporate the ROE target there is a very clear understanding between the two Boards that the target is to achieve a 12% return on equity.
Item 10 Attachment B
3. ACIL has been monitoring very closely the actions by POAL during the negotiation of the new collective agreement and are satisfied that POAL is continuing to meet its good faith bargaining obligations. Their Board is very experienced in labour relations matters and they are being closely advised by the companys lawyers on their legal obligations.
While the changes proposed at the port (of which labour flexibility is only one issue) are significant I would not characterise them as radical. They reflect the way in which other successful ports operate and in particular Tauranga. The Boards do not consider these changes will have a medium-term negative effect on the operation of the port, its dividends or importers or exporters. While there may be some short-term negative impact as a result of current events these initiatives will only serve to have long-term positive effects on operations, dividends and make the port more attractive to importers and exporters. In this way, not only will returns to the Council be improved but they will also contribute significantly to the economic growth aspirations outlined in the Auckland Plan. POAL has been discussing the need for change with MUNZ since March of last year and has then been in formal bargaining for a new collective agreement since September. There have been a large number of bargaining sessions and in the latter part of last year these were facilitated by a Department of Labour mediator. After the loss of the Maersk Southern star service in early December, POAL tabled with MUNZ the need to explore the effect of this loss on staffing levels and also to consider alternative labour models. POAL decided that it was the responsible approach to explore these matters and to do so on a parallel processes. First, continuing to bargain for a new collective agreement. Second, formally proposing contracting out of work and commencing a consultation process with staff and MUNZ about that proposal. Since that time POAL has continued to bargain with MUNZ. Several bargaining meetings took place in the two weeks prior to Christmas and then a further meeting occurred on 12 January. While there have been no bargaining meetings since then, POAL has stressed to MUNZ that it is available for bargaining and would see merit in doing so if MUNZ wanted to respond to the last offer POAL has made. To date, POAL has not received a response to that offer. While MUNZ was prepared to discuss some changes to the expired collective agreement at the last meeting, it was unwilling to respond to the company offer. MUNZ has not suggested any further bargaining meetings. If it was to do so POAL would certainly attend. The ACIL Board have not had an opportunity to comment on your memo due to time constraints but I will be referring it to them and will let you know if they anything further to add. Yours sincerely
Gary Swift
Chief Executive Auckland Council Investments Limited
Chairman's Report : Ports of Auckland Industrial Dispute Page 112
Statement by Chair of Accountability and Performance Committee, Cr Richard Northey, re Ports of Auckland Dispute at the Committee Meeting on 9 February 2012 The concerns I believe that Auckland Council as owner and shareholder on behalf of Auckland residents and businesses can legitimately have about the Ports industrial dispute are relatively narrow ones: 1. Both the Maritime Union and Ports of Auckland very much need to make every effort to resolve the dispute speedily and fairly and to achieve more efficiency, and to negotiate in good faith. The obligation to negotiate in good faith is a clear legal requirement and moral obligation and both sides, particularly the Port Company that Aucklanders own, need to negotiate in good faith to achieve a settlement. Many Auckland businesses, farmers and workers owe their viability and livelihood to having an efficient and effective Port operating in Auckland. I am concerned at the risk that major disruption of the Port operation, particularly if it came as a consequence if the Port Company were to act to contract out the workforce, could severely harm Auckland manufacturing and exporting businesses and their workers. The Port Company should make every effort to achieve a good new collective agreement because of the potential damage to the Auckland economy that could well result from acting to contract out the workforce. Medium term disruption of the Ports operation would also risk the Auckland Councils dividend and total income and lead to a significant cutback in Council services or alternatively a rate rise. I support the Port Company seeking to make the work practices of the Port more flexible to make an already efficient Port of Auckland more efficient and effective. However, keeping a directly employed and fully engaged workforce is preferred because it materially contributes to that objective much more than contracting it out. If better efficiency can be achieved through the collective agreement negotiations, then retaining having a directly employed workforce that are using their skills, experience and their suggesting proposals for further improvements would enable us all to benefit.
2.
3.
4.
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Attachment C
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Extract from Albert/Eden Local Board meeting held on Thursday 8 March 2012
33
Consideration of Extraordinary Items MOVED by Member Easte, seconded Member Haynes a) That the Albert-Eden Local Board urges all parties in the Ports of Auckland Limited dispute to negotiate in good faith. b) That the Albert-Eden Local Board urge the Governing Body to work with Auckland Council Investments Limited to ensure that Ports of Auckland Limited negotiate in good faith and pursue a swift resolution that is satisfactory to all parties to the dispute. CARRIED Member Anderson abstained Member Woolfield abstained
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Attachment E
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File No.: CP2012/03231
Executive Summary
The Local Government Act 2002 (LGA) provides for local authorities to exempt certain council controlled organisations (CCOs) from the statement intent and reporting requirements normally associated with a CCO. This report recommends an exemption for the Mangere Mountain Education Trust (MMET). This trust has previously been exempted and the exemption expired in November 2011. In making a decision about exemption the council is required to consider the nature and scope of the organisations activities and the costs and benefits of exemption. The localised focus of the trust and the limited scope of its activities are key considerations in continuing the exemption. In addition, the CCO compliance requirements would duplicate existing monitoring by the council, which is undertaken under a services agreement with the trust. The trust receives approximately $90,000 per annum from the Council and the trusts performance in relation to this funding is monitored under the agreement.
Recommendation/s
a) b) That the report be received. That the Accountability and Performance Committee grant a council controlled organisation exemption, under the Local Government Act 2002, to the Mangere Mountain Education Trust, to be reviewed no later than 1 November 2014.
Background
The LGA 2002 provides for local authorities to exempt certain CCOs from the statement intent and reporting requirements associated normally associated with a CCO. A decision to exempt must take into account the nature and scope of the CCOs activities provided, and the costs and benefits of granting the exemption. Grounds for granting an exemption could include that the CCO is small scale, and its performance is being monitored through other channels such as a funding agreement. Mangere Mountain Education Trust (MMET) is a legacy CCO, which was exempted from CCO requirements by the Manukau City Council. The trust was originally established in 2003 under an accord between the Manukau City Council, the Auckland Regional Council, the Department of Conservation, and Te Wai-o-Hua Trust. MMET is charged with establishing a visitor facility and other amenities on Mangere Mountain for the benefit of the public. The Auckland Council provides the buildings, including the Mangere Mountain Education Centre, to the trust under licence, and provides approximately $90,000 per annum operational funding under a services agreement. The council has the power to appoint four of the eight directors. As the council appoints fifty percent of the directors, the trust meets the legal definition of a CCO. The remaining trustees are appointed by the Department of Conservation and the Te Wai-o-Hua trust. A CCO exemption granted by a local authority, can be granted for a maximum of three years, and can be revoked at any time. The exemption for Mangere Mountain Education Trust expired in November 2011, and so needs to be reviewed immediately. Other CCO Exemptions
Mangere Mountain Education Trust CCO Exemption
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The council currently has two other CCOs with exemptions expiring in October 2012. These are Arts Regional Trust and Mt Albert Grammar School Community Swimming Pool Trust. When these are reviewed this could be an opportunity to consider whether exemptions could be applied to any other legacy CCOs. Waterfront Auckland has three marina trust subsidiaries, which have exemptions until August 2013. An exemption must be granted by resolution of a local authority and so these will need to be reviewed by the council in 2013.
Decision Making
Nature and scope of activities The trust undertakes defined activities that are targeted to a particular geographic location (Mangere Mountain). The facility that the trust operates is an educational facility, which fosters an understanding of the environmental, cultural, spiritual and heritage values associated with the mountain. The localised focus of the trust and the limited scope of its activities are key considerations in providing continued exemption to the CCO. Costs and benefits of providing exemption There would be little benefit from requiring MMET to prepare an SOI. The Councils Parks, Sports and Recreation Department monitors the performance of the trust twice a year against the services agreement, and funding is drawn down twice a year under the agreement. The Team Leader, Parks Specialist and Programmes in the southern area notes that the department has a close relationship with the trust, and regularly attends trustee meetings. There are no concerns about the financial or non-financial performance of the trust. Additional monitoring via a statement of intent process would add unnecessary compliance costs for both the trust and the council as it would duplicate existing processes. It would also provide no additional benefit for the community, as the trust has a physical presence and visibility in the community within which it operates. Conclusion For these reasons, and taking into account the nature and scope of the trusts activities, this report recommends that the trust continue to be exempted from CCO status and this is reviewed no later than 1 November 2014.
Significance of Decision
The decision to exempt a CCO from the reporting requirements of a CCO is not a decision that would trigger the councils significance policy.
Maori Impact Statement

The local iwi, Te-Wai-o-Hau appoints two of the trustees and provides resources in kind to the trust. The activities of the trust are of benefit to Maori as the objects of the trust specified in the Trust Deed include to undertake and facilitate the study of Mangere Mountain and its spiritual significance to Tangata Whenua. For example, the trust promotes a Maori history walk and has gardens showcasing traditional Maori food and herbal medicines. The decision to continue the CCO exemption of the trust is not considered to have any adverse affect on Maori communities.
Consultation
Consultation has been undertaken with the trust chair and the Councils Parks, Sports and Recreation Department, and these parties support continued CCO exemption.
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Local Board Views

Mangere Mountain is located in the Mangere-Otahuhu Local Board Area. CCO exemption is a governance matter, however the local board services relationship manager for the local board has indicated that there are no issues associated with continuing the status quo with respect to governance of the trust.
Financial and Resourcing Implications

There are no financial and resourcing implications associated with continuing the exemption.
Legal and Legislative Implications

This report meets the legislative requirements of the LGA 2002 in granting an exemption under section 7 of that act.
Implementation Issues
There are no implementation issues.
Attachments
There are no attachments for this report.
Signatories
Authors Authorisers Catherine Syme, Principal Advisor, CCO Governance and Monitoring Jaine Lovell-Gadd, Manager CCO Governance and Monitoring Andrew McKenzie, Chief Finance Officer
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File No.: CP2012/03260
Executive Summary
The content of this report focuses on the highlights and achievements of the organisation for the seven months ending January 2012 under the key areas the council carries out work in, to achieve organisational objectives. The financial overview for the seven months provides an indication of how the organisation is performing against the budget, associated financial risks and efficiencies.
Recommendation/s
a) b) That the report be received. That the Accountability and Performance Committee note the performance report for the seven months ended 31 January 2012, highlighting: i) ii) A net underlying operating deficit of $23.9 million is reported; and A year to date capital expenditure of $173 million
Background
This report is part of the regular monthly reporting to Accountability and Performance Committee on the Councils performance for the year to date.
Decision Making
No decision required unless the committee indentifies any areas to be further investigated.
This report does not trigger any of the criteria or thresholds of the significance policy.

This is not a significant decision for Maori, and as is simply reporting back to Committee does not involve any consultation.
Consultation
No consultation is required for this item, as it is simply a reporting back to Committee.
Local Board Views

Local Boards receive their own reporting for their respective areas.

There are no financial or resourcing implications arising from receipt of this report.

Monthly reporting is not a legal requirement and there are no legislative implications from the receipt of this request.
Performance Report for the seven months ending January 2012 Page 123
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Performance Report for the seven months ending January 2012
Item 12
There are no implementations issues.
Attachments
No. A Title Performance Report January 2012 Page 125
Signatories
Authors Authorisers Nalar Mohamed, Manager, Business Performance and Reporting Kevin Ramsay, Manager Finance Andrew McKenzie, Chief Finance Officer
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Performance report January 2012
Tryphena Harbour Wharf before the upgrade, Great Barrier Island, November 2011
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Attachment A
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Contents
Highlights and achievements Performance measures Financial performance Operating revenue and expenditure Revenue by Activity Operating expenditure by Activity Capital expenditure by Activity Our priorities this year Appendix A. Capital projects over $1million by activity B. Economy and Finance monthly
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The following is an overview of key highlights and achievements.
Community
x x The Fickling Centre upgrade is now completed, in conjunction with the upgrade of Mt Roskill Library and Citizens Advice Bureau. Feedback from Puketapapa Local Board was very positive with a high degree of user interest from community groups. The Summer Fun Programme 2011/12 is in full swing and has been very well attended. From 1 November 2011 to 1 April 2012, 399 free family fun outdoor activities in 55 parks and locations across the North Shore. Participants appear to be from all over the region, with attendance increased significantly from last year. Combined community partnership contract with Ministry of Justice signed up to June 2012 value at $330,000 across a range of community safety activities. Progress with youth representation in the south continues with launch of Howick Youth Council, following recently established Manurewa Youth Council. Terms of reference for a similar forum have been established with Papakura Local Board. Regional Hui on Family and Sexual Violence Prevention is confirmed for 2 March at Orakei Marae with elected members, Advisory Panels, Maori Statutory Board, agencies and community sector. Output of the hui will be used to create a submission to the Long term plan (LTP) process, informed by the family violence sector. Draft Auckland Graffiti Vandalism Plan ready for presentation to Community Safety Forum in February. The Plan incorporates local board feedback and once approved will inform the next stages of service level development and procurement. The new services commence 1 July. Mayor's Taskforce for Jobs youth employment project progressing well with financial support confirmed from the Tindall Foundation. Officers supporting local boards to develop "Readiness Plans" and exploring resourcing options to support the significant interest in the project. Dare to Explore, Libraries' summer reading programme for children, has been an outstanding success with over 6,200 registrations, more than double the number last year. By donation from Fairfax Media, the entire Manukau Courier photographic archive has now been transferred to the South Auckland Research Centre. The estimated 100,000 prints and negatives dating from between 1963 and 2002 provide a unique and invaluable historical resource. More than 1000 of the most striking photographs have been digitised and released on the Auckland Libraries 'Footprints' database. Libraries marked the Year of the Dragon with a programme of over 80 activities. Find Your Field of Dreams (FYFOD), AMP'd Leadership Graduation - event planned and coordinated by previous and current leadership graduates. FYFOD, AMP'd team recognised at the Manurewa Youth Workers Awards and received both the Youth Services and Youth Transitions Awards. Manukau Leisure received Innovation Award for the Krank Initiative at the NZ Fitness Awards. Craig Rouse, Centre Manager for Manurewa Aquatic Centre, was presented the NZRA Paul Stuart Memorial Award for Excellence and Outstanding Personal Contribution to Wider Facilities Management Community. Official opening for Kauri Kids early childhood educators (ECE), Otara Involvement in a local board workshop on broadband on January 31st including presentations from Chorus and Vodafone.
x x x
x x
x x
x x x x x x x
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Highlights and achievements
Lifestyle and culture

x x x Music & Movies in Parks integrated communications campaign continued. As at 31 January, the campaign generated 24 media articles, 3140 Facebook 'likes' for Music in Parks and 1315 for Movies in Parks. 30,666 visitors have gone to the Music in Parks website. "South" is a brand new arts publication launched in January, celebrating the unique South Auckland Maori and Pacific creative flair. This was developed collaboratively by the Pacific Arts Coordinator and the Kaiwhakahaere Toi O Manakau. Auckland Regional Services Trust Fund - Applicants selected by Rodney and Hibiscus combined local boards on 14 December 2011 to submit a Developed arts programme Proposal, following recommendations from the Advisory Panel. Letters of advice sent to applicants. Lopdell House Gallery redevelopment project was publicly announced as a partnership by Lopdell House Development Trust and Waitakere Ranges Local Board. Sturges Road Art Bridge project by designer Anthony Summich (now deceased) was completed. Opening scheduled 24 February 2012. Five Creative Communities public information sessions held across the region from 24 - 31 January to support potential applications. 470 Junior World Sailing Champs held in Takapuna from 26 January - 3 February. Rugby World Cup (RWC) training venue at Onewa Domain received high level of recognition in terms of the quality of the field Huia Domain waste water treatment system upgrade completed Moire Park BMX Pump Track completed
x x x x x x x
Economic development
x x x x x x x x Finalisation of Fairtrade report for February Economic Development Forum. Process to develop a business precinct plan for East Tamaki agreed with Howick and Mangere-Otahuhu local boards. Programmes of work finalised for local improvement projects in Manurewa, Otara and Old Papatoetoe. Construction commenced or due to start soon. Mayoral courtesy calls with diplomats from Israel, Philippines and Australia. Met with Maungakiekie-Tamaki Local board regarding Tomioka city (Japan) relationship. Development of the Broadband Forward Works programme to maximise digital benefits for the region - setting out the key functions, outcomes and work components to achieve digital success. Development of stakeholder support between Economic Development and Auckland Tourism, Events and Economic Development (ATEED) for broadband stakeholder engagement and education across the region. WiFi 2 network issues reporting process established with network operator. Issues resolution process has been expedited. Drafting of Chapter 4 (Economic) of the Auckland Plan completed for submission to the Auckland Future Vision Committee meeting of 3 February 2012.
Planning and regulation

x Waste Management and Minimisation Plan integrated communications campaign continued. As at 31 January, the campaign generated 63 media articles, 2331 Facebook 'likes', 1961 video views, 869 video 'likes', 371 downloads of the Waste Management and Minimisation Plan and approximately 1500 submissions received. 95% of building consents processed was within statutory timeframe.
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Accountability and Performance Committee 15 March 2012 x x x x x 96% of Code Compliance Certificates (CCC's) were processed within target timeframe. Planning completed for the pilot programme for the new swimming pool compliance processes. Pilot due to start early February. Preparations underway for the introduction of the Restricted Building Works / Licensed Building Practitioners legislation on 1 March 2012. The regional dog adoption website has commenced and is on track for a soft launch in April. Worked with Local Government New Zealand CE regarding the establishment of a national regulatory reference group. The aim of this group is to identify and document national regulatory best practice and provide a conduit for the influence of future legislative and policy change affecting Local Government regulatory service delivery. A strategic planning meeting was held with Police, District Health Board, and Alcohol Advisory Council senior managers to agree key joint actions regarding alcohol related harm initiatives for 2012 and beyond. 95% of non-notified applications were processed within target timeframes (96% in December) A total of 475 non-notified applications were processed for the month (683 for December) 1338 monitoring inspections were undertaken in January (1329 in December) Continuous Improvement process set up to enable staff to submit suggestions for improvement across all areas of the business. Sustainable Business Practice Team established. Review of the Urban Design Panel has been undertaken & recommendations put forward for consideration & implementation Public notification of proposed new dog bylaw and dog policy. Region wide approaches to Open space management planning and design guidelines agreed with Parks, Sports and Recreation Forum. Twenty-one Private Plan Change requests being processed. 82 Council Plan changes being processed. A public meeting was held to address concerns over reports highlighting intensification in Birkenhead.
x x x x x x x x x x x
Environmental management
x x Eighteen schools were presented with bronze, silver or green-gold certificates of achievement by Cr Wayne Walker at the annual Enviroschool celebration event, held at Owairaka Primary School in Mt Albert in December Christmas Energy Saving Campaign showing significant reduction in consumption throughout Christmas holidays. The Christmas campaign's increased energy awareness will help future campaigns.
Solid waste
x Waste and recycling collections over the Christmas/New Year holiday period went well. There were no collection delays and no specific requests received by Elected Representatives. Positive feedback was received from the Call Centre management (south) relating to the marketing of the change of the collections. Presentations on the draft Waste Management and Minimisation Plan (WMMP) content have been made in a number of community meetings arranged by Local Boards around the region. Community groups under the Auckland Community Zero Waste Alliance (ACZWA) carried out draft plan submission awareness raising activities such as stalls and presentations at local events aimed at encouraging the community to submit to the Plan. As a result, there was high
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Accountability and Performance Committee 15 March 2012 profile media coverage of the draft WMMP in OurAuckland, NZ Herald, Manukau Courier and on Radio Waatea, articles in various community papers and news item on TVNZ. Great Barrier, Maungakiekie-Tamaki, Papakura and Franklin local boards have hosted public information sessions on the Draft Waste Minimisation Plan.
Stormwater
x x 170 of the 202 stormwater physical works and design projects planned in this years programme has been committed as at 31 December 2011. The provision of one stormwater quality pond rather multiple ponds in Riverhead will lead to an anticipated reduction in future operational maintenance.
Commercial and Investment

x x 100% pass rate in Health & Safety audits (676 criteria checked) for the second month in a row Successfully filed a US Digital Millennium & Copyright infringement notice against iswikispace.com
Corporate
x x x 434 media queries received and responded to. Partnership confirmed with Auckland Chamber of Commerce and Ministry of Social development (MSD) to launch Youth Experience Programme in Council for 2012 The final draft of the Customer Service Strategy for Auckland Council was developed in January with the first outputs - a set of design principles due to be delivered to the Executive Lead Team in February. During January the team have been working on the terms of reference for stage two of the strategy roll out. A request for expression of interest (REOI) was completed for the procurement of the Contact Consolidation solution in January and the full Business Case for the procurement and implementation of the solution was presented to the Strategy and Finance Committee and approved. Late objections continue to arrive in small numbers daily. Those where there are extenuating circumstances or the property record appears to be in error are being accepted. Of the 11,586 objections registered at 31 January 596 (5.14%) have been resolved. A process is currently underway seeking proposals from private valuers to assist with the clearance of objections. Contracts are expected to be signed and work commenced by 1 March. 256,000 Instalment 3 rates invoices generated for posting early February. 2nd Draft Service Catalogue & Costing Methodology sent out to CCO's with actuals for review and feedback Key strategic step forward with Asset maintenance and Property management (AMPM) project going live late last year. The benefits of all property billing, processing and debt collection in one consolidated system as opposed to eight different legacy systems are starting to be realised. New reporting functionality has been delivered which is assisting the team work through debt collection matters. Further enhancements to the system are still to be delivered. Overall, good progress is being made on bedding down new systems and processes. Working with auditors on the financial and policy components for the draft LTP approved by the Governing Body in December 2011. Panel of valuers appointed to revalue 3900 Council owned operational properties.
x x x
x x
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Accountability and Performance Committee 15 March 2012 x x x x Successful delivery of a consolidated browsing (through the proxy consolidation project) experience for all Council users, also allows for web usage reporting from one system. Business Case for Webcasting Governing Body meetings endorsed by ISG. Work commenced on the updating of the Information System Business continuity plan (BCP) document for the BCP audit in March, SQL database consolidation and ECC Bledisloe (equipment for civil defence command centre) projects. Enterprise project management office (EPMO) have extended Auckland Council's Project Management Framework (PMF) to include the "Guide to the Project Change Control" and the "Project Management Risk Guide" (in draft) as well as extending its services by offering "Project Risk Modelling" Obtained a number of findings in the Council's favour from the Office of the Ombudsman
Governance
x x x x x x Iwi submissions on the Onehunga Foreshore Restoration Project report to the Governing Body (December) - a report addressing Treaty matters within the project and requiring Governing Body decision. The report was carried. Board appointments advertised for substantive CCOs (Regional Facilities Auckland, Auckland Tourism, Events and Economic Development Limited and Auckland Transport). Draft 2012/2015 Statements of Intent submitted by Watercare, Auckland Council Property Limited, Auckland Council Investments Limited, Auckland Tourism, Events and Economic Development Limited and the Auckland Waterfront Development Agency Continued work on new infrastructure for the Marina Management System Completed calendar of Elected Member meetings for distribution to key stakeholders in the organisation Business meetings were held in January, where local boards adopted their draft Local Board Agreement and also received reports on: Determining Community Outcomes in the Long Term Plan, Identification of Significant Natural Areas in the Unitary Plan, Land Based Effects on Aquatic Environments - Sediment, and Guidelines for Voluntary Safety Groups Operating within Auckland Local Board Service (LBS) officers worked with other departments to resolve outstanding issues on the allocation of non-regulatory decision making, involving streetscapes and town centres and regional parks During January local boards began to receive reports on: Determining Community Outcomes in the Long Term Plan. Identification of Significant Natural Areas in the Unitary Plan, Land Based Effects on Aquatic Environments - Sediment, and Guidelines for Voluntary Safety Groups Operating within Auckland. Working with Governance and Parks teams to liaise with OTS and Crown negotiators to ensure good outcomes to various Treaty Settlement negotiations ongoing between the Crown and Auckland iwi. Finalised programme for the opening of 6 pou whenua Supported Howick Local Board engagement with Maori and in particular the desire for the whare in Howick to be managed by Maori
x x
x x x
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Council Support
x Call Centre service levels for January was just above the target of 80% at 81.5% (up 1% on December). Call volumes decreased 3% on December figures due mainly to the public holidays. Other activities of note during January that have contributed to the call centre performance: x 78,000 letters inviting submissions on dog bylaws posted out from 26 January x Over 2,500 annual leave hours allocated across the region x Call Centre Telephony Consolidation Request for expressions of interest (REOIs) received (14 in total) x Every Interaction Counts workshop attendance by lead teams x Public Service Association (PSA) stop work meetings Cleaned up and assisted with providing security barriers after campsites were removed from Aotea Square, Albert Park, Victoria Park and 360 Queen St. Preparation of risk management and insurance information for presentation to Singapore and London insurance markets 2012/2013 Insurance strategy presentations to CCO's Broadening scope of Claim Management System to include all classes. Across Auckland Inc. (excluding WaterCare) Strategy to bring about motor vehicle claims awareness with use of Auckland Inc vehicles including take home policy.
x x x x x
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Performance measures
This report is continuously being updated to include statistical information collected around the organisation as it becomes available. Where there are targets shown for 2011/2012, these reflect the targets as disclosed in the annual plan for 2011/2012. A separate report is included to illustrate the statistical information and trends.
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Performance measure trends

Number of Building Inspections completed
14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan Feb Jun Jul Mar May Nov Dec Aug Sep 1,448 Sep Apr Oct 1,354 1,317
766 Oct
12,073 10,226 9,090 8,410 6,526 5,511 10,067 8,701 9,299 8,654 9,066 9,049 10,209 9,668 9,187
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Attachment A
Number of Building consents received

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Nov
1,758 1,604 1,398 1,373
1,572 978 1,185 1,324
1,471
1,413
1,506
764
Jan
Feb
Jun
Jul
Dec
Mar
May
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Number of resource consent applications completed

1,200 1,000 800 600 400 200 0 Jan Feb Nov Dec Mar May Jun Jul Aug Sep Apr 985 743 1,027 888 618 665 873 795 743 830 853
864
689
482
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Aug
Apr
Oct
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Number of resource consent infringement notices issued

70 60 50 40 30 20 10 0 Jan Feb Jun Jul Nov Dec Mar May Aug Sep Apr Oct 32 27 28 60 52 40 25 14 22 44 39 43 34 34
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Number of visitors to the Library (000's)

1,600 1,400 1,200 1,000 800 600 400 200 0 Nov
1,226 1,021 1,127 986
1,020 1,037
1,100
1,280
1,190 1,193
1,161
1,283 1,274
1,366 1,191
Jan
Feb
Jun
Jul
Mar
May
Dec
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Number of Library items borrowed & issued (000's)

1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Nov
1,502 1,486 1,477 1,299 1,376 1,382 1,368 1,383 1,371 1,366
1,454
1,583
Aug
1,490 1,411 1,484
Jan
Feb
Jun
Jul
Sep
Apr
Dec
Mar
May
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Aug
Sep
Apr
Oct
Oct
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Attachment A
Item 12
Item 12
Number of food license applications (new & renewals)

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Nov
1,646 1,663 1,332
1,827
1,028 329 213 Dec 77 91 Jan Feb 138 Mar 98 Apr 155 May 132 Jun Jul Aug Sep 991 Oct 900 15,734 14,929 Oct Oct
565 283
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Attachment A
Number of liquor license applications (new & renewals)

1,400 1,200 1,000 800 600 400 200 0 Jan Feb Nov Dec Mar May Jun Jul Aug 14,243 Aug Sep 15,590 Sep Apr
1,237 1,008 992 843 618 745 731
1,107 883
1,011
1,099 1,127 954
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Household refuse (tonnes)

18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Nov 17,047 16,652 15,908 16,370 17,101
15,846 16,718 16,372
15,826 15,612 15,194
Jan
Feb
Dec
Mar
1 Nov 2011 to 31 Jan 2012
May
Apr
1 Nov 2010 to 31 Oct 2011
Jun
Jul
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Household recycling (tonnes)

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan Feb Jun Jul Nov Dec Mar May Aug Sep Apr Oct
11,043
12,480 10,863 11,511 11,899 10,686 10,364 11,134 11,093 10,681 10,120
9,108
10,287 9,725 9,766
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Waste to landfill (tonnes)

30,000 25,000 23,319 22,269 20,951 18,709 23,091 25,505 21,574 23,804 22,530 22,139 24,698 20,815 19,262
20,000 23,335 23,796 15,000 10,000 5,000 0 Jan
Feb
Jun
Jul
Nov
Dec
Mar
May
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Number of calls received by Customer services

300,000 250,000 200,000 150,000 100,000 50,000 0 Jan Feb Jun Jul Nov Dec Mar May Aug Sep Apr Oct 237,402 278,976 234,689 231,148 227,458 203,776
271,509
221,233 209,616
249,175 259,469
235,743 202,108
190,943 185,241
1 Nov 2011 to 31 Jan 2012
1 Nov 2010 to 31 Oct 2011
Aug
Sep
Apr
Oct
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Attachment A
Item 12
Financial performance
The financial overview provides a summary of the year to date financial results for Auckland Council. It shows how financial resources have been used towards delivering on Councils goals for improving Auckland.
Financial Performance Overview

For year to date January 2012
Notes 1. Operating revenue includes direct user charges, interest income, dividend income, inter-entity revenue and property rental 2. Annualised average return on the movement in the value of the offshore investment portfolio (DFA) 3. Movement on market value of treasury swaps if sold rather than buy held to maturity.
For the seven months to 31 January 2012, Council has reported a $24m operating deficit compared to a budgeted deficit of $20m. The capital expenditure is $173.2m, compared to a budget of $184.5m. Initial projections indicate around $51m of the budget will be deferred to future years.
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Accountability and Performance Committee 15 March 2012 Operating revenue Operating revenue is behind budget by $8.3m (unfavourable). The main contributor is from: x Direct user charges Low volumes in building and resource consent applications due to market conditions which continue to have an impact on the revenue intake from the regulatory business
Rates revenue x Rates revenue has a favourable variance of $2m for the 7 months to January 2012, mainly due to rates penalties net of remissions.
Operating expenditure Operating expenditure is $2.3m under budget for the seven months to January 2012. The variances are: x Staff costs $4.5m (unfavourable) This is mainly from wages and salaries as a result of overtime costs and temporary staff being required for additional activities such as dog licensing, rates assessments, Rugby World cup and Libraries evaluation. There has been a substantial improvement since the December results as leave was taken, reducing the leave provision. Internal charges $7.9m (unfavourable) This variance is a result of: o lower internal charges from City Parks which is offset by higher than planned operating external revenue recovered by City Parks, $2.9m o lower than budgeted capitalisation of staff cost of around $5m, with further work underway to identify further costs to be capitalised. Funding expenses $11.8m (unfavourable) This variance is a result of increased interest cost which will continue to report an adverse variance against budget. Expenditure areas with favourable variances There are other expenditures that are performing favourably which have helped to offset the unfavourable variances from other expenditure. The major contributors are: o depreciation $15m o office consumables $4m o occupancy and utilities $2m o inter entity funding costs $6.9m
Abnormal items x Bad debts write off and provision of $3.1m. This relates to outstanding debtors from legacy council which are now deemed unrecoverable or are in dispute and under legal investigation x $2.9m on prior year adjustment of finance leases to correct the opening balance for 1 November 2010 on accrued interest balances from legacy councils Non-operating revenue Development and financial contributions $34.5m (unfavourable) Revenue from development and financial contributions continue to be lower than budgeted, as a consequence of lower levels of consents applications than anticipated. While the building industry remains slow, contributions from development will remain lower than budgeted.
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Attachment A
Item 12
Accountability and Performance Committee 15 March 2012 Accounting adjustments
Due to the nature of the investment markets, the valuation on investment assets is expected to vary from month to month depending on the conditions of the market. In order to provide certainty of future interest payments, Council has actively entered into both medium- and long-term interest rate swaps. Over the lives of the interest rate swaps, it is probable that losses will be reversed. When the future floating rate rises above the swapped fixed rate, a gain will be recognised. Fluctuations on the market conditions of treasury related activities will continue to be reflected in the current book value of Councils financial derivative liabilities and swaps. This is a non-cash item with limited risks and is required to be recorded to meet accounting requirements. The net accounting adjustments on these activities contributing to the unfavourable variance for the seven months to January 2012 are: x Loss of $14m from forward foreign exchange contracts and forward interest rate swaps x Loss of $46m from on interest rate swap between Council and bank and interest rate swaps held for trading. Both activities are for the Electric Multiple units (EMU). These losses have been recognised in the profit and loss and are not in a hedge relationship. Areas for Focus The focus areas for the organisation build on those highlighted in the December report, with initiatives as follows: x the shortfall in revenue in the regulatory activity is currently being addressed through initiatives such as streamlining internal processes to improve efficiencies and maximise available resources, monitoring billable hours to ensure chargeable time are invoiced, reassess the use of contractors and consultants and re-aligning staff requirements. x A project is currently underway to monitor staff costs through the management and reduction on the use of temporary staff and contractors filling permanent established positions. Examples of some of the initiatives deployed in the regulatory area include redeployment of permanent staff from areas where there is spare capacity to the areas of need, identifying activities consultants perform that in-house staff could do and offering permanent roles at reduced rates to some consultants whose services are essential to the business at possibly higher than the budgeted costs, and the efficient management of staff annual leave. x All departments across the organisation are working to ensure they perform to budget less 2% over the last four months of the financial year. [This report is still an ongoing improvement project and open to any comments and proposals for enhancement from its audience)
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Attachment A
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Revenue by Activity
Attachment A
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Attachment A
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Operating expenditure by Activity
Attachment A
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Attachment A
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Capital expenditure by Activity
Capital expenditure by Activity

Overall, total capital expenditure is currently tracking close to budget for the seven months to January 2012. However, the following transactions have been processed ahead of schedule: x land for MPL Flat Bush was purchased earlier than planned, $26m x Various ICT projects initiated ahead of schedule, $5m x Purchase of various park land and capital works, $7m A number of projects are behind budget for various reasons. The main ones are: x delay in payment for replacement of vehicles as delivery of the vehicles has been delayed x discretionary fund for local board projects yet to be fully committed, $3.7m x delays on various stormwater projects including pond de-silting, forward design on ponds, Ascot to Ellerslie and Flat Bush, $17m There are accounting adjustments on the following assets: x prior year land purchase of Marine Industrial Precinct recognised this year, $8m (book adjustment) x transfer of land to Auckland Transport, $13m
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1. Rugby World Cup - Meeting our commitment to deliver the Rugby World Cup 2011
x This event is now completed.
2. Single rating system - Producing a single rates bill for 2011/2012 and starting work on the 2012/13 single rating system
x x x x x x x x Overall rating 2014 programme on track. Programme will look at two key vendors for final solution _ SAP and Infor (Pathways). SAP to provide solution assessment to Council on 15 February for evaluation. Infor continues to assist with the migration of FDC and PDC. Resources are being hired for FDC migration. Test cycle 1 for all sites due to commence 1 February. FDC test cycle to be undertaken in Ozone and Pathway as contingency Data cleansers on board to validate/cleanse new rating attributes Rates guide to support draft LTP in development phase
3. Organisation wide learnings - Capturing organisation-wide learnings

x
The Rugby World Cup 2011 Evaluation Report was publicly released in December. Illustrating its commitment to capturing learnings, the Council shared the outcomes of the appraisals conducted on the 140 projects and 15 programmes delivered for Rugby World Cup 2011. The learnings included the importance of project governance and management and consistent branding and communication as well business, volunteer and team engagement. The need for more hotel accommodation was also identified
4. Project Genesis - Continuing to look into ways to become more efficient and effective
x x x Target savings are being achieved (see Genesis Performance Summary at conclusion of this report) Contractor information prepared by HR and Finance circulated for action to be led by ELT members. The Tenders and Procurement Sub-committee approved three Genesis supplier recommendations put to them in December. Savings achieved over the multi-year contract terms are as follows: x Security: a saving of approximately $4.4m compared with previous contract value x Multi-Functional Devices: a saving of approximately $9m compared with budget x Electricity (Time of Use): an increase of approximately $2m compared with previous contract value but a saving of approximately $1.2m compared with market (note for Electricity Genesis saving is from demand reduction rather than contract) The Operations procurements: Parks Maintenance, Solid Waste and Stormwater and the remaining Finance procurement: Facilities Management and Cleaning have all had proposals in from the market and are now being negotiated. The negotiations are going extremely well and will realise further savings. Meetings with Local Boards clusters covering off the Parks Maintenance Procurement went extremely well with it being accepted that approval and contract delegation would be via the Tenders and Procurement Sub-committee. The Property Pipeline progress was reported on at the end of January, with future action to be taken by the project team being set up within ACPL (i.e. Genesis in monitor mode). The Governing Body meeting to approve disposal of property is scheduled for April with Local Board meetings to clear additional property in the interim. Reconciliation of savings to budget for future periods put on hold at CFO request
x x
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Attachment A
Item 12
Our priorities this year
Item 12
5. Performance measures - Measuring financial performance, customer satisfaction and other activities
x Performances measures are collected as part of business as usual to inform stakeholders and managers on an ongoing basis of the progress of the business against set expectations. The targets are continuously being reviewed and updated to reflect the current nature and climate of the business. Measures include public transport patronage, various customer satisfaction levels, return on financial investments, number if visits to events and facilities, achievement of drinking water standards, and consent processing times. LTP performance measures: LTP measures have been inserted into the working LTP draft document and are now being reviewed and audited. Targets are included with these LTP measures, and are continuing to be refined based on further feedback. A review of how performance measures will be collected is largely complete, with very few process changes having been identified to enable the collection. Performance System: A proposal will be presented within the next month to the Executive Prioritization & Governance Forum on a tactical solution that will meet our immediate data collection and reporting needs.
Attachment A
6. Co-governance Putting in place the policies, systems and processes required to share decision-making between the governing body and local boards
x x x x Over January, local boards continued finalising their draft local board agreements for inclusion in the draft Long Term Plan. Work continued to resolve outstanding issues on the allocation of non-regulatory decision making involving streetscapes and town centres and parks. Work was undertaken on the process for obtaining local board input into the procurement policy and the approach to parks contracts. There were eight local board business meetings held in January. Most of these meetings were to formally consider local board agreements.
7. Productive CCO relationships - Developing productive working relationships with our Council Controlled Organisations (CCOs) through the letters of expectation and the development of the statement of intent.
x x Draft 2012/2015 Statements of Intent submitted by Watercare, Auckland Council Property Limited, Auckland Council Investments Limited, Auckland Tourism, Events and Economic Development Limited and the Auckland Waterfront Development Agency. Board appointments advertised for substantive CCOs (Regional Facilities Auckland, Auckland Tourism, Events and Economic Development Limited and Auckland Transport).
8. The Auckland (spatial) and other plans - Supporting the development of all plans required for the Auckland Council (the Auckland Plan, area plans, local board plans, the Unitary Plan, Civil Defence Emergency Management Plan, the Long Term Plan and others as agreed)
x Hearings of 700 submissions on the Draft Auckland (Spatial) Plan were completed by the end of December 2011. Deliberations on submission on the Draft Auckland Plan commenced at the beginning of February 2012 and will completed by 1 March 2012. The final Auckland Plan will be adopted in March 2012. Hearings are being arranged in March 2012 for those people who wished to be heard separately on their submissions on the Draft Economic Development Strategy and the draft City Centre Masterplan. Good progress is being made on the Unitary Plan including working
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with the political steering group on policy papers. An outcomes matrix was endorsed by the political working party in February 2012 and a skeleton Unitary Plan is also to be produced in February 2012. On track for completion of draft by December 2012. Discussions with Central Government officials about process to speed up the adoption of the Unitary Plan. Long Term Plan: Draft of Long Term Plan circulated to elected members on 23 December 2011. The Draft of the Long Term Plan to be adopted by Strategy and Finance Committee on 15 February 2012. Draft LTP to be released for public consultation before end of February 2012. Progress made in the last month on financials, Independent Maori Statutory Board proposals, and Local Board agreements. Area Spatial Plans: paper approved by Auckland Future Vision Committee on 7 February 2012 on the sequence and programme of area plans across Auckland. City Centre Masterplan: a design leadership team with representation from Auckland Council, Waterfront Auckland and Auckland Transport has been established to begin work on the proposed Quay Street boulevard as the first priority for funding of $130 million in the LTP for city centre projects. Governance group has been established for the Quay Street project comprising CEs of Auckland Council, Auckland Transport and Waterfront Auckland
x x
x x x
Auckland Council, Auckland Transport and NZTA jointly reviewed proposed changes to the transport chapter of the draft Auckland Plan. Auckland Council, Auckland Transport and NZTA jointly reviewed the modelled land use and transport result of the draft Auckland Plan. A workshop with Councillors to discuss the draft Regional Land Transport Programme has been deferred to March.
10. Building a strong and dynamic culture - Continuing to build our culture based on our purpose and values, putting in place appropriate policies, learning and development initiatives and systems
x HR Compensation and Performance Management Systems: Following sign-off in December for the HR Compensation System, detailed requirements and detailed planning are now underway. Completion of the detailed requirements is dependent on a conclusion of discussions with the PSA. Implementation timelines will be confirmed once resourcing is confirmed. The Performance Management IS Business Case was signed off by the Steering Committee, approving SAP as the recommended solution. Business Case being presented to IS Governance in February for endorsement. IS raised risk of potential confusion between terms of reference for HR Performance Management Project and Enterprise Performance Management Project. Stakeholder meeting planned for February to mitigate the risk. Remuneration Framework: Auckland Council is committed to moving towards a performance-based remuneration framework. Discussions with the PSA about what this might look like continued in January in an effort to work through current disagreement on: what would be negotiated from time to time, the number of progression steps below 90% of the Band midpoint, and what could be included in the collective agreement. These discussions are still ongoing. Behavioural Competency Framework: The competency model was signed off by the HR Director. The 4-tier model will be tested in February by HR Advisors to validate how job roles and job titles across Council can be mapped into the framework. Performance Management Framework: A business case is being prepared to ensure alignment between the HR Compensation and Performance Management IS business cases. HR Working Group is now meeting twice-weekly to
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Attachment A
9. The Transport plan - Working with the Transport CCO to bring together the Transport Plan for the region.
Item 12

accelerate decision-making on the PM Framework. Recommendation on the rating scales and their definitions for competencies and objectives have been agreed, as well as the number of objectives (pre-defined and agreed) for the template. A framework and templates will be submitted to HRLT for ratification in March. Staff Engagement Survey: Demographic listings finalised enabling accurate reporting of data. Online testing of email invitations commenced. Launch of promotion campaign with survey Go-Live date on 20 February. Core Curriculum: A core curriculum of 12 courses was launched in January, focusing primarily on communication skills. The curriculum covers the period February to July. Design and development costs are allocated to the central OD budget. A revised booking process and cancellation policy sees local budget-holders being accountable for spend on a user-pays basis, with charges for non-attendance. Youth Experience Programme: Auckland Council has partnered with Auckland Chamber of Commerce and the Ministry of Social Development to provide work experience opportunities for young people (cadets) starting their careers. This programme will start in February. It is anticipated that 50 cadets will have the opportunity of a two week work experience within the first three months. The two weeks will enable cadets to identify career choices, gather data for their CV and activate the individuals job search strategy.
x x
11. Strengthening our leadership teams - Continuing to develop relationships between the Executive Leadership Team and the Senior Leadership Team to strengthen organisation leadership
x January SLT meeting held, six-monthly performance results and priorities for the year discussed.
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(Sorted Alphabetically)
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Attachment A
Item 12
Capital projects over $1 million
Appendix A
Attachment A
Item 12
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Attachment A
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Attachment A
Item 12
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Attachment A
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Economy and Finance Monthly January 2012

Economy
New Zealand economic developments
x The global economic deterioration is taking its toll on the
New Zealand economy, resulting in slow growth and lower than expected tax revenues. The NZ Treasury has recently downgraded the forecast surplus for 2014-15 the time by which the Government plans to return to the black from $1.5bn before the election to less than $500m. Some analysts forecasts now indicate a $1bn budget deficit in June 2015. These deteriorating fiscal prospects could translate into further spending cuts. Then there is the uncertainty of the revenues from the partial sale of SOEs
Appendix B
x The US economy has recently showed moderate signs of

recovery as the unemployment rate in December dropped to 8.5 per cent, a three-year low; manufacturing output climbed 0.9 per cent, the biggest gain since December 2010, and GDP rose at a 3 per cent annual rate in the final 2011 quarter after increasing 1.8 per cent in the previous quarter.
x For decades, foreign trade has been the main driver of

growth for the Japanese economy. However, in December 2011, Japan recorded its first annual trade deficit since 1980 as its exports fell for the third consecutive month, driven by a yen near post-war highs against the dollar, slower global growth and Marchs earthquake/tsunami that has also increased energy imports.
x Since 2010, New Zealand merchandise trade balance has

shown consistent and rising surpluses, a trend that was confirmed by the $698 million (5.7% of exports) surplus of the December 2011 quarter. Compared to the September 2011 quarter and seasonally adjusted, exports increased by 4.3 per cent to $12.3 billion, driven by record-high value for dairy products. Imports were up 1.3 per cent to $11.6 billion. However, the current account deficit is widening.
x South Koreas GDP quarterly growth in December 2011 was

0.4 per cent, showing a significant slowdown, mainly due to lower exports.
Attachment A
x Amid new widespread credit rating downgrades, the Euro

monetary union is still struggling to find a new institutional framework. The European countries (except the Czech Republic) have recently agreed on a Germany inspired legally binding common fiscal discipline and increased the size of the European rescue fund. Greek debt is being renegotiated and creditors are again asked to voluntarily accept sharp losses; Italys new unelected government in a few weeks has approved a new tough budget and introduced wide ranging economic structural reforms; Portugal is still under threat of default; Spain is heading towards recession with a 25 per cent total and a staggering 48.5 per cent youth unemployment rate. The UK is increasingly acting as an external partner as its economy is struggling and its financial sector considers tougher European financial rules a threat.
x National demand is still subdued. In December, New

Zealand spending on credit and debit cards reached NZ$6.6 billion but, seasonally adjusted, the total value of transactions decreased 0.2 per cent. This follows a similar decrease of 0.3 per cent in November and a relatively large 1.7 per cent increase in October 2011 during the RWC.
x Inflation is flat. The consumers price index (CPI) fell 0.3 per
cent in the December 2011 quarter, driven by a 25 per cent drop of vegetable prices, which suffered a supply shortage in the previous quarter. Even without accounting for vegetables, the CPI would have risen by only 0.1 per cent. Lower telecommunication services, furniture, kitchenware, and appliances counterbalanced rises in international air fares and petrol. In the year to the December 2011 quarter the CPI rose 1.8 per cent, which compares with a 4.6 per cent rise for the September quarter year.
Financial markets
Financial markets this month
x Stock markets have recorded some improvement, but
uncertainty and volatility remain extremely high.
x Aucklands population officially reached 1.5 million. Its

population exceeded 0.5 million for the first time at the 1961 Census, 1 million in 1996 and is projected to reach 2 million in 2030. New Zealand's population reached 1.5 million in 1936, when Auckland was home to 17 per cent of the country's population. That share doubled to 34 per cent by 2011. Auckland is the fifth largest city of Australasia.
Currency markets this month

x The NZ dollar is very strong and 7 per cent higher, on a
trade-weighted basis, than the Reserve Bank forecast for the current quarter. On one side, a high dollar represents a threat to exporting sectors, especially those with high elasticity of demand to price and high substitutability (e.g. tourism). On the other side, it has a disinflationary effect and increases real incomes.
x Nationally, in the December 2011 year housing approvals

were the lowest since 1965. However, new housing approvals in Auckland showed a rising trend. In November 2011, the total number of authorised consents in Auckland rose to 430, or NZ$129 million up from 362 and NZ$94 million, respectively, in November 2010.
Interest rates
x The US Federal Reserve has announced that its benchmark
interest rate will stay low until late 2014.
International economic developments

x The International Monetary Fund has cut its forecast for
global growth for 2012 and 2013, warning that the European debt crisis threatens to derail global growth. It now predicts a growth rate of 3.3 per cent for 2012, down from a September 2011 forecast of 4 per cent, and 3.9 per cent for 2013, down from 4.5 percent. The IMF identified a potential global financing need of US$1 trillion in coming years and is seeking US$500 billion in new lending resources.
x The Reserve Bank of New Zealand (RBNZ) has left the

Official Cash Rate unchanged at 2.5 per cent. The RBNZ acknowledged a slight improvement of the global financial market sentiment since December, but considered the global economy remains fragile and volatile, while domestic demand is still weak. .
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Statistics
New Zealand main economic indicators
Year to September NZ GDP growth rate Auckland GDP growth rate Current account (%GDP) CPI - year to December 2010 % 1.4 1.1 - 3.5 4.0 2011 % 1.9 2.8 - 4.3 1.8
Unemployment rate (*)

Year to September New Zealand Auckland (*) not seasonally adjusted 2010 % 6.4 7.4 2011 % 6.6 6.8
The labour market in Auckland

Quarter end September 2011 Working-age population Labour Force / participation rate Employed / % of working age pop Unemployed / unemployment rate Source: Statistics New Zealand 1,106,900 756,300 704,600 51,700 68.3% 63.7% 6.8%
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Attachment A
Item 12
Facts and Figures from the Research Unit
Item 12
Auckland Residential Growth Model

Councils Research Unit (RIMU) has responsibility for developing and maintaining Aucklands Growth Model. This work provides the growth projections needed to anticipate demand for infrastructure and services in the region. Part of this work is the Auckland Residential Futures Model, comprising projections for population, households and dwellings by mesh block to 2051. This work was recently completed. The non-residential component, comprising number of employees and business floor space is currently in development. The Residential Futures Model is a scenario model providing a spatial simulation of possible residential growth. It models potential residential capacity based on anticipated growth in demand for residential dwellings. The three main functions of the model are: x population demand x effective dwelling demand x the allocation process Population growth is the underlying driver of residential dwelling demand, and is determined by changes in fertility, mortality and migration. The Residential Futures Model can run on low, medium or high population growth projections and each growth series incorporates changes by age-sex-groups for the Auckland region as a whole. Effective dwelling demand is a relatively new concept introduced to the model. It represents the economic constraints that have slowed the building of new dwellings and formation of new households. In 2010, new dwelling consents dropped to their lowest figure in the last 20 years in Auckland (figure 1). Figure 1. Auckland Dwelling Consents, 1992-2011
growth of each effective demand growth scenario starting from a 2011 calibrated base figure. Figure 2. Effective Demand Projections (annual growth)
Attachment A
Source: RIMU, Auckland Council (2011) The allocation process works from household preferences for location of residence and dwelling type. It is a sequential process taking place each year and models the potential uptake of residential capacity based on a given scenario of demand. The allocation process looks at the interaction between supply and demand: x While demand is less than supply, all households are accommodated in their area of Choice. x When demand exceeds supply, the number of households accommodates in a area of choice is limited to the dwelling type in that area. x The response is to have a shift in growth to where capacity is available or to intensify where allowed. Projections of population, households and dwellings can be expressed by local board, area unit and mesh block, annually from 2006 to 2031 and five-yearly to 2051 (as shown by Figure 3). Figure 3. Auckland Modelled Dwelling Growth Mesh block, 2006-2051
Source: RIMU, Auckland Council (2011) The effective dwelling demand incorporates information from Infometrics Ltd and the Department of Building and Housing. Figure 2 below reveals the
Source: RIMU, Auckland Council (2011) For more information contact: Paul Owen Source: Statistics New Zealand
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File No.: CP2012/02525
Executive Summary
Auckland Council Group as an issuer of NZX listed bonds is required under NZX listing rules to publish half year financial results in the form of an Interim Financial Report. The Interim Financial Report is to be made available prior to 30 March 2012. The chairs of Accountability & Performance and Strategy & Finance committees under delegated authority approved a preliminary release to the NZX of this Interim Financial Report on 29th February 2012. This report requests the formal approval of the Interim Financial Report of Auckland Council Group.
Recommendation/s
a) b) That the report be received. That the Interim Financial Report to 31 December 2011 for Auckland Council Group be approved for publication.
Background
Auckland Council has bonds listed on the New Zealand Stock Exchange (NZX). The listing imposes on Council reporting obligations, one of which is the publishing of half year results in an Interim Financial Report. Council officers have prepared the Interim Financial Report in conjunction with officers of the CCOs. The report consists of financial information for the Auckland Council Group including a statement of financial performance and financial position, and statements from the Mayor and chief executive. The Interim Financial Report has not been audited, nor is it required to be audited.
Decision Making
The publication of Interim financial information does not require formal adoption by the Governing Body. As the information discloses financial performance of the council group for the six months to 31 December and financial position at that date, it is appropriate the Accountability and Performance Committee approve the information for publication.
During the six months to 31 December 2011 the Accountability and Performance committee has reported on the performance of Council. The publication of the Interim Financial Report supplements information currently in the public domain and extends it to the council group. Individually the CCOs have reported their performance to 30 September to the Accountability and Performance Committee. The CCOs are due to report December performance in April. The recommendations do not trigger councils Significance Policy.

Maori, as stakeholders in the council are effected and have an interest in this report that concentrates on the group financial statements. It does not highlight specific outcomes or
Approve December 2011 Interim Financial Report
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Item 13
Item 13
activities. The adoption of the report is required to meet contractual obligations to the NZX. As such, the report and content of the report, has no particular benefit to, or adverse effect on Maori.
Consultation
The Interim Financial Report has been prepared after consultation with a wide range of council and CCO officers.
Local Board Views

Not applicable.

Not applicable.

Auckland Council has bonds listed on the New Zealand Stock Exchange. The conditions of listing include publishing of half year results in the form of a Interim Financial Report within 90 days of 31 December. The approval of this report will allow the publication of half year results and fulfils Auckland Councils NZX listing obligations.
Not applicable.
Attachments
No. A Title Half year report final to NZX Page 161
Authors Authorisers
Robert Nelson, Financial Controller Kevin Ramsay, Manager Finance Jaine Lovell-Gadd, Acting Chief Finance Officer
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Auckland Council Group half year report 31 December 2011

Attachment A
Approve December 2011 Interim Financial Report Page 161
Item 13
Attachment A
Item 13
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Message from the Mayor Message from the Chief Executive Statement of Responsibility Statement of Comprehensive Income Statement of Changes in Equity Statement of Financial Position Statement of Cash Flows Notes to the Financial Statements 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 General information Significant accounting policies Critical accounting estimates and judgements Rates Income Income tax Deferred tax Property, plant and equipment Intangible assets Investment properties Investment in subsidiaries Equity accounted investments Proportionally accounted joint ventures Borrowings Provisions
2 3 4 5 6 7 9
10 10 10
10 10 11 11 11 11 12 12 12 13 14 14 14 15 16 16
Reconciliation of net surplus/(deficit) after tax to net cash inflow from operating activities Capital commitments and operating leases Contingencies Related party transactions Financial risk management Events occurring after the balance date
Page 163
Attachment A
10
Item 13
Contents
Message from the Mayor

We are 18 months on from the largest local government amalgamation in New Zealand history. I dont think anyone foresaw the enormity of the task ahead or how well it has been dealt with. Auckland Council is a very large organisation and, while it will take time for its many parts to function in perfect synchronicity, it has been a significant accomplishment getting it up and running. During the next three years, we will develop a single rating system that is fair and balanced for every Aucklander, no matter where you live. This was one of the many responsibilities set down by the government and is the single greatest challenge we face. By keeping rates at or around the rate of inflation and by providing those most affected with assistance through the transition, we are making this process as smooth as possible. Through the Auckland Plan I have set down my vision for how Auckland will look 30 years from now and during the past month some of you have had your say on our plan to implement that vision. The vision is bold I accept that but the time has come to take responsibility for among other things creating a transport system that will serve our city for generations. To achieve this I have put to you a range of options for meeting our funding shortfall. We can no longer defer these tough decisions to future generations. There are even greater challenges ahead but this is an organisation geared to meet them head on.
Len Brown Mayor of Auckland
Page 164
Auckland Council has reached an important stage in its evolution - moving from an organisation in transition to one leading this region into an era of transformation. Our first 18 months have been filled with many challenges as we set the foundations to move to this next phase but there have been many triumphs. The Rugby World Cup was a huge success and the collaboration across many organisations, including this council, our council-controlled organisations and central government was a key to that success. Auckland Transports agreement to purchase 57 Electric Multiple Units for use on the citys metropolitan rail network and the opening of the Viaduct Events Centre and North Wharf also occurred during this period. In this six month reporting period the Auckland Council Group has invested approximately $520 million replacing and building new assets across the region.
Below is an example of the many types of investment projects these funds have gone to: Electrification of the urban rail network Increasing bulk water supply, treatment plant capacity Northwest strategic growth Increasing capacity in the wastewater interceptor A new car park at Manukau A grandstand in Massey Park Upgrading the Papatoetoe recreation grounds Restoring the Tepid Baths Library collections $47 million $22 million $19 million $12 million $ 6 million $ 6 million $ 5 million $ 5 million $ 4 million
In terms of our financial performance we are also on track as signalled by the recent affirmation of our long-term rating of AA by the credit agency Standard and Poors. We have a long-term programme in place to make significant savings and efficiencies. As we look ahead to the next six months there is still a lot of important work to do including the implementation of a single rates system and the adoption and implementation of the Auckland Plan and our first Long Term Plan.
Doug McKay Chief Executive Auckland Council
Page 165
Attachment A
These cover a broad range of new strategic initiatives such as the strategic growth are project in the north west of the city and business as usual, such as renewing and replenishing our region wide library collection.
Item 13
Message from the Chief Executive
Statement of Responsibility
Responsibility
The Council and management of Auckland Council Group (the Group) accept responsibility for the preparation and completion of the financial statements and the judgements used in them and hereby adopt the financial statements as presented. The Council and management of the Group accept responsibility for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting. In the opinion of the Auckland Council the financial statements for the six months ended 31 December 2011 fairly reflect the financial performance and financial position of the Group.
__________________________
Len Brown MAYOR 15 March 2012
____________________________
Doug McKay CHIEF EXECUTIVE 15 March 2012
Page 166
Group 6 months to 31 Dec 2011 Note Income Rates Service and other Finance Other gains Total income Expenditure Personnel Depreciation and amortisation Finance Loss on fair value of derivative instruments Other Total expenditure Operating deficit before tax and share of equity accounted investments Share of equity accounted investments' surplus Deficit before tax for the period Income tax benefit Deficit after tax for the period Attributable to: Auckland Council 5 19 339 298 197 128 677 1,639 (85) 4 789 757 3 5 1,554 $millions
18 (67) (14) (53)
(53)
Other comprehensive income Movement in share of reserves of associates Loss on cash flow hedges Gain on diversified financial asset Total other comprehensive loss Total comprehensive loss Total comprehensive loss attributable to: Auckland Council (81) 19 (3) (28) 3 (28) (81)
The accompanying notes form part of these financial statements. .
Page 167
Attachment A
Item 13
Statement of Comprehensive Income (unaudited) For the six months ended 31 December 2011
Item 13
Statement of Changes in Equity (unaudited) For the six months ended 31 December 2011
Asset Contributed Accumulated revaluation reserve Equity funds $millions $millions $millions Other reserves $millions Total $millions Non controlling interests Total Equity $millions $millions
Equity at 1 July 2011
26,354
(107)
1,300
437
27,984
27,985
Total comprehensive loss for the period Transfers Transfers to/(from) accumulated funds Transfers (to)/from other reserves
(53)
(28)
(81)
(81)
Attachment A
(4) 4
(4) 4
(4) 4
Equity at 31 December 2011
26,354
(156)
1,300
405
27,903
27,904
The accompanying notes form part of these financial statements.
Page 168
Group Actual as at 31 Dec 2011 Note ASSETS Current assets Cash and cash equivalents Debtors and other receivables Other financial assets Derivative financial instruments Inventories Non-current assets held for sale Total current assets Non-current assets Debtors and other receivables Other financial assets Derivative financial instruments Property, plant and equipment Intangible assets Biological assets Inventories Investment properties Equity accounted investments Total non-current assets TOTAL ASSETS 9 11 7 8 133 57 36 32,473 296 5 3 274 656 33,933 34,748 209 383 203 17 3 815 $millions
Group Actual as at 30 June 2011 $millions
130 351 202 1 20 2 706
25 52 33 32,239 299 5 268 660 928 34,287
Page 169
Attachment A
Item 13
Statement of Financial Position (unaudited) As at 31 December 2011
Item 13
Statement of Financial Position (unaudited) (continued)

Group Actual as at 31 Dec 2011 Group Actual as at 30 June 2011 $millions
Note
LIABILITIES Current liabilities Derivative financial instruments Creditors and other payables Employee entitlements Borrowings Tax payable 13 5 14
$millions
9 491 74 735 3 68 1380
11 584 66 950 1 67 1,679
Attachment A
Provisions Total current liabilities
Non-current liabilities
Derivative financial instruments Creditors and other payables Employee entitlements Borrowings Provisions Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Accumulated funds Reserves Total ratepayers equity Non-controlling interest TOTAL EQUITY 26,354 (156) 1,705 27,903 1 27,904 26,354 (107) 1,737 27,984 1 27,985 13 14 6 293 9 7 3,797 487 871 5,464 6,844 27,904 126 9 7 3,081 512 888 4,623 6,302 27,985
Page 170
Group 6 months to 31 Dec 2011 Note Cash flows from operating activities Receipts from rates revenue, customers and other services Interest received Dividends received Payments to suppliers and employees Interest paid Income tax refund Goods and services tax paid (net) Other Net cash from operating activities Cash flows from investing activities Proceeds from matured medium term investments Proceeds from sale of property, plant and equipment Proceeds from loan repayments Purchase of property, plant and equipment Purchase of intangible assets Purchase of medium term investments Purchase of subsidiary Purchase of other investments Net cash from investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Payments of finance leases Repayment of foreign exchange contracts Net cash from financing activities Net increase in cash and cash equivalents and bank overdrafts Cash and cash equivalents and bank overdrafts at 1 July 2011 Cash and cash equivalents and bank overdrafts at 31 December 2011 1,578 (1,074) (3) (42) 459 4 14 2 (501) (17) (10) (1) (2) (511) 15 1,403 1 16 (1,088) (129) (8) (60) (1) 134 $millions
82 127 209
The GST (net) component of operating activities reflects the net GST paid to and received from the Inland Revenue. The GST (net) component has been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes and to be consistent with the presentation basis of the other primary financial statements. Proceeds from borrowings and repayment of borrowings include existing facilities which have been rolled into new maturities.
The accompanying notes form part of these financial statements. .

Approve December 2011 Interim Financial Report Page 171
Attachment A
Item 13
Statement of Cash Flows (unaudited) For the six months ended 31 December 2011
Item 13
Notes to the Financial Statements (unaudited)

1 GENERAL INFORMATION
With effect from 1 November 2010, the eight existing local authorities in the Auckland region and 20 councilcontrolled organisations were disestablished. A new unitary authority, Auckland Council (the Council), and six new council-controlled organisations were formed. New governing structures were established from this date. The Council is governed by the Local Government Act 2002 and the Local Government (Auckland) Act 2009 and is domiciled in New Zealand. Auckland Council Group (the Group) The Group consists of the ultimate Parent, Auckland Council, and its subsidiaries, associates and joint ventures. All subsidiaries and associates are domiciled in New Zealand. The primary objective of the Council and Group is to provide goods or services for the community or social benefit rather than making a financial return. Accordingly, the Council has designated itself and the Group as public benefit entities for the purposes of New Zealand equivalents to International Financial Reporting Standards.
Attachment A
The Council and Group prepared accounts for the eight months ended 30 June 2011. The financial statements were audited and authorised for issue by the Council on 27 October 2011. This is the first half year report prepared by the Group and is unaudited.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out in the Council and Group annual report to 30 June 2011. These policies have been consistently applied to the reporting period to 31 December 2011. These interim financial statements of the Council and Group have been prepared in accordance with New Zealand generally accepted accounting practice. They comply with NZ IAS 34 (apart from the requirement to disclose comparative figures as the comparable period was a two month period following the formation of the Group on 1 November 2010) and other applicable Financial Reporting Standards, as appropriate for public benefit entities.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The accounting estimates and judgements used in the Council and Group annual report to 30 June 2011 have been applied to the six month period ended 31 December 2011.
RATES INCOME
Rates income for the period includes $86 million of income received for instalments 3 and 4 in advance.
INCOME TAX
Current tax expense for the interim period presented is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted by balance date.
DEFERRED TAX
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of the assets and liabilities, using tax rates enacted or substantially enacted by balance date.
Page 172
PROPERTY, PLANT AND EQUIPMENT

Actual as at 31 Dec 2011 $millions
Total cost of assets acquired Net book value of assets disposed Profit on assets disposed
526 (8) 9
INTANGIBLE ASSETS
Total cost of assets acquired
17
INVESTMENT PROPERTIES
Total cost of assets acquired Transfers to property, plant and equipment
8 (2)
10
INVESTMENT IN SUBSIDIARIES
The following changes have occurred in the six months to 31 December 2011. Acquisition of Auckland Film Studios Ltd At 30 June 2011 Auckland Council investments Ltd (ACIL) held 44.4% of the issued shares of Auckland Film Studios Ltd (AFSL). AFSL owns the film studio complex at Henderson and is New Zealands premier supplier of infrastructure for the screen production industry. On 5 August 2011 ACIL acquired the remaining 55.6% of the issued share capital for cash consideration of $1,515,000.
Page 173
Attachment A
Item 13
Item 13

11 EQUITY ACCOUNTED INVESTMENTS
Name Principal activity Ownership interest 31 December 2011 % Carrying amounts 31 December 2011 $ millions
Investments in associates Auckland International Airport Ltd United Containers Ltd
Airport infrastructure Container depot
22.4 27.5
650 4
Investment in equity accounted joint ventures North Tugz Marine towage Seafuels Ltd Re-fuelling services for ships
50 50
2 656
Attachment A
12
PROPORTIONALLY ACCOUNTED JOINT VENTURES
The Group has the following joint venture interests: 50% in Waste Disposal Services which is accounted for as a jointly controlled operation; and 70% in Araparera Forestry which is accounted for as a jointly controlled asset.
13
BORROWINGS
During the six months ended 31 December 2011, total borrowings increased by $501 million to $4.5 billion. As opportunities presented themselves an effort was made to increase the average term of debt. Term debt as a percentage of total borrowings has increased from 76% to 84% during the period. European Medium Term Notes programme Section 107 of the Local Government (Auckland Council) Act 2009 creates an exception for the Council to the prohibition in section 113(1) of the Local Government Act 2002 against local authorities borrowing or entering into incidental arrangements in foreign currency. Following the enactment of the amendment to the Local Government (Auckland Council) Act 2009 in September 2011, the Council initiated a US$2.5 billion Secured Medium Term Notes programme on 30 November 2011, allowing multi currency borrowings in offshore markets. The programme is listed on the Singapore Stock Exchange. All borrowings under the programme will be fully hedged to eliminate any foreign currency fluctuations. The debt obligations of the Council under the programme are secured pursuant to the existing Debenture Trust Deed and will rank pari passu with Councils domestic debt. Offshore lenders under the programme, like domestic lenders, will receive as security a charge over rates and future rates income of the Council. Market conditions permitting, it is anticipated that the first issue under this programme will take place in the second quarter of 2012.
Page 174
New Zealand Local Government Funding Agency The Local Government Borrowing Act 2011 enabled the establishment of The NZ Local Government Funding Agency Ltd (LGFA) which was incorporated on 1 December 2011. The LGFA is owned by 18 Local Authority Councils, including the Council, and the Crown. It is a council-controlled organisation operating under the Local Government Act 2002. The LGFAs primary purpose is to provide more efficient funding costs and diversified funding sources (including foreign currency) for NZ local authorities. It will provide investors with a new source of securities rated at AA+ (domestic long term) by international credit ratings agencies Standard and Poors and Fitch Ratings. These ratings are the same as the NZ Government. The Council subscribed for four million shares in the LGFA on which $2 million has been paid and $2 million remains uncalled. The Council holds 8% of the paid up capital and 8.9% of the issued capital. Several layers of shareholder support have been established to gain the AA+ credit rating. The principal elements of this support are: x Shareholders, other than the government, have granted to the LGFA the right for the company to issue further shares to the shareholders.
x Shareholders, other than the government, have provided guarantees for the liabilities of the LGFA. The right of the LGFA to issue further shares, convert the Notes or call on the guarantee is restricted as to priority and certain events occurring or being anticipated. The Council has carried out a preliminary assessment of its guarantee obligations and estimated and recognised a $4.4 million liability under the guarantee. Purchase and Funding of Electric Multiple Unit Train Fleet On 1 September 2011 a joint announcement was made by the Minister of Transport, Auckland Transport, Auckland Council and NZ Transport Agency with funding assistance from the Crown, Auckland Transport, a council-controlled organisation is to purchase 57 x 3 car Electric Multiple Units (EMU) and to develop an EMU maintenance facility. The funding from the Crown will be by way of a 35-year loan of $400 million plus a 50-year loan of $100 million with a series of drawdowns from the Crowns Debt Management Office. In addition, the Crown will provide a nonrepayable grant of $90 million. This grant is expected to be paid to the Council in the 2015/16 financial year. If the two projects exceed the Crown funding, the balance will be met by the Group. The Council will act as a conduit for funding purposes through the centralised Auckland Council Treasury function, with the Council borrowing from the Crown facility via a series of drawdowns, and then on-lending to Auckland Transport for meeting its payment obligations. As some of the payment obligations are denominated in foreign currency, Auckland Transport also uses Auckland Council Treasury function to arrange forward foreign exchange contracts on its behalf to hedge against any foreign currency fluctuations. First drawdown of $20 million on the $400 million loan occurred in November 2011.
14
PROVISIONS
There have been no material changes in provisions between 30 June and 31 December 2011. The provision associated with the settlement of weathertightness claims continues to represent over 77% of the value of the total provision.
Page 175
Attachment A
x As participating local authorities borrow from the LGFA, the local authority must invest 1.6% of the borrowings in borrower notes (Notes) issued by the LGFA. The Notes are redeemed when the borrowing are repaid. The LGFA has the right to convert the Notes to redeemable preference shares.
Item 13
Item 13

15 RECONCILIATION OF NET SURPLUS/(DEFICIT) AFTER TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES
6 months to 31 Dec 2011 $millions Deficit after tax Add/(less) non-cash items: Depreciation and amortisation expense Increase in other provisions Movement in derivative instruments Vested assets Tax credit Share of associates surplus Other (53)
298 4 129 (13) (15) (3) 2 (12) (96) 8 (4) (57) 3 (32) (25) 134
Attachment A
16
Add/(less) items classified as investing or financing activities: Gains on disposal of property, plant and equipment Add/(less) items movements in working capital items: Creditors and other payables Employee benefits Tax receivables/payables Capital project items in creditors and other payables Inventories Debtors and other receivables Provisions Net cash inflow from operating activities
CAPITAL COMMITMENTS
Actual as at 31 Dec 2011 $millions Increase in Property, plant and equipment capital commitments Decrease in other capital commitments 100 (2)
17
CONTINGENCIES
Increase in contingent liabilities Local Government Funding Agency Ltd guarantee
The LGFA has uncalled capital of $20 million. The uncalled capital can be called by the LGFA at any time, but is most likely to be called if there is a liquidity event. The Groups portion of the uncalled capital is to match dollar for dollar its paid up capital. As such, there is a contingent liability for uncalled capital of $2 million.
Page 176
18
RELATED PARTY TRANSACTIONS
Transactions with key management personnel Key management personnel include the Mayor, Councillors, Local Board Members, Chief Executive and the senior management team of the Council. Key management personnel, as part of a standard customer relationship, were involved in minor transactions with the Group such as the payment of property rates, water rates etc. The following key management personnel were members of organisations that had significant dealings with the Council and Group as part of the normal operations. During the six months to 31 December 2011 the Group has entered into the following transactions: Transactions with related parties exceeding $250,000 Payments made to organisation $
351,834 950,000 1,200,000 283,050 456,304 447,793
Balance owing at 31 Dec 2011 $

-
Related party
Arthur Anae and Sir John Walker Richard Northey Ken Baguley Andrew Baker Derek Battersby Kay McIntyre
Position
Councillors Councillor Local board member Local board member Local board member Local board member Local board member Local board member Local board member Local board member Local board members Senior executive
Organisation
Trustees of the John Walker Find Your Field of Dreams Trust Board member on the Observatory and Planetarium Board Auckland Regional Helicopter Trust Trustee of the Safer Papakura Trust Chairperson of the Tag Out Trust Project Director of refurbishment of outdoor courts for the Auckland Netball Centre Trustee of the Bledisloe Estate Trust Trustee of the Lopdell House Development Trust Husband is a Director and Shareholder in Tonkin and Taylor Limited Chief Financial Officer for Treescape Limited Trustees of the Ecomatters Environment Trust Brother is part of the Senior Management at Smart Environmental Ltd
Don McKenzie Greg Presland Lisa Whyte Michael Williams Denise Yates and Derek Battersby Shelley Watson
313,961 479,177 1,042,527 2,143,338 360,516 1,331,182
292,439 102,073 -
Transactions with associates During the six months to 31 December 2011 the Group has entered into the following transactions with its associates:
6 months to 31 Dec 2011 $millions
Rates revenue received Revenue from other services provided

3 1 Page 177
Attachment A
Item 13
Item 13

19 FINANCIAL RISK MANAGEMENT
Interest rate risk exposures The Group is exposed to interest rate risk as it borrows funds at both fixed and floating rates. The Group uses interest rate swaps from time to time to manage these exposures. The method of recognising the gain or loss on derivatives depends on whether the derivative is designated as a hedging instrument. Changes in the fair value of derivative instruments designated as cash flow hedges are accounted for in the cash flow hedge reserve, and changes in the fair value of derivative instruments that do not qualify for the hedge accounting are recognised immediately in the income statement. Foreign currency risk exposures The Group undertakes transactions denominated in foreign currencies from time to time and as a result of these activities, exposures in foreign currency arise. It is the Groups treasury policy to hedge foreign currency risks as they arise. The Group uses forward foreign exchange contracts to manage these exposures.
Attachment A
Loss on derivatives In the course of funding the Groups operations and capital projects, the Groups total borrowings as at 31 December 2011 were $4.5 billion. In order to provide certainty of future interest payments, the Group has actively entered into both medium and long term interest rate swaps. Forward interest rate swaps in recent months are favourable relative to the expected long term trend. At 31 December 2011, these fixed interest rates are less favourable when compared to the current market floating interest rate, resulting in $128 million of loss during the six months ended 31 December 2011 when these derivatives have been fair valued under the guidelines of NZ IAS 39. These losses have been recognised in the profit or loss as a number of interest rate swaps are not designated in a hedge relationship or do not meet the NZ IAS 39 effectiveness test requirements. Over the lives of the interest rate swaps it is probable these losses will be reversed. In the event the future floating rate rises above the swapped fixed rate a gain will be recognised.
20
EVENTS OCCURRING AFTER THE BALANCE DATE
There were no material events post balance date that would require adjustments or disclosures in the financial information presented in this interim financial report.
Page 178
File No.: CP2012/03251
Row Number 1
Resolution No. AP/2011/43
Item No. 14
Resolution That Auckland Waterfront report on the intended use and appropriate lifetime of the cloud structure subsequent to the Rugby World Cup. That officers report to the appropriate committee on the level and purpose of debt attributed to RFA and on possible options for retaining an appropriate proportion of surpluses as working capital. That the Committee pursue the verbal offer by the Watercare chair to participate in a workshop on Watercare premises to consider water supply options and other planning by Watercare Services Ltd. Watercare Services Limited, First Quarter Report to 30 September 2011 d) That Watercare Services Limited be requested to report on long term and short term debt and any use of water restrictions in future reports. e) That Watercare Services Limited prepare a presentation, to be shared at the planned workshop, showing how it intends to manage risks where repeated wet and dry weather overflows of significance are occurring across the region.
Action Taken To be advised
Target Date April 2012
AP/2011/66
14 8/9/11
To be advised
April 2012
AP/2011/63
19 8/9/11
AP/2011/99
14 8/12/11
Workshop date confirmed to be held at Watercare on 17 May 2012 following the Accountability and Performance Committee meeting.
17 May 2012
Progress on resolutions of the Accountability and Performance Committee
Page 179
Item 14
Item 14
AP/2011/96
11 8/12/11
Performance Report for the four months ending October 2011 ix) That expenditure on consultants will be highlighted in future reports. CCOs Requirement to Act Consistently with Auckland Council Plans and Strategies d) That a report or reports will be compiled to ensure this process is undertaken for the small number of plans and strategies that have already been adopted by the Auckland Council since 1 November 2011.
The Manager Finance will give an update at the meeting.
March 2012
AP/2011/109
12 8/12/11
Pending
May 2012
Recommendation/s
That the Accountability and Performance Committee receives the report.
Attachments
There are no attachments for this report.
Signatories
Authors Authorisers Tam White - Committee Secretary Andrew McKenzie, Chief Finance Officer
Page 180

AKL Council Accountability and Performance Committee Agenda 16.3.2012

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AKL Council Accountability and Performance Committee Agenda 16.3.2012

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Accountability and Performance Committee 15 March 2012

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