Council - Extraordinary (5 May 2020) - Agenda

MEETING AGENDA

EXTRAORDINARY COUNCIL

Tuesday 5 May 2020 at 1pm

VIA ZOOM (for members)

Recording is available online after the meeting

Chairperson: Mayor Neil Holdom Members: Cr Tony Bedford Cr Sam Bennett Cr Gordon Brown Cr David Bublitz Cr Anneka Carlson Cr Murray Chong Cr Amanda Clinton-Gohdes Cr Harry Duynhoven Cr Richard Handley Cr Stacey Hitchcock Cr Colin Johnston Cr Richard Jordan Cr Dinnie Moeahu Cr Marie Pearce

1 Council - Extraordinary (5 May 2020) - Agenda

Purpose of Local Government The reports contained in this agenda address the requirements of the Local Government Act 2002 in relation to decision making. Unless otherwise stated, the recommended option outlined in each report meets the purpose of local government and:

 Promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

 Would not alter significantly the intended level of service provision for any significant activity undertaken by or on behalf of the Council, or transfer the ownership or control of a strategic asset to or from the Council.

END

2 Council - Extraordinary (5 May 2020) - Apologies

APOLOGIES

None advised

3 Council - Extraordinary (5 May 2020) - Deputations

ADDRESSING THE MEETING Requests for public forum and deputations need to be made at least one day prior to the meeting. The Chairperson has authority to approve or decline public comments and deputations in line with the standing order requirements.

PUBLIC FORUM Public Forums enable members of the public to bring matters to the attention of the committee which are not contained on the meeting agenda. The matters must relate to the meeting’s terms of reference. Speakers can speak for up to 5 minutes, with no more than two speakers on behalf of one organisation.

 None advised

DEPUTATIONS Deputations enable a person, group or organisation to speak to the meeting on matters contained on the agenda. An individual speaker can speak for up to 10 minutes. Where there are multiple speakers for one organisation, a total time limit of 15 minutes, for the entire deputation, applies.

 None advised

4 Council - Extraordinary (5 May 2020) - Table of Contents

REPORTS

1. Impact of Covid-19 on the Taranaki Community

2. Proposed Annual Plan 2020/21

3. Financial Support for Papa Rererangi i Puketapu Ltd

4. Procurement Recovery Plan (Covid-19)

5. Rent Relief for Council’s Commercial and Community Group Tenants

END

5 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

IMPACT OF COVID-19 PANDEMIC ON THE TARANAKI ECONOMY

PURPOSE

1. This report provides the Council with an Infometrics report co-commissioned by the Council and Venture Taranaki on the projected impact of the Covid-19 pandemic on the Taranaki economy.

RECOMMENDATION That, having considered all matters raised in the report, the report from Infometrics “Economic Impacts of COVID-19 on the Taranaki Economy – Early Estimates for Venture Taranaki and New Plymouth District Council, April 2020” be noted.

SIGNIFICANCE AND ENGAGEMENT

2. This report is provided for information purposes only, and has been assessed as being of some importance.

DISCUSSION

3. Council officers and Venture Taranaki staff co-commissioned a report from Infometrics on the forecast implications of the Covid-19 pandemic on the Taranaki economy.

4. The attached report outlines the significant impact expected. Taranaki is considered ‘mid-pack’ in the regions. The table below provides a high-level indication of Infometrics forecasts.

5. Taranaki’s strengths lie in its agriculture and food production, and not being highly exposed to tourism and international migration. However, the energy sector is likely to face a strong drop as a result of a decline in demand. Māori unemployment is already higher than the rest of Taranaki’s unemployment, and the gap is expected to grow.

6 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

6. As Infometrics note, the forecasts are based on a range of assumptions and modelling.

IMPLICATIONS ASSESSMENT

7. This report confirms that the matter concerned has no particular implications and has been dealt with in accordance with the Local Government Act 2002. Specifically:  Council staff have delegated authority for any decisions made;  Council staff have identified and assessed all reasonably practicable options for addressing the matter and considered the views and preferences of any interested or affected persons (including Māori), in proportion to the significance of the matter;  Council staff have considered how the matter will promote the social, economic, environmental, and cultural well-being of communities in the present and the future.  Unless stated above, any decisions made can be addressed through current funding under the Long-Term Plan and Annual Plan;  Any decisions made are consistent with the Council's plans and policies; and  No decisions have been made that would alter significantly the intended level of service provision for any significant activity undertaken by or on behalf of the Council, or would transfer the ownership or control of a strategic asset to or from the Council.

APPENDICES Appendix 1 Infometrics “Economic Impacts of COVID-19 on the Taranaki Economy – Early Estimates for Venture Taranaki and New Plymouth District Council, April 2020” (ECM 8277889)

Report Details Prepared By: Greg Stephens (Senior Policy Adviser) Team: Policy Development Team Approved By: Liam Hodgetts (Group Manager Strategy) Ward/Community: Taranaki Date: 30 April 2020 File Reference: ECM 8277892

------End of Report ------

7 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

Economic Impacts of COVID-19 on the Taranaki Economy – Early Estimates for Venture Taranaki & New Plymouth District Council

April 2020

8 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

Authorship

This report was prepared by Andrew Whiteford and Alistair Schorn, with the assistance of Rob Hayes, Gareth Kiernan and Dr Adolf Stroombergen.

Email: [email protected] [email protected]

All work and services rendered are at the request of, and for the purposes of the client only. Neither Infometrics nor any of its employees accepts any responsibility on any grounds whatsoever, including negligence, to any other person or organisation. While every effort is made by Infometrics to ensure that the information, opinions, and forecasts are accurate and reliable, Infometrics shall not be liable for any adverse consequences of the client’s decisions made in reliance of any report provided by Infometrics, nor shall Infometrics be held to have given or implied any warranty as to whether any report provided by Infometrics will assist in the performance of the client’s functions.

9 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

3 Economic impacts of COVID-19 on the Taranaki economy – April 2020 Table of contents

Executive Summary ...... 5

Introduction ...... 7 The greatest economic shock in living memory ...... 7 Modelling of the impacts of COVID-19 are based on key assumptions ...... 8 The Level 4 lockdown has knocked the Taranaki economy .9 Consumer spending has fallen off a cliff ...... 9 Traffic flows have dwindled ...... 10 56% are working at Level 4 which will rise to 78% at Level 3 ...... 10 Taranaki sits in the middle of the pack ...... 12 Drop in demand for oil and gas will drag down the Taranaki economy ...... 12 Primary exports are holding up ...... 12 Food production will continue ...... 12 Taranaki is not highly exposed to international tourism ...... 12 International education is a minor sector in Taranaki ...... 13 Taranaki’s economy will contract by 8.5% ...... 13 The energy sector will take the biggest hit ...... 13 More than 5,500 jobs will be lost ...... 16 Lower skilled jobs will be hardest hit...... 17 Some jobseekers can move between industries ...... 18 Māori households will also be hard hit ...... 20 Job losses will push unemployment to 10.1% ...... 21 And result in lost earnings of $312m ...... 22 Non-residential construction could support recovery in Taranaki ...... 23 Some thoughts on recovery ...... 25 Housing affordability and lifestyle benefits can be assets ...... 25 Skills development and retention will be key ...... 25 Infrastructure development is an opportunity ...... 25 Local government will play a critical role in the recovery ...... 26 Appendix I. Forecast Assumptions ...... 27 Lockdown is 4½ weeks at Level 4 and 2 weeks at Level 3 ...... 27 Sustained global demand for food, but non-food exports will be knocked hard ... 27 Foreign tourism tanks by 91% ...... 28 Domestic tourism spending drops by 21% ...... 28 International education revenue halves...... 29 Domestic education picks up some of the slack...... 29 House prices and construction activity take a hit ...... 30 Government stimulus includes $10b wage subsidy and benefit increases ...... 31

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4 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Appendix II. Broad approach to modelling the impact of COVID-19 on the Taranaki economy ...... 32 Forecasting the macroeconomy...... 32 Measuring impacts on individual industries ...... 32 Measure the impact on regions and districts ...... 33

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5 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Executive Summary

This report provides an overview of the anticipated economic impacts of the COVID-19 pandemic on the Taranaki Region.

COVID-19 presents the greatest economic shock in living memory. This contraction is set to be at least four times larger than anything seen in New Zealand since the Great Depression.

All regions and districts will be hard hit by the pandemic. Taranaki sits in the middle of the regional league table. The Taranaki economy is heavily reliant on the energy sector which faces a strong drop in demand from all its major users including electricity generation, food processing, the chemical industry, smaller users in the commercial sector (shops and restaurants) and in the household sector. Demand for transport fuels has fallen everywhere.

But there are factors that will cushion the blow:

• Taranaki has a large primary sector and primary exports are holding up • Food consumption will continue through the recession and Taranaki has a sizeable food manufacturing sector • The region is not highly exposed to international tourism and education, both of which will be knocked hardest by the pandemic.

The Level 4 lockdown has brought much of the Taranaki economy to a standstill. Consumer spending and heavy traffic has dropped to nearly half the level at the same time last year, but by lower proportions than in the national economy.

About 56% of the Taranaki workforce were able to work during Level 4 (53% in the national economy). This working rate will rise to 77% during Level 3 (74% nationally).

Taranaki’s GDP is forecast to contract by 8.5% over the year to March 2021, compared with an 8.0% contraction in the national economy. The energy sector will contribute more than a third of the expected decline.

We expect more than 5,500 jobs to be lost in Taranaki by March 2021, which is over 9% of the workforce. Job losses will push the unemployment rate to 10.1% from its current rate of 5.3%. The bulk of job losses are forecast to be in accommodation and food services (-1,072 jobs), retail and wholesale trade, (-890), transport, postal and warehousing (-795) and construction (-585).

The industries that will experience the largest job losses generally employ lower skilled workers and it follows that lower skilled jobs will decline fastest. We estimate that nearly half of all job losses are in lower skilled occupations.

Some occupations require relatively generic skills, which can allow workers in these occupations to move between industries. Opportunities for these workers may arise in some industries in Taranaki who face reduced supply of international backpackers and other seasonal workers. We outline the industries which are likely to shed staff with generic skills.

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6 Economic impacts of COVID-19 on the Taranaki economy – April 2020

The Māori unemployment rate in Taranaki is usually more than double the overall rate. This gap will stay wide as Māori are highly exposed to industries that will experience large job losses in Taranaki.

We estimate that a nearly $3.5b was earned through wages and salaries in Taranaki in the year to March 2020 and this will decline by $312m in the year to March 2021. Approximately 84% of household income in Taranaki is earned as wages and salaries.

We expect residential construction activity in Taranaki to fall to levels last seen in the early 2000s. Soaring unemployment, a sudden termination of immigration, and falling house prices are set to slow new residential developments in their tracks.

Prospects for non-residential construction are more positive. Our forecasts include the planned $300m wing for the Taranaki Base Hospital. This project will be lift construction activity to historically high levels and is vital for the construction sector and the recovery of the Taranaki economy. Without this project construction activity could drop to levels which are very low by historical standards.

Summary of key indicators

Indicator Taranaki Region New Zealand Change in consumer spending (week ending 12 April 2020 compared to same period 2019) -49.2% -55.9% Change in heavy traffic (week ending 9 April 2020 compared to 1 February 2020) -51.4% -59.7% % working at Level 4 55.6% 52.8% % working at Level 3 77.3% 74.2% GDP % change, year to March 2021 -8.5% -8% Job losses, year to March 2021 -5,586 -250,522 Employment % change, year to March 2021 -9.5% -9.8% Unemployment rate, March 2021 10.1% 9% Loss in total earnings, year to March 2021 ($m) $-312.96 $-14,197.08 Residential construction % change, year to March 2021 -19.3% -18.8% Non-residential construction % change, year to March 2021 -19.1% -18.3%

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7 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Introduction

This report provides an overview of the anticipated economic impacts of the COVID-19 pandemic for the Taranaki Region. It includes an assessment of the headline impacts of the COVID-19 lockdown as of April 2020, forecast changes to economic activity, employment and other key indicators over the year to March 2021, information on potential mobility of labour between different industries, and the outlook for construction activity in the region. The forecast analysis presented in this report draws on a suite of economic models maintained by Infometrics. Models are only as good as the assumptions we put into them and we have clearly outlined our key assumptions. This report is accompanied by a spreadsheet set which contains all the data used to prepare this report plus additional data. It is also accompanied by a report called Additional insights on the economic impacts of the COVID-19 pandemic which provides information which is too detailed for this main report. The supporting document contains an expanded explanation of how COVID-19 is likely to impact the New Zealand economy and additional detail of how the pandemic will impact on each industry.

The greatest economic shock in living memory

COVID-19 presents the greatest economic shock in living memory, and although the full extent of the shock is still to play out, it is clear is that the economy will be irrevocably changed by this pandemic. The speed with which the economic outlook changed during March far exceeded anything experienced during the Global Financial Crisis (GFC) of 2008/09.

Infometrics is currently forecasting a 13% contraction in economic activity in the New Zealand economy between the December 2019 and June 2020 quarters, with most of the decline occurring in the June quarter due to the lockdown. This contraction is set to be at least four times larger than anything seen before, so there is understandably considerable scope for error in this estimate. Over a slightly longer time horizon, our forecast is for an 8% contraction in economic activity over the year to March 2021.

By March 2022, we expect quarterly GDP to be 6.6% below its December 2019 level. We estimate the unemployment rate will peak at 9.5% in the September 2021 quarter, and to remain above 8% until the December 2023 quarter. In addition, underemployment is set to rise, while some of the unemployed will drop out of the labour force or seek out education opportunities in order to reskill. These factors will contribute to a decline in the labour participation rate, which we predict could fall to its lowest level since 2001.

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8 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Modelling of the impacts of COVID-19 are based on key assumptions

We have made the following assumptions when modelling the effects of the COVID-19 pandemic, the economic downturn, and the government’s policy responses on the New Zealand economy.

• Lockdown is 4½ weeks at Level 4 and 2 weeks at Level 3 - we have based our industry employment and output modelling on Level 4 being in place for 4½ weeks and Level 3 being in place for two weeks.

• Economic activity is constrained across the entire economy - we estimate that approximately 65% of economic activity can take place under Level 4. This estimate includes people that can work from home and those people working in essential services. Under Level 3, our estimate of potential economic activity taking place rises to 82%.

• Global demand for food products will hold up but non-food exports will take a hit – people still need to eat during a recession, which will limit any reduction in our food exports, we have allowed for a 16% contraction in non-food manufacturing export volumes over the coming year, and a 9.5% reduction in international demand for unprocessed forestry exports such as logs.

• Foreign tourism tanks – we have estimated a 91% reduction in foreign tourist spending in New Zealand over the coming year, and a similarly sized reduction in New Zealand tourists spending money overseas.

• Domestic tourism spending will drop – despite more New Zealanders choosing to have domestic holidays rather than travel overseas, we estimate a 21% decline in domestic tourism spending from the previous year.

• International education revenue halves – we estimate the number of international students at schools this year to be 79% of normal levels, and predict a 49% reduction in international education revenue during the year to March 2021.

• Domestic education demand will increase – we have allowed for a lift in total demand for tertiary training from domestic students over the coming year of 8.3%, similar to what we saw following the GFC.

• The housing market takes a hit – our assumptions include an 11% drop in average house prices between mid-2020 and the end of 2021.

• Construction is also hit hard – the housing market downturn will drag down the rate of residential construction by nearly 20%, while non-residential construction activity will decrease by a similar magnitude. In contrast, prospects for civil construction are positive outside Level 4 lockdown conditions.

• Government comes to the party –our modelling includes a $10b wage subsidy scheme and $2.5b through a one-off increase in social welfare benefits of $25 per week.

A full description of the Infometrics modelling assumptions is provided in Appendix I.

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9 Economic impacts of COVID-19 on the Taranaki economy – April 2020

The Level 4 lockdown has knocked the Taranaki economy

Like the rest of New Zealand, much of Taranaki’s economy has been closed by the Level 4 lockdown.

Consumer spending has fallen off a cliff Consumer spending in Taranaki increased in the week leading up to the Level 4 lockdown on 25 March 2020, and then declined rapidly dropping to almost half the level at the same period in 2019. Spending in the week ending 12 April was 49% lower than in the same week in 2019. Nationally spending declined by 56%. The only category in which spending has held up and even increased compared with 2019 was food, liquor and pharmacy.

Consumer spending through Paymark network ($m)

Total spending

$25

$20

$15

$10

$5

$0 12-Jan 19-Jan 26-Jan 2-Feb 9-Feb 16-Feb 23-Feb 1-Mar 8-Mar 15-Mar 22-Mar 29-Mar 5-Apr 12-Apr

2019 2020

Clothing, Footwear & Department Food, liquor & pharmacies Stores $15.00 $1.00 $10.00

$0.50 $5.00

$0.00 $0.00 12-Jan 2-Feb 23-Feb 15-Mar 5-Apr 12-Jan 2-Feb 23-Feb 15-Mar 5-Apr

2019 2020 2019 2020

Fuel & Automotive Home & Recreational Retailing

$4.00 $3.00 $3.00 $2.00 $2.00 $1.00 $1.00 $0.00 $0.00 12-Jan 2-Feb 23-Feb 15-Mar 5-Apr 12-Jan 2-Feb 23-Feb 15-Mar 5-Apr

2019 2020 2019 2020

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10 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Hospitality & Accommodation All other

$6.00 $2.00 $1.50 $4.00 $1.00 $2.00 $0.50 $0.00 $0.00 12-Jan 2-Feb 23-Feb 15-Mar 5-Apr 12-Jan 2-Feb 23-Feb 15-Mar 5-Apr

2019 2020 2019 2020

Traffic flows have dwindled

According to data from NZTA, heavy traffic flows in Taranaki peaked ahead of the Level 4 lockdown, then dropped sharply as non-essential businesses closed, and goods movements softened. Traffic flows have fallen by a smaller proportion than in the national economy suggesting that economic activity is holding up better than other parts of the country. Heavy traffic flows in Taranaki decreased by 51% in the week ending 9 April 2020 compared with 1 February 2020. The decline was 60% in the national economy.

Heavy traffic flows, Index, 1 Feb 2020 = 100

120 100 80 60 40 20 0 1-Feb 7-Feb 13-Feb 19-Feb 25-Feb 2-Mar 8-Mar 14-Mar 20-Mar 26-Mar 1-Apr 7-Apr 13-Apr

New Zealand Taranaki Region

56% are working at Level 4 which will rise to 78% at Level 3 We estimate that during the Level 4 of the lockdown, approximately 56% of the total Taranaki workforce can operate, either by working from home, or being employed in essential services. In the national economy 53% could work. At Level 3, the rate will rise to 77% compared with 74% in the national economy.

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11 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Taranaki Workforce operating at Alert Level 3

Health care and social assistance Agriculture, forestry and fishing Retail and wholesale trade Construction Food processing and manufacturing Non-food manufacturing Education and training Transport, postal and warehousing Professional, scientific and technical services Public administration and safety Accommodation and food services Administrative and support services Mining, electricity, gas, water and waste services Rental, hiring and real estate services Financial and insurance Services Information media and telecommunications Other services Arts and recreation services

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Total working at Level 3 Employment 2020

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12 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Taranaki sits in the middle of the pack

All districts and regions in New Zealand will be hit hard by the pandemic. The worst hit will be areas that are heavily exposed to international tourism including Queenstown, Mackenzie, Westland, and Kaikōura. By contrast the least affected areas are those whose economies are dominated by the primary sector and with large food manufacturing sectors.

Taranaki sits between these two groups. It has a relatively small international tourism sector, a large primary and food producing sector, but it is dominated by the energy sector which will be constrained by a decline in demand for energy. The combined effect of these forces puts Taranaki in the middle of the region pack.

Drop in demand for oil and gas will drag down the Taranaki economy

The Taranaki economy is heavily reliant on the energy sector. We expect output in the sector to decline by 13% which reflects decreased demand from all the major users of gas including electricity generation, food processing, the chemical industry, smaller users in the commercial sector (shops and restaurants) and in the household sector. Demand for transport fuels has fallen everywhere.

A few factors will lessen the impact of the pandemic on Taranaki’s economy:

Primary exports are holding up

Despite the widespread turmoil in international markets, New Zealand’s exports of food products are holding up and for some commodities even growing slightly. Agriculture, forestry and fishing is Taranaki’s second largest industry (after the mining, electricity, gas water and waste services industry) and accounts for more than 15% of GDP. Continued primary export strength is likely to support the region’s economic recovery.

Food production will continue

People need to continue eating during a recession which means the food manufacturing sector will not be as hard hit as the rest of the economy. Taranaki has a large food manufacturing sector, including meat and dairy processing, which accounts for nearly 5% of GDP. The strength of these sectors which will support the Taranaki economy though tough economic times.

Taranaki is not highly exposed to international tourism

Only 20% of tourist expenditure in Taranaki is from foreign tourists in a sector that contributes only 2.5% towards GDP. Domestic tourism will hold up much better than foreign tourism; we estimate that domestic tourism spending in the year to March 2021 will drop by 21% compared with a 91% drop in foreign tourism spending.

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13 Economic impacts of COVID-19 on the Taranaki economy – April 2020

International education is a minor sector in Taranaki

New Zealand had more than 110,000 international students in 2019 but fewer than 1,000 in Taranaki. The big loss of international students due to the border closure will hit areas with large international student numbers hard.

Taranaki’s economy will contract by 8.5%

Taranaki’s GDP is forecast to contract by 8.5% over the year to March 2021, compared with 8.0% in the national economy. The expected contraction in Taranaki is significantly deeper than the energy-sector induced recession of 2012.

Annual GDP change, 2002-2021

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0% 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

New Zealand Taranaki Region

The energy sector will take the biggest hit

The energy sector contributes about a quarter of Taranaki’s economic output. Mining, electricity, gas, water and waste services will contribute more than a third of the overall decline in GDP in Taranaki over the year to March 2021. GDP in these industries is expected to decline by $225m or -13%.

Amongst the major users of gas are electricity generation, food processing (especially dairy) and the chemical industry (fertiliser, hydrogen peroxide, and methanol). All will be negatively affected by COVID-19, along with many smaller users in the commercial sector (shops and restaurants for example) and in the household sector. Two large users of gas, Methanex and the dairy processing plant at Whareroa are themselves in Taranaki. Oil is primarily exported although some is an input into the Marsden Point oil refinery.

With current restrictions on movement throughout the world, demand for petrol, diesel and other transport fuels has fallen everywhere. This has accelerated the decline in the oil price that was already happening before the COVID-19 outbreak, driven by slowing world growth, gaming behaviour by oil producers and, most fundamentally of all, a long term trend decline in real prices due to the decarbonisation of transport fuels. The timing is such that Covid-19 may hammer expectations and investor sentiment even though its pure effect on prices is relatively minor with regard to both duration and longer-term oil supply/demand fundamentals.

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Change in GDP by broad industry, 2020-2021 ($million)

-$225.05 Mining, electricity, gas, water and waste services -$89.17 Transport, postal and warehousing -$50.15 Non-food manufacturing -$48.01 Retail and wholesale trade -$43.53 Agriculture, forestry and fishing -$32.04 Construction -$30.72 Accommodation and food services -$29.59 Professional, scientific and technical services -$17.62 Financial and insurance Services -$16.60 Rental, hiring and real estate services -$12.88 Information media and telecommunications -$12.57 Food processing and manufacturing -$10.30 Administrative and support services -$8.87 Other services -$5.38 Arts and recreation services -$1.42 Education and training -$0.25 Public administration and safety $1.33 Health care and social assistance

-$250 -$200 -$150 -$100 -$50 $0 $50

Other major contributors to the decline are transport, postal and warehousing ($89m, - 31%), non-food manufacturing (-$50m and retail and wholesale trade ($52m, -9.3%).

A discussion of some of the other broad trends affecting industries is provided below.

• Transport, postal, and warehousing has been significantly affected by the pandemic. As is the case for accommodation and food services, these effects will continue long after the lockdown ends. Other parts of the transport and logistics industry have been weakened by factors such as reduced commuter travel and cutbacks in distribution and freight requirements caused by the lockdown. Some of these effects will start to reverse out with a pick-up in online spending outside Level 4, but this positive influence on activity is likely to be outweighed by the reduction in overall spending caused by the weaker labour market and incomes.

• Retail and wholesale trade has experienced a significant drop in demand under Level 4, and restrictions will remain in place under Level 3 as well. These effects are not being felt equally, with supermarkets enjoying periods of higher-than-usual demand. Other businesses that can sell online will be able to operate under Level 3, although we do not expect spending patterns during this period to be normal. The declines in tourism activity and other discretionary spending will also be felt disproportionately by retailers selling more luxury or higher-end products.

• Non-food manufacturing tends to be less labour-intensive than many other industries, but the downturn in the global economy will have a significant negative effect on demand for the industry. Manufactured exports are expected to be squeezed by weak demand conditions across much of Europe, North America, and Australia. The Global Financial Crisis also demonstrated the strong links between parts of non-food manufacturing and building work. Consequently, the forecast downturn in construction activity will also contribute to a decline in employment and output in this industry.

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• Professional, scientific, and technical services is the seventh-largest industry in the Taranaki economy. Despite the industry being less directly affected by COVID-19 than many other industries, the forecast drop in output is still large. Cost-cutting by firms and a reduction in business numbers across the economy will negatively influence demand for services within this industry across the board. Areas that are likely to be most heavily affected include those subindustries that are closely linked with construction activity.

• Accommodation and food services will be arguably the most heavily affected part of the economy by the COVID-19 pandemic and its aftermath. The disappearance of international tourism and declines in domestic tourism and other discretionary spending are key factors in the industry’s contraction. Activity will continue to be severely constrained under COVID Alert Level 3, while domestic travel will also remain restricted under Alert Level 2.

• Construction activity was close to peaking even before the COVID-19 pandemic occurred. Rising unemployment, falling house prices, slower population growth, and tighter bank lending conditions will all weigh on activity over the next 1-2 years across both the residential and non-residential subindustries. Prospects for infrastructure look more promising given the government’s desire to use this channel to try and stimulate the economy’s recovery. We also note that strong growth in the population and building stock over recent years has increased the baseline level of maintenance work that needs to be done, mitigating the downturn for those parts of the industry that tend to be less cyclical.

• Financial and insurance services will be squeezed by the downturn in economic activity. Lockdown conditions are likely to have increased the amount of work being done electronically across parts of this industry, and this shift could potentially hasten the trend towards reduced job numbers for some occupations. More difficult business and financial market conditions could also negatively affect the viability of some firms in this industry. However, we note that the overall strength and robustness of the financial system is much better than it was between 2006 and 2010 when the industry grappled with the finance company collapses and the Global Financial Crisis.

• Information media and telecommunications activity will also come under pressure, despite the short-term boost to selected businesses from the increase in remote working that has taken place. Traditional media such as newspapers and magazines were already under significant pressure prior to COVID-19. Substantial drops in advertising revenue have exacerbated this situation and will lead to job losses, despite government support. Significant job losses in areas such as libraries, movie theatres, and some parts of telecommunications are also possible.

• Administrative and support services are expected to mirror broader economic trends in business activity, with cost cutting, business failures, and the weak labour market negatively affecting this industry. Given the downturn in tourism, travel agents will be by far the most heavily hit, with modest declines in employment across other parts of the industry.

• Arts and recreation services are suffering the twin effects of a reduction in discretionary spending and restraints on what services and products can actually be offered to consumers. Performing arts, professional and community sports, horse racing, casinos, and other entertainment and events will continue to be constrained at Alert Levels 2 and 3, with restrictions on gathering numbers at both indoor and

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16 Economic impacts of COVID-19 on the Taranaki economy – April 2020

outdoor events. Ongoing border restrictions are also set to disrupt the ability of promoters to run events where they are reliant on entertainers or sportspeople coming into New Zealand from overseas.

More than 5,500 jobs will be lost

Employment in Taranaki is expected to decline from about 58,700 in the year to March 2020 to approximately 53,100 in year to March 2021, a decline of 9.5% or 5,500 jobs. This compares to an economy-wide decline in employment of 9.8%.

Employment annual % change, 2002-2021

5.0%

0.0%

-5.0%

-10.0%

-15.0% 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

New Zealand Taranaki Region

Industries showing the largest job losses are different from the industries showing the largest declines in GDP. Although the mining, electricity and gas sector will show the largest decline in GDP it is highly capital intensive so the number of direct jobs expected to be lost is 150.

The bulk of job losses are forecast to be in accommodation and food services (-1,072 jobs), retail and wholesale trade, (-890), transport, postal and warehousing (-795) and construction (-585).

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17 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Employment change by broad industry, 2020-2021

-1072 Accommodation and food services -890 Retail and wholesale trade -795 Transport, postal and warehousing -585 Construction -446 Non-food manufacturing -371 Professional, scientific and technical services -282 Agriculture, forestry and fishing -273 Other services -172 Administrative and support services -150 Mining, electricity, gas, water and waste services -110 Arts and recreation services -102 Financial and insurance Services -100 Food processing and manufacturing -96 Information media and telecommunications -71 Rental, hiring and real estate services -41 Health care and social assistance -30 Public administration and safety -2 Education and training

-1,200 -1,000 -800 -600 -400 -200 0

Lower skilled jobs will be hardest hit The industries that will experience the largest job losses generally employ lower skilled workers and it follows that lower skilled jobs will decline fastest. We estimate that nearly half (-2,490) of all job losses are low skilled.

Employment change by skill level, 2020-2021

-1438 Highly-skilled

-1658 Semi-skilled

-2490 Low-skilled

-3,000 -2,500 -2,000 -1,500 -1,000 -500 0

A detailed breakdown of the types of occupations that are likely to experience the largest jobs losses is shown in the chart below. Largest losses are expected for specialist managers (-436), sales assistants and sales persons (-359), hospitality, retail and service managers (- 340) and road and rail drivers (-326).

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18 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Employment change by occupation, ANZSCO Level 2, 2020-2021

-436 Specialist Managers -359 Sales Assistants & Salespersons -340 Hospitality, Retail & Service Managers -326 Road & Rail Drivers -266 Hospitality Workers -224 Business, HR & Marketing Professionals -207 Chief Execs, General Managers, Legislators -207 Automotive & Engineering Trades Workers -201 Other Labourers -199 Farmers & Farm Managers -181 Food Trades Workers -175 Design, Engineering, Science Professionals -163 Construction Trades Workers -150 Cleaners & Laundry Workers -135 Sales Representatives & Agents -130 General Clerical Workers -129 Office Managers & Program Administrators -113 Factory Process Workers -110 Engineering, ICT & Science Technicians -105 Farm, Forestry & Garden Workers -97 Numerical Clerks -94 Other Technicians & Trades Workers -94 Other Clerical & Administrative Workers -91 Machine & Stationary Plant Operators -87 Sports & Personal Service Workers -87 Food Preparation Assistants -85 Electrotech & Telecoms Trades Workers -81 Sales Support Workers -79 Inquiry Clerks & Receptionists -67 Construction & Mining Labourers -62 ICT Professionals -61 Legal, Social & Welfare Professionals -60 Clerical & Office Support Workers -59 Storepersons -57 Skilled Animal & Horticultural Workers -47 Mobile Plant Operators -43 Personal Assistants & Secretaries -41 Arts & Media Professionals -37 Health Professionals -33 Education Professionals -32 Carers & Aides -27 Protective Service Workers -7 Health & Welfare Support Workers

-500 -450 -400 -350 -300 -250 -200 -150 -100 -50 0

Some jobseekers can move between industries

Certain occupations such as clerical and administration workers, machine operators and drivers, and labourers require relatively generic skills, which can allow workers in these occupations to move between industries. Opportunities for these workers may arise in some industries in Taranaki who face reduced supply of international backpackers and other overseas seasonal workers.

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19 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Here, we analyse job losses in these occupation groups across the region’s industries to identify potential labour sources for employers who might have job vacancies. For example, clerical and administrative workers who have lost their jobs in the transport, postal and warehousing, or retail and wholesale trade industries, might find opportunities in public administration, utilities or education and training where fewer job losses are expected. In coming years, we will be able to identify opportunities for jobseeker mobility into industries that are starting to recover.

Job losses in 'Community and personal service worker' occupations by broad industry, 2020-2021

Transport, postal and warehousing 20 Retail and wholesale trade 13 Rental, hiring and real estate services 3 Public administration and safety 9 Professional, scientific and technical services 5 Other services 29 Non-food manufacturing 2 Mining, electricity, gas, water and waste services 2 Information media and telecommunications 1 Health care and social assistance 8 Food processing and manufacturing 0 Financial and insurance Services 1 Education and training 0 Construction 3 Arts and recreation services 41 Agriculture, forestry and fishing 2 Administrative and support services 18 Accommodation and food services 270

0 50 100 150 200 250 300

Job losses in 'Sales worker' occupations by broad industry, 2020-2021

Transport, postal and warehousing 24 Retail and wholesale trade 356 Rental, hiring and real estate services 19 Public administration and safety 1 Professional, scientific and technical services 9 Other services 8 Non-food manufacturing 15 Mining, electricity, gas, water and waste services 2 Information media and telecommunications 6 Health care and social assistance 1 Food processing and manufacturing 3 Financial and insurance Services 10 Education and training 0 Construction 10 Arts and recreation services 5 Agriculture, forestry and fishing 1 Administrative and support services 6 Accommodation and food services 101

0 50 100 150 200 250 300 350 400

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20 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Job losses in 'Machine operator and driver' occupations by broad industry, 2020-2021

Transport, postal and warehousing 321 Retail and wholesale trade 41 Rental, hiring and real estate services 2 Public administration and safety 0 Professional, scientific and technical services 4 Other services 6 Non-food manufacturing 55 Mining, electricity, gas, water and waste services 23 Information media and telecommunications 1 Health care and social assistance 0 Food processing and manufacturing 10 Financial and insurance Services 1 Education and training 0 Construction 35 Arts and recreation services 1 Agriculture, forestry and fishing 5 Administrative and support services 7 Accommodation and food services 11

0 50 100 150 200 250 300 350

Job losses in 'Labourer' occupations by broad industry, 2020-2021

Transport, postal and warehousing 83 Retail and wholesale trade 64 Rental, hiring and real estate services 8 Public administration and safety 1 Professional, scientific and technical services 8 Other services 18 Non-food manufacturing 62 Mining, electricity, gas, water and waste services 16 Information media and telecommunications 8 Health care and social assistance 3 Food processing and manufacturing 68 Financial and insurance Services 1 Education and training 0 Construction 65 Arts and recreation services 7 Agriculture, forestry and fishing 76 Administrative and support services 58 Accommodation and food services 176

0 20 40 60 80 100 120 140 160 180 200

Māori households will also be hard hit

The Māori unemployment rate in Taranaki has historically been more than double the overall rate. In the year to March 2019 the Māori unemployment rate stood at 13.3% compared with 5.0% region wide. This gap is likely to stay wide as Māori are highly exposed to industries that will experience large job losses in Taranaki.

The principal impacts on Māori employment in Taranaki are forecast to take place in the accommodation and food services (-71 jobs), transport and warehousing (-62), retail and wholesale trade (-46) and construction (-38) industries.

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21 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Māori employment changes by broad industry, 2020-2021

-71 Accommodation and food services -62 Transport, postal and warehousing -46 Retail and wholesale trade -38 Construction -29 Non-food manufacturing -16 Food processing and manufacturing -14 Other services -14 Agriculture, forestry and fishing -13 Administrative and support services -12 Professional, scientific and technical services -9 Mining, electricity, gas, water and waste services -7 Arts and recreation services -5 Information media and telecommunications -4 Financial and insurance Services -3 Rental, hiring and real estate services -2 Public administration and safety -2 Health care and social assistance 0Education and training

-80 -70 -60 -50 -40 -30 -20 -10 0

The largest declines in employment by skill level for Taranaki’s Māori population are forecast to occur in low-skilled (-175 jobs) roles.

Māori employment changes by skill level, 2020-2021

-76 Highly-skilled

-96 Semi-skilled

-175 Low-skilled

-200 -180 -160 -140 -120 -100 -80 -60 -40 -20 0

Job losses will push unemployment to 10.1%

Taranaki’s overall unemployment level is forecast to rise from 5.3% in the December 2019 quarter, to 10.1% in March 2021. This compares to a forecast national unemployment rate of 9.0% by March 2021.

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22 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Unemployment rate, 2002-2021

12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

New Zealand Taranaki Region

And result in lost earnings of $312m

We estimate that a nearly $3.5b was earned through wages and salaries in Taranaki in the year to March 2020 and this will decline by $312m to $3.2b in the year to March 2021.

Approximately 84% of household income in Taranaki is earned as wages and salaries (including from self-employment) in the labour market, the rest is earned through government transfers such as benefits, superannuation and student allowances. By contrast 90% of household income in the national economy is earned as wages and salaries.

The largest declines in earnings are expected to occur in transport, postal and warehousing (-$51m), retail and wholesale (-$42m), construction (-$36m) and accommodation and food services (-$34m).

Change in earnings by broad industry, 2020-2021 ($million)

-$51.29 Transport, postal and warehousing -$42.33 Retail and wholesale trade -$35.93 Construction -$34.04 Accommodation and food services -$30.23 Professional, scientific and technical services -$29.99 Non-food manufacturing -$15.87 Mining, electricity, gas, water and waste services -$14.03 Agriculture, forestry and fishing -$12.68 Other services -$9.79 Financial and insurance Services -$8.42 Administrative and support services -$7.58 Information media and telecommunications -$6.50 Food processing and manufacturing -$5.27 Arts and recreation services -$4.36 Rental, hiring and real estate services -$2.27 Health care and social assistance -$2.26 Public administration and safety -$0.12 Education and training

-$60 -$50 -$40 -$30 -$20 -$10 $0

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23 Economic impacts of COVID-19 on the Taranaki economy – April 2020

The table below shows that Taranaki’s total earnings in the labour market is expected to decline by 9.0% over the year to March 2021 which puts it in the middle of the pack among the 16 regional council areas.

% Change in earnings by regional council areas, 2020-2021

Region Change West Coast Region -11.1% Otago Region -11.0% Canterbury Region -9.8% Auckland Region -9.5% Nelson Region -9.1% Southland Region -9.0% Taranaki Region -9.0% Tasman Region -8.7% Marlborough Region -8.7% Northland Region -8.5% Wellington Region -8.5% Bay of Plenty Region -8.2% Waikato Region -8.1% Hawke's Bay Region -7.9% Manawatu-Wanganui Region -7.5% Gisborne Region -7.4% New Zealand -9.1%

Non-residential construction could support recovery in Taranaki

Infometrics expects residential construction activity in Taranaki to fall to levels last seen in the early 2000s. Soaring unemployment, a sudden termination of immigration, and falling house prices are set to slow new residential developments in their tracks.

Prospects for non-residential construction are more positive. Our forecasts include the planned $300m wing for the Taranaki Base Hospital. This project will be vital for the construction sector and the recovery of the Taranaki economy. Without this project construction activity could drop to levels which are very low by historical standards.

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24 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Real value of work put in place, residential and non-residential (2000-2024, 2009/10 prices)

$350 $300 $250 $200 $150 $100 $50 $0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Non-residential Residential Total

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25 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Some thoughts on recovery

Housing affordability and lifestyle benefits can be assets

Over the next several years, recessionary condition might give rise to increased levels of domestic migration. We anticipate that increased unemployment and high costs of living in the main urban centres, might provide a competitive edge for regions offering lower property prices and high-quality lifestyle attractions. This is likely to be reinforced by an increased capacity for working remotely, as the pandemic has forced many organisations to improve their systems and practices in this area.

With low house prices and an attractive lifestyle offering Taranaki is well positioned to take advantage of any such increase in domestic migration.

Skills development and retention will be key

Increased unemployment will lead to increased interest in tertiary and vocational education. Constrained economic conditions will present fewer opportunities for school leavers and recent graduates to enter the workforce, while recently unemployed workers will explore options for retraining and up-skilling. Under these conditions, the government’s Reform of Vocational Education (RoVE) process will assume even greater importance than before the recession.

While much of the detail around the RoVE process is yet to be finalised, local government support for the process will be critical in promoting economic recovery and enhancing future resilience in the local workforce.

Councils and key regional stakeholders will need to play a leading role in implementing the RoVE outcomes. In particular, they will need to be centrally involved in the establishment and operation of structures such as the Regional Skills Leadership Groups (RSLGs), that will be a critical outcome of the RoVE process.

Infrastructure development is an opportunity Government has prioritised the identification of ‘shovel ready’ infrastructure projects, that can assist in economic recovery across the country. These projects are likely to be funded through a range of support mechanisms, including Crown Infrastructure Partners, New Zealand Upgrade Programme and possible even a realignment of the Provincial Growth Fund.

In addition to an immediate focus on these ‘shovel ready’ projects, we believe that regions have a window of opportunity to develop projects with somewhat longer implementation timeframes. If sufficiently ambitious, such projects can provide a step change in the economic development trajectory of regions. Projects that fall into this category might include enhanced water management, localized renewable energy generation and distribution, and transportation infrastructure such as inland ports or customs-controlled areas.

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26 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Local government will play a critical role in the recovery Local governments will play a critical role in supporting local communities over the coming months and years. Some of the measures that the councils and its partners might consider include:

• Maintaining levels of operational expenditure and where possible accelerating already funded capital projects • Implementing preferential procurement policies to support local businesses rather than those located outside the Region (or even outside New Zealand) • Increased investment in community development activities, particularly in vulnerable and highly impacted communities • Highly localised destination marketing activities, aimed firstly within the Region’s communities, and only subsequently being extended to neighbouring communities and further afield in New Zealand • The extension of business support services, particularly in partnership with regional economic development agencies, as well as local chambers of commerce, industry bodies and organisations such as the Regional Business Partners Network or Business Mentors New Zealand • Maintaining a balance between rates increases required to fund ongoing and future activities, and increasing financial stress in the community • Leveraging off the existing local public asset base – prudent borrowing against assets or depletion of financial reserves in the short to medium term • Support for local vocational and tertiary education providers, to promote reskilling within local communities • Support for and participation in bodies such as the Regional Skills Leadership Groups • Developing infrastructure projects beyond the most obvious “shovel-ready” project that might already be under consideration through various central government support measures • The development of comprehensive local wellbeing-based economic development strategies, in line with government’s Living Standards Framework and other international best practice in the field of wellbeing economics. An an example of this is the Taranaki 2050 Roadmap which includes wellbeing work. These and other activities, while unable to avert the inevitable unemployment increases and economic distress, can ease the impacts of the recession, increase the resilience of the Taranaki community, and support economic recovery in the longer term.

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27 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Appendix I. Forecast Assumptions

We have made the following assumptions when modelling the effects of the COVID-19 pandemic, the economic downturn, and the government’s policy responses on the New Zealand economy.

Lockdown is 4½ weeks at Level 4 and 2 weeks at Level 3

Following the Prime Minister’s announcement on April 20 of the expected timeline for the COVID Alert Level 4 and Level 3 conditions, we have based our industry employment and output modelling on Level 4 being in place for 4½ weeks and Level 3 being in place for two weeks.

Across the entire economy, we estimate that approximately 65% of economic activity can take place under Level 4. This estimate includes people that can work from home and those people working in essential services. Under Level 3, our estimate of potential economic activity taking place rises to 82%. Obviously, the effects of Alert Levels 3 and 4 on specific industries vary significantly.

We have not made economy-wide adjustments for conditions in Alert Levels 1 or 2 because the constraints on activity are much less widespread. Instead, we have made specific targeted adjustments to industries associated with tourism (see below). These industries will be the most heavily and directly affected by COVID-19 over the medium term, almost irrespective of the alert levels implemented by the government at any particular point in time.

Sustained global demand for food, but non- food exports will be knocked hard

Forecasts of global economic growth for 2020 are being rapidly revised lower due to the COVID-19 pandemic, lockdown conditions, and negative effects on economic activity around much of the world. Between February and April, Consensus forecasts for global growth during 2020 have slumped from +2.3% to -2.5%. We expect further revisions in coming months will take this figure to -5.0% or below.

This downturn will have some effect on New Zealand’s agricultural export prices for products such as dairy, meat, and horticulture. However, the fact that people still need to eat during a recession will limit the pressure on our agricultural producers. Furthermore, the drop in the New Zealand dollar, from US67c at the start of the year to below US60c, has offset some of the decline in international prices.

The most pressure will come on non-food exports such as forestry and manufactured products. Putting aside the disruption to movements of goods that occurred early in the year with the shutdown of ports in China, weaker incomes and spending around the world will limit both business and consumer demand for manufactured products.

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28 Economic impacts of COVID-19 on the Taranaki economy – April 2020

During 2009, we saw a 5.9% decline in New Zealand’s non-food manufactured export volumes. With the current global downturn being significantly larger than the Global Financial Crisis (GFC), we have allowed for a 16% contraction in volumes over the coming year. Alongside this drop, we have also assumed a 9.5% reduction in international demand for unprocessed forestry exports such as logs.

Foreign tourism tanks by 91%

We expect New Zealand’s borders to effectively remain closed for a year, with either complete closures or, at a minimum, a mandatory 14-day quarantine requirement for people arriving from overseas. However, we also recognise that there is scope for a trans- Tasman or wider Polynesian travel “bubble” to be introduced later in the year if COVID-19 infection conditions allow. We have assumed that this “bubble” could be implemented from December onwards, and could result in 50% of usual tourist travel on NZ-Australia and NZ-Pacific Island routes.

Travel up until November will be very limited – we have allowed for visitor numbers to be at just 0.8% of their usual levels. This figure allows for a small amount of non-holiday travel, and it is equivalent to total international arrival numbers (including returning New Zealanders) for the week to 14 April 2020. We have also maintained this assumption for countries outside Australia and the Pacific Islands beyond November 2020, on the basis that COVID-19 case numbers overseas will warrant ongoing strict controls. The allowance for small visitor flows in and out of New Zealand recognises there will be some people who are required to travel for work purposes.

Taken together, these assumptions result in an estimated 91% reduction in foreign demand for tourism over the coming year, and a similarly sized reduction in New Zealand demand for international tourism.

Domestic tourism spending drops by 21%

With New Zealanders effectively unable or unwilling to travel overseas during the coming year, at least some of the pool of $5.4b that was spent on international tourism during 2019 is likely to be spent on holidays within New Zealand instead.

Having looked at domestic and international tourism spending patterns, we estimate that total spending on a holiday in New Zealand is likely to be about 69% of what would be spent on an equivalent holiday overseas. Some of this gap arises because a domestic holiday will naturally involve less spending on airfares. Furthermore, people on holiday within their own country also tend to spend less, on average, on both accommodation and eating out.

Reallocating this proportion of overseas tourism spending by New Zealanders to domestic spending results in a total pool of about $21b of potential spending for the coming year. However, the economic downturn will have a negative effect on people’s willingness to spend on travel and holidays. For example, there was an 8.6% drop in annual spending on restaurants and hotels between March 2008 and December 2009 during the GFC.

Furthermore, there have been severe limitations on people’s ability to travel domestically during the 6½ weeks of Level 3 and Level 4 lockdown, and these restrictions will only be partially relaxed when we move to Alert Level 2. We note that The Treasury’s Scenario 1

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29 Economic impacts of COVID-19 on the Taranaki economy – April 2020

assumes we could remain in Alert Levels 1 and 2 for a total of 10 months, although the specific timings across each of these Alert Levels is not stated.

Taking all these considerations together, we estimate that spending on domestic holidays over the coming year could be constrained by 35%. After incorporating the increased pool of potential spending due to a lack of international travel, these constraints imply a 21% decline in domestic tourism spending from the previous year.

International education revenue halves

Data up to 2018 shows that, for international fee-paying students in New Zealand, 50% were enrolled at Single Data Return (SDR) providers such as universities and polytechnics, 31% were enrolled at non-SDR providers that largely cater to international students, and 20% were enrolled at primary and secondary schools. We have made differing assumptions about how each of these providers will be affected.

We have assumed that non-SDR providers will be knocked heavily, with the relatively short nature of many of their courses meaning they are not conducive to students being quarantined for two weeks on arrival in the country. We expect an 82% reduction in student numbers over the coming year, with virtually all the surviving revenue arising from students who were already in the country before border restrictions were implemented. This assumption is based on media reports suggesting about 3,000 of the 17,000 students that would normally be trained at English language schools during the year were already here and being taught when the border closures occurred.

In early April, Universities New Zealand’s chief executive Chris Whelan stated that universities are facing a 25-33% reduction in international student numbers this year. In our view, this expected decline might prove to be too small, particularly given that there must be serious doubts about the mid-year intake of students that would normally occur in July. We have opted for a bigger reduction in international student revenue across all SDR providers, with universities retaining 62% of their international student revenue this year – mostly thanks to students who were already in the country in January and February. Our figure has also been informed by Immigration NZ’s visa approval data for March, which showed a 43% reduction in student visa approvals compared with March 2019.

International education at a primary and secondary level will be less affected by the pandemic and border closures, given that the school year started in early February before most of the effects of COVID-19 appeared in New Zealand. We are aware that some students will have chosen to return home, and that students that might have come later in the year will now not do so. We have allowed for the number of international students at schools this year to be 79% of normal levels.

Taken together, these figures imply a 49% reduction in international education revenue during 2020, which we have included in our modelling.

Domestic education picks up some of the slack

During periods of labour market weakness, there is an increased propensity of people to leave, or stay out of, the workforce and undertake study instead. For example, between 2008 and 2010, the number of domestic equivalent full-time tertiary students (EFTS) increased from 235,100 to 254,500, a rise of 8.3%. This lift contrasts with the periods of

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30 Economic impacts of COVID-19 on the Taranaki economy – April 2020

labour market strength between 2004 and 2008, and again between 2012 and 2018, when domestic EFTS numbers fell by 3.3% and 10.4% respectively.

Demographic factors, such as the number of school leavers, can also play a role in determining overall student numbers. Between 2008 and 2010, over half the increase in student numbers could be attributed to a lift in the number of students completing secondary school compared with three years prior. In contrast, since about 2012, the number of Year 13 students has been relatively stable, meaning that any changes in total tertiary student numbers now are more a reflection of economic conditions or other factors influencing training choices, such as the government’s tertiary fees-free scheme.

Bearing these factors in mind, we have allowed for a similar lift in total demand for tertiary training over the coming year as we saw following the GFC. However, the change in demographic trends compared with a decade ago means that the implied increase in underlying demand for training will be greater than in the wake of the GFC.

House prices and construction activity take a hit

The substantial rise in unemployment associated with many of the outcomes summarised above will have a significant negative effect on the housing market. Furthermore, border closures for the next year mean that net migration will be close to zero, and population growth is set to drop to a 30-year low of 0.5%pa. These results will limit the number of potential buyers in the housing market as well as considerably reducing underlying demand for new housing.

Our assumptions include an 11% drop in average house prices between mid-2020 and the end of 2021. We note that house price falls in the short-term will be restrained by the mortgage holiday scheme that the government has negotiated with retail banks. Nevertheless, this housing market downturn will drag down the rate of new residential construction, particularly given that banks are likely to be very reluctant to finance property development over the next year. Nationally, we estimate the value of residential building work put in place to decline by 19% over the year to March 2021.

Non-residential construction activity will also come under downward pressure given declines in key drivers for space such as employment, household spending, and tourism activity. We estimate the value of non-residential work put in place to decline by 18% over the year to March 2021

In contrast, prospects for civil construction are positive outside Level 4 lockdown conditions. Nevertheless, we are cautious about the potential for an immediate lift in activity caused by government stimulus and increased spending. Although there is likely to be faster growth in infrastructure activity over the medium term, we anticipate that planning, design, and consenting requirements will prevent more rapid growth in work until 2022.

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31 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Government stimulus includes $10b wage subsidy and benefit increases

We have made allowances for two major government initiatives in our modelling. The first of these initiatives is the wage subsidy scheme, which represents a cash injection of approximately $10b to businesses to help meet their labour costs. The total fiscal cost of this scheme has risen over time, although the rate of increase appears to have slowed over the last week or so.

We note that there could be scope for the scheme to be extended beyond 12 weeks for selected businesses that continue to be negatively affected under Alert Level 2, although the government has not made any strong signals about an extension at this stage. Indeed, an extension of the scheme might not be sufficient to secure the ongoing viability of many businesses that are dependent on tourism activity anyway.

The second initiative we have included in our modelling is the one-off increase in social welfare benefits of $25 per week. This change represents a boost to aggregate household incomes of around $2.5b. In tandem with the wage subsidy scheme, this additional money from the government will mitigate the negative effects of falling employment on overall household incomes. In doing so, the policies will also limit the decline in household consumption spending that results from the economy’s downturn.

There is obviously significant potential for additional government stimulus to be introduced in coming weeks and months. Further fiscal initiatives are likely as the public health response to the COVID-19 pandemic becomes less critical and more of the policy focus turns to measures that could help drive the economic recovery. The government’s 2020 Budget is due to be announced on May 14, and this date will be a key one.

At this stage, we have not made any specific allowance for additional fiscal measures. In our view, it is likely that their effectiveness in accelerating economic growth is likely to be limited within the next 12 months. We expect the negative effects of the pandemic, the lockdown, and the failures of tourism and hospitality businesses will continue to ripple through the economy for some time. These effects will weigh heavily on business and consumer confidence, influencing spending and investment decisions, and reducing the immediate effectiveness of any government initiatives designed to try and boost economic growth.

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32 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Appendix II. Broad approach to modelling the impact of COVID-19 on the Taranaki economy

Infometrics has drawn on a range of econometric and statistical model to measure the potential impact of COVID-19 on regional economies.

Forecasting the macroeconomy

Infometrics maintains a macroeconomic forecasting framework that underpins our five- year forecasts of activity across the national economy. Our framework accounts for the relationships between different sectors of the economy and their responsiveness to one another. These include the labour market, households, businesses, government, the international trade sector, and financial markets.

In times of economic upheaval, we refine the output from the framework based on expert input from our forecasting team, their knowledge of rapidly changing trends in the economy, and the insights we gain from our interactions with central government, Councils, Economic Development Agencies and private sector clients.

Overseeing the forecasting process and framework is Gareth Kiernan, who has been forecasting the New Zealand economy for more than 20 years. The framework provides quarterly forecasts of GDP, employment, unemployment, and a range of other macroeconomic indicators up to 2025.

Measuring impacts on individual industries

The pandemic will affect industries differently. To measure this, we have used Infometrics’ general equilibrium (GE) model, which is designed to measure the impact of economic shocks on individual industries. We introduce shocks to the model, including a sharp decline in foreign tourism, declines in international education and non-food commodity exports, and a fall in productivity across affected industries. We also temper these shocks through the introduction of support measures such as the wage subsidy and an increase in benefit payments.

The GE model estimates the combined impact of these factors on future economic output and employment across 54 industries. In this sense, the GE model breaks down the national macroeconomic forecasts of GDP and employment to industry level.

Infometrics’ GE model is maintained by one of New Zealand’s foremost econometricians, Dr Adolf Stroombergen.

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33 Economic impacts of COVID-19 on the Taranaki economy – April 2020

Measure the impact on regions and districts

Regions will also be impacted differently by COVID-19. Those with a large tourism industry, for example, will be hardest hit. To measure regional impacts, we draw on our Regional Forecasting Model (RFM), an econometric model that breaks down national industry forecasts to territorial authority level.

The RFM draws on historic trends, patterns and relationships, and projects these into the future. It creates multiple forecast models for every territorial authority and industry combination and using machine learning techniques, selects and applies the model which is historically determined to have best predictive ability. It then produces forecasts of GDP and employment across 54 industries for each territorial authority up to a predetermined point in the future, e.g. 2025 or 2030.

40 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

Additional insights on the economic impacts of the COVID-19 pandemic

April 2020

41 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

Authorship

This report has been prepared by Gareth Kiernan, with the assistance of Brad Olsen, Andrew Whiteford, and Dr Adolf Stroombergen.

Email:

[email protected]

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42 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

3 Additional insights on the economic impacts of the COVID-19 pandemic– April 2020 Table of contents

Overview ...... 4 Infometrics Economic Outlook: Biggest hit to economy since the Great Depression ...... 5 Avoiding a repeat of the Great Depression ...... 7 The details of our forecast outlook ...... 9 Unemployment to threaten double digits ...... 9 Household caution set to stay ...... 11 Cutting unnecessary business spending to preserve cashflow ...... 12 A hit to trade, both in and out ...... 13 Government to the rescue ...... 15 Evolving our forecasts as decisions play out ...... 17 COVID-19 effects by broad industry ...... 18 Accommodation and food services ...... 18 Retail and wholesale trade ...... 18 Transport, postal, and warehousing ...... 18 Arts and recreation services ...... 18 Construction ...... 19 Professional, scientific, and technical services ...... 19 Non-food manufacturing ...... 19 Administrative and support services ...... 19 Information media and telecommunications ...... 19 Financial and insurance services ...... 20

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Overview

This report sets out additional insights on the economic impacts of the COVID-19 pandemic. It details Infometrics’ latest economic forecasts and our key views around how the economy is likely to respond.

We also outline the expected effects on some of New Zealand’s key industries, providing more detailed insights on key drivers of activity across the economy.

This report is designed to supplement our regional economic impact reports.

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Infometrics Economic Outlook: Biggest hit to economy since the Great Depression

The latest Infometrics economic forecasts were published on Friday 17 April, reflecting data and insights up to 9 April 2020. Below is our Forecast Story, published on 17 April alongside the forecasts, which details the drivers of activity and our assessment of the economy.

COVID-19 presents the greatest economic shock in living memory, and although the full extent of the shock is still to play out, it is clear is that the economy will be irrevocably changed by this pandemic. These times are highly uncertain, as we communicated in Well, that escalated quickly! The speed with which the economic outlook changed during March far exceeded anything we experienced during the Global Financial Crisis (GFC) during 2008/09, which itself felt particularly fast-moving at the time.

We are rewriting our economic manuals due to the overwhelming combination of body blows to the economy. We are currently forecasting a 13% contraction in economic activity between the December 2019 and June 2020 quarters, with most of the decline occurring in the June quarter due to the current lockdown. This contraction is set to be at least four times larger than anything we’ve seen in living memory, so there is understandably considerable scope for error in this estimate.

Our expectations for the economy are considerably more pessimistic than many other forecasters, with the real divergence among forecasts arising not in the extent of the short-term hit to the economy but, instead, about how quickly the economy recovers again. By March 2022, we expect quarterly GDP to be still 6.6% below its December 2019 level. In comparison, the trading banks’ forecasts for March 2022 range from BNZ’s prediction of 7.0% smaller to Westpac’s rosy outlook of 3.2% bigger. Forecasts of the unemployment rate also capture this spread: we are picking a 9.4% unemployment rate in March 2022, compared with a range of 8.4% (BNZ) to 5.2% (Westpac) for the trading banks.

In short, we view the current repercussions for the economy to not only be significantly worse than others expect, but also to endure for longer as structural adjustments are forced on the economy. Our view is that the New Zealand economy is entering a U- shaped downturn (see Graph 1) rather than the more optimistic V-shaped recovery being picked by Westpac and, to a lesser extent, ANZ and ASB. Although the government has stepped in quickly to try and help businesses through the lockdown, the wage subsidy and other measures will not be enough to keep all businesses going. The tourism and hospitality sectors will be particularly heavily affected by extended border restrictions and will not recover to pre-pandemic levels within the foreseeable future. Many business failures are inevitable, and it will take time for the surplus labour and capital resulting from this downturn to be redeployed by other businesses.

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Graph 1

This recovery will take time GDP forecast comparison, annual running totals, 2009/10 $b 300 Apr 20 forecast

Jan 20 forecast 250

200

150 07 09 11 13 15 17 19 21 23 25

Our key assumptions around the economy’s outlook are as follows.

• We expect the Level 4 lockdown to be fully in place for only four weeks. However, significant restrictions (Level 3) are likely to remain across much of the country for another 3-4 weeks. Of course, there is considerable uncertainty about the scope and duration of extended or subsequent lockdowns, or post- lockdown restrictions.

• We expect some limitations on economic activity to remain in place over the following 6-9 months. At this stage, it is unclear exactly what or how stringent these restrictions might be. However, they are most likely to include borders that will be closed to non-New Zealanders for some time, easing back to a 14- day quarantine for foreign arrivals over time. While either of these measures are in place, they will prevent international tourist numbers from picking back up.

• We estimate that the economy is operating at about 65% of capacity during the Level 4 lockdown, based on our estimates that approximately 42% of output can continue to be generated by those people working from home and another 23% from essential services. Once the Level 4 lockdown has ended, our allowance for further significant restrictions is equivalent to Level 4 conditions remaining in place for a further fortnight.

• Further government support and stimulus for the economy will be forthcoming in coming months. Next month’s 2020 Budget is likely to contain the biggest initiatives. However, we would expect other significant announcements at December’s Half-Year Economic Update or the 2021 Budget, as the shape and magnitude of the required response from the government becomes clearer.

• The six-month mortgage holiday scheme arranged between the government and the trading banks will only delay an inevitable downturn in the housing market. We predict the number of forced sales will increase substantially once the scheme expires in September, particularly given our expectation that unemployment will continue rising until the second half of 2021. Downward pressure on property prices will be exacerbated by an overhang of newly constructed houses that were started prior to the pandemic, which developers will struggle to sell. We expect an 11% fall in house prices between June 2020 and December 2021.

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• Businesses that have survived through the lockdown and are not directly affected by the collapse in tourism will remain under pressure throughout the following 12-18 months. A tighter rein on both business and household budgets will have a negative effect on demand conditions for many firms. Although the number of business failures is likely to be at its highest within the next 3-6 months, we expect to see a continuing stream of above-average insolvency numbers throughout 2021 as well.

Given these assumptions, we forecast that GDP growth will remain patchy until the first half of 2022. By that stage, COVID-19 is likely to have been controlled by a vaccine and overseas economies will be on the long road to recovery. International tourism will start to reappear and demand conditions for other exports will also improve, particularly those exports that are reliant on markets other than China. Government stimulus, in terms of both cash for households and spending on infrastructure, will also support accelerating economic growth. Businesses will become more confident about their own revenue prospects, leading to increased investment and hiring. Signs of a tightening labour market will also improve consumers’ confidence and willingness to spend.

After an 8.0% contraction in the economy during the March 2021 year, we expect year- end growth to turn positive again by the end of 2021. There will be considerable underutilised resources in the economy that, in tandem with highly stimulatory fiscal policy, are likely to drive strong growth results in subsequent years. We forecast that GDP growth could get as high as 5.9%pa in 2023 (see Graph 2).

Graph 2

Eventually trying to make up for lost time GDP, year-ended % change 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 16 17 18 19 20 21 22 23 24 25

Over the three years to June 2025, we are predicting economic growth to average 4.8%pa. However, it is also worth noting that average growth between June 2019, before the pandemic, and June 2025 will only be 1.6%pa. Even with rapid growth in the later years of our forecast period, we still predict the economy will be 1.8% smaller in 2025 than we were anticipating before COVID-19 came along.

Avoiding a repeat of the Great Depression

The current shock to the economy looks likely to be of a similar magnitude to the one experienced in the early 1930s at the start of the Great Depression, when the economy shrank by an estimated 12% between March 1930 and March 1933. One of the other

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defining features of the Great Depression was the length of the downturn – it was not until 1936 that the New Zealand economy recovered to be larger than it was in 1930. However, we see several important reasons to be optimistic that the current downturn can be arrested and reversed more quickly than the one that occurred 90 years ago. These factors include:

• the government’s fiscal position

• a better understanding of the appropriate fiscal policy response to an economic downturn

• a broader and more generous welfare system

• the floating exchange rate

• the ability to independently set monetary policy

• New Zealand’s export linkages to China.

Firstly, the government has entered the COVID-19 pandemic in a vastly superior financial position than its 1930s counterpart. Central government debt was equivalent to 160% of GDP in 1929, compared to gross debt of just 28% of GDP in 2019. Credit ratings agencies have previously indicated that the government could lift its net debt from its current level of 19% of GDP to about 50% of GDP during a crisis without any ratings downgrade.

Fiscal policymakers also have a much better understanding of the appropriate response to an economic shock than they did 90 years ago. The initial government reaction to the slump in activity in 1930 was to increase taxes and cut spending to try and maintain a balanced budget. Of course, such a response simply exacerbated the economic downturn. In contrast, the current government has taken firm action to try and reduce the magnitude of the downturn by borrowing to provide support for businesses in the near term. Further measures will undoubtedly be introduced by the government in coming weeks and months, with an aim to stimulate more activity once the worst of the COVID-19 pandemic has passed and the economy is able to recover.

Finally, regarding government policy, New Zealand has a much more comprehensive welfare system than existed in the 1930s. This safety net means that the consequences of unemployment are less disastrous for people than in previous generations. The current downturn will have a negative effect on job security and consumer confidence, with considerable flow-on effects into people’s spending behaviour, but the hit to spending is likely to be less marked than in the 1930s. In addition, increased benefit payments by the government during the downturn are effectively an automatic fiscal stabiliser, helping to mitigate the worst of the economic downturn.

New Zealand’s monetary policy framework is also considerably more conducive to supporting the economy than it was at the start of the Great Depression. At that time, New Zealand didn’t have its own central bank or its own genuine currency and used a fixed exchange rate against the British pound. The initial brunt of the 1930 economic shock was borne by farmers, with the international economic downturn significantly negatively affecting demand for their products.

A depreciation in the exchange rate would have been an orthodox response, as it would have at least partly offset the drop in commodity prices that farmers experienced. However, at the time, a strong currency was viewed as a measure of sound economic

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management and financial prudency. It was not until early 1933, three years after the start of the downturn, that the government moved to formally devalue the New Zealand pound.

In contrast, the New Zealand dollar has fallen by as much as 17% this year against the US dollar. This drop is mitigating the negative effects of weaker global demand driving down international commodity prices and, potentially, export volumes. Of course, the decline in the New Zealand dollar is most pertinent for agriculture-related exports. The lower exchange rate is irrelevant for tourism operators, whose potential market will be close to zero as long as significant border restrictions remain in place.

Alongside the floating exchange rate, having our own central bank means we can also set interest rates independently. We have already seen the Reserve Bank slash the official cash rate by 75 basis points and undertake quantitative easing to bring down longer-term interest rates. These moves will only soften the downturn in the near-term, rather than stimulate growth. However, as demonstrated by the experience of the Great Depression, the alternative is incredibly unpalatable. Interest rates only edged down by about half a percentage point between 1929 and 1933, yet the CPI plunged 21% during this period. In other words, real interest rates were incredibly contractionary, and the real burden associated with massive levels of government and farm-related debt rose as prices fell (for both property and general goods and services).

One final factor that adds to our cautious optimism about the medium-term outlook is New Zealand’s trade ties with China. China’s strong action to bring COVID-19 under control is in stark contrast to the initial lack of decisive action across much of Europe and the US. As a result, we expect domestic demand within China to start returning towards normal much sooner than in many of the major developed economies.

We recognise that persistently weak demand conditions in Europe and the US will have negative implications for Chinese exports, manufacturing activity, and economic and income growth in China. Nevertheless, we believe that Chinese demand for food will remain relatively strong. Many of our dairy, meat, horticultural, and seafood exporters will still have well-functioning markets into which they can sell their products. Prices are likely to be softer given weak demand conditions around other parts of the globe, although as we have previously noted, this price effect is likely to be partly offset by a weaker New Zealand dollar.

The details of our forecast outlook

The remainder of our Forecast Story discusses our expectations for specific subcomponents of the New Zealand economy, and the key issues and risks we see for each of these variables.

Unemployment to threaten double digits

We are assuming that the COVID-19 pandemic will have massive consequences for the labour market. These effects will come through several channels and will result in a variety of different outcomes over an extended period.

Firstly, there will be job losses in industries that were being directly affected by COVID- 19 before the lockdown occurred, such as tourism and hospitality. The government has signalled that New Zealand’s borders are likely to remain largely shut until either a

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vaccine is available or until the risk of reimporting new cases of COVID-19 from overseas has diminished. But even if Europe and North America get their COVID-19 outbreaks under control sooner rather than later, issues for the tourism sector will remain. Airline capacity will be significantly below previous levels, people are likely to be cautious about long-haul travel, and the global economic downturn will limit tourism-related spending. In short, we could easily see employment declines of 25-40% in industries that are heavily reliant on tourism.

Secondly, there will be closures of firms that are not able to remain solvent throughout the lockdown. These businesses will typically be unable to generate revenue during this time, but will still face costs such as rent, wages, interest, or other fixed costs. The government has alleviated some of the pressure on firms with its wage subsidy scheme and business lending package. However, there will be many businesses that were only marginally financially viable before the pandemic, and their owners will choose to cut their losses by closing down. These firms could include many small businesses owned by baby boomers who are close to retirement, who will see little sense in pumping more money into their business to keep it afloat with limited future payoff.

The longer the lockdown continues, the greater the number of business failures is likely to be.

Even once the lockdown ends, the flow-on effects of these initial job losses and business failures will cause problems for other firms. Reduced levels of business investment and household spending will force less directly affected businesses to cut back staff hours or reduce employee numbers. Business and consumer confidence levels are likely to stay persistently low throughout 2020 and 2021, with job losses and business failures a continuing theme. A cascading effect of business closures is expected, with immediately unaffected firms facing lower activity levels over time as their customers stop trading.

The labour market outcomes clearly show through in our forecasts. We are predicting a 12% fall in total employment between December 2019 and September 2021, including a 6.6% decline in the June 2020 quarter alone. The unemployment rate is forecast to climb from 4.0% to 9.5% by September next year (see Graph 3).

Graph 3

The labour market has a mountain to climb Forecast comparison of the unemployment rate, seasonally adjusted 10% Apr 20 forecast 8% Jan 20 forecast

6%

4%

2% 16 17 18 19 20 21 22 23 24 25

But even these stark numbers mask the full effect of the recession. Some workers will be forced to cut back their hours, reducing overtime or shifting from full-time to part-time work. In other words, underemployment or underutilisation of labour will rise in tandem

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with unemployment. Furthermore, some of those people who are no longer employed will not be counted as unemployed. Instead, some will simply drop out of the labour force as new jobs become too difficult to find, while others will seek out education opportunities to enable them to reskill. Both subgroups will contribute to a fall in the participation rate, which we predict could fall from 71% to 66%, its lowest level since 2001.

We anticipate that the rise in unemployment could take time to filter through into the economy as a result of the government’s wage subsidy. Some firms that would otherwise have laid off staff will struggle through in the near term, with wage costs being largely borne by taxpayers. However, once the wage subsidy ends, further job losses will occur, with firms that are no longer viable operations becoming exposed by the lack of continued government support.

We see the risks to our labour market forecasts as balanced. Over the next two years, we might have overestimated the scale of likely business failures and job losses, which would suggest that the peak rate of unemployment could be lower than 9.5%. However, there is also a chance that an unemployment rate of close to 10% could take longer to recover from than we have allowed for, as people struggle to retrain or find new job opportunities. These sorts of structural issues could result in unemployment still being above our projection of 5.4% by the end of our forecast period in 2025.

Household caution set to stay

Consumer confidence was abruptly lower in March, but there will still be further significant drops to come as the effects of the lockdown on businesses become clearer and job losses mount. Household spending activity will fall sharply in the June quarter, primarily because consumers are unable to spend on many of the goods and services they would regularly purchase. We have allowed for a quarterly drop of almost 9%.

Spending will bounce back from this negative supply shock in the September quarter, but the extent of this rebound will be limited by the job losses and reduced incomes that have transpired in the meantime. And with unemployment continuing to climb until a forecast peak of 9.5% in September 2021, a full recovery in household spending will take some time to occur.

Discretionary spending will bear the brunt of more frugal household spending as consumers watch costs much more closely. Outside of food, housing costs, and other necessary goods and services, a humbler spending profile is likely to emerge. Even for those households who don’t see hours cut or jobs lost, the severe downturn and threat of rising unemployment will see them conserve more of what they earn to provide a buffer if the worst occurs.

By mid-2022, we expect total household spending to be back at its pre-crisis levels, although there will still be ground to make up for the lost growth since early 2020 (see Graph 4). We expect spending growth to average 4.5%pa over the three years to June 2025 as the labour market tightens, household incomes recover, and population growth picks up.

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Graph 4

Cutting back on discretionary spending Fcst. comparison of private consumption, ann. running totals, 2009/10 $b 200 Apr 20 forecast 180 Jan 20 forecast

160

140

120 16 17 18 19 20 21 22 23 24 25

We see two key risks to our spending forecasts. Firstly, in the near-term, the negative shock to household spending could be greater than we have allowed for – both in the June quarter, but also in the following year as unemployment rises. Secondly, from 2021 onwards, there is potential for additional government stimulus to boost household spending, via measures such as tax rebates or additional social welfare payments beyond what we have currently allowed for, to boost household spending. Any larger- than-expected government action to expedite the recovery in consumption during 2021 and 2022 would reduce the scope for such fast growth in spending later in the forecast period.

Cutting unnecessary business spending to preserve cashflow

With firms under severe cashflow pressure in the near-term, and business confidence likely to hit record lows, business investment will plunge over the coming year. We are predicting a 26% reduction in spending over the year to March 2021, surpassing the 24% decline that occurred in 2009. Smaller falls are likely to continue throughout most of 2021, as the flow-on effects of the COVID-19 lockdown and the collapse in tourism and hospitality activity keep weighing on demand conditions, business activity, and confidence levels (see Graph 5).

Graph 5

A huge hole in business investment Fcst. comp. of non-building private inv., ann. running totals, 2009/10 $b 35 Apr 20 forecast

30 Jan 20 forecast

25

20

15 16 17 18 19 20 21 22 23 24 25

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We expect a recovery in business investment by late 2022, with growth holding in double digits during 2023 and 2024. This pick-up will be underpinned by improving demand conditions both domestically and internationally. It will also signify a reallocation of resources within the New Zealand economy away from businesses and industries that have suffered during the pandemic. New firms will be able to take advantage of stimulatory monetary and fiscal conditions to target new areas for growth. Demand for capital equipment by these businesses will be matched by their demand for workers, so the pick-up in investment spending is likely to coincide with the early stages of the labour market recovery.

Our projected decline in business investment over the next 1-2 years is not much larger than the one that occurred following the GFC, so the near-term risks to our forecast are on the downside. We have allowed for a relatively long trough in investment activity, and we see some scope for spending to pick up sooner if fiscal policies are successful in stimulating domestic demand and boosting confidence earlier during 2021.

A hit to trade, both in and out

New Zealand’s tourism exports totalled $16.2b during 2019, representing about 19% of total goods and services exports. As outlined above, we expect international inbound tourism is likely to be virtually non-existent for the next 12 months, with 14-day quarantine requirements or closed borders likely to discourage or prevent visitors from coming here. As a result, we are forecasting a 20% contraction in export volumes over the year to March 2021.

Most of our commodity exports will be less heavily affected, notwithstanding a decline in trade volumes with China in early 2020 as their ports were largely shut down. The biggest exception will be forestry, with backlogs at ports and softer demand due to the global economic downturn expected to cement weaker export volumes. Non-food manufactured exports are also likely to temporarily dip thanks to a hiatus in production during the lockdown.

Although we are forecasting growth of up to 15%pa in export volumes during 2022 and 2023, we still expect volumes by mid-2025 to be about 9% below the levels they would have otherwise reached (see Graph 6). This result will be due to the lingering effects of the pandemic on international tourism, with reduced willingness to travel and less capacity in the airline industry. With overseas economies set to shrink this year, the current global downturn will also have a dampening effect on international demand and lead to softer export volumes, even over the medium-term.

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Graph 6

Tourism's loss a big hit to exports Forecast comparison of export volumes, ann. running totals, 2009/10 $b 85 Apr 20 forecast 80 Jan 20 forecast 75

70

65

60

55 16 17 18 19 20 21 22 23 24 25

Travel of New Zealanders overseas will be similarly affected to inbound tourism: non- existent for the next 6-12 months, followed by a gradual return towards “normal” as borders are reopened, quarantine restrictions are lifted, airline capacity is rebuilt, and lingering traveller concerns about COVID-19 fade.

Tourism imports are much smaller than exports, totalling $6.7b over the last year, and representing 7.8% of total goods and services imports. Consequently, the direct effect of COVID-19 on imports will be smaller. These figures also demonstrate that increased spending on domestic holidays by Kiwis will be unable to fully make up for the decline in revenue due to the loss of foreign tourists.

Alongside changing travel patterns, the downturn in New Zealand’s domestic economy will also weigh on import volumes. Lower household spending will reduce demand for consumption good imports (21% of total imports). Capital equipment imports are also likely to take a big hit (15% of total imports). In the wake of the GFC, the annual total of capital imports plunged 33% over an 18-month period. Given our anticipated decline in business investment spending, we are likely to see an even sharper fall in capital imports than we did during 2009.

We are forecasting a 16% contraction in total import volumes over the year to March 2021. We anticipate that the subsequent recovery in imports during 2022 and 2023 (see Graph 7) could be more muted than export growth for two reasons. Firstly, we expect a sustained change in New Zealanders travel patterns, with more holidays taken domestically and international travel taking a long time to return towards pre-pandemic levels. Secondly, business’ willingness to invest could remain weaker than normal for some time, dampening the recovery in capital imports.

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Graph 7

Imports are pulled lower as well Forecast comparison of import volumes, ann. running totals, 2009/10 $b 110 Apr 20 forecast 100 Jan 20 forecast

90

80

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60 16 17 18 19 20 21 22 23 24 25

The risks to our forecasts for both exports and imports lie, if anything, on the upside, particularly over the medium term. Given that we are currently in the midst of the pandemic, it is unclear how sustained an effect current events will have on international travel behaviour.

Government to the rescue

Fiscal policy has the biggest role to play in cushioning the economy’s downturn and then generating momentum heading into the recovery. In broad terms, this support and stimulus can happen via three channels.

• Increased government spending on purchasing goods and services (government consumption)

• Transfers of money to individuals or businesses (which shows up in private consumption or business investment)

• Increased government spending on assets such as infrastructure (government investment)

Notwithstanding the fact that the overall size of government would normally be expected to expand more quickly under a Labour administration than under National, we don’t anticipate any step change in government consumption. The most obvious area of potential increase in spending is the health sector, where more funding will obviously be needed in the short term to facilitate the response to the COVID-19 pandemic.

The government’s wage subsidy package and welfare benefit increases come within the transfers category, increasing the government’s outlays, but with the money not being used to purchase goods or services. Similarly, any future tax cuts, rebates, or handouts of money to households will also come within this category. This money does not show up in government consumption, but it will affect the government’s financial position and results in a larger fiscal deficit in coming years.

The government’s current focus is, rightly, on trying to reduce the financial stress on households and businesses caused by the initial economic shock of the lockdown – in other words, smoothing the downturn path. Limiting business insolvencies or failures will

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make it easier for the economy to recover once trading conditions start returning to normal.

Once the worst of the shock is over, then the government’s efforts must turn to measures that will help rekindle aggregate demand and stimulate a pick-up in growth. We expect these measures to concentrate on shoring up households’ financial positions, which will be negatively affected in the meantime by job losses, other temporary reductions in income, and hits to wealth caused by falling house prices, KiwiSaver balances, and other investor losses.

The government should also consider measures that encourage businesses to commit to new investment and hiring. Stimulus measures for households and businesses will need to kick in during 2021, although it could be 2022 before we start to see the real fruits in terms of better economic outcomes.

Finance Minister Grant Robertson has also emphasised the potential role that infrastructure has to play in the recovery. We understand the government is looking for a wide range of infrastructure projects that it can fund over coming quarters to boost economic activity, including projects that would normally be funded by local government or the private sector. The focus is on “shovel-ready” projects, with particular attention being paid to smaller projects, so that work can be undertaken across a wide range of areas to try and generate a reasonably broad-based recovery.

This spending by central government shapes as a timely injection of cash for local councils that have been struggling to fund their required infrastructure investment. Central government money will help expand network infrastructure to meet the strong population growth of recent years, as well as replace critical network assets that have reached the end of their working life.

In the short-term, government investment will be constrained by the hiatus in projects caused by the lockdown. We predict that growth in spending will then accelerate towards 5%pa during 2021, with growth averaging 4.5%pa over the four years to June 2025. By the end of the forecast period, we expect the volume of government investment to be almost 10% greater than we had allowed for in our January forecasts.

Graph 8

Imports are pulled lower as well Forecast comparison of import volumes, ann. running totals, 2009/10 $b 110 Apr 20 forecast 100 Jan 20 forecast

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60 16 17 18 19 20 21 22 23 24 25

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Evolving our forecasts as decisions play out

We will continue to track the COVID-19 pandemic and response throughout the next few months, providing our views as circumstances change and decisions are made by key local, national, and international leaders.

For New Zealand, understanding when the lockdown will end, and how businesses can operate under lower COVID-19 alert levels, will provide greater clarity about the economy’s near-term direction.

Internationally, developments in both the health and economic responses to COVID-19 will allow us to better determine the global growth path and how it will affect New Zealand.

Our regular weekly commentaries and economic data release notes to clients will provide our most up-to-date views on how the economy is continuing to evolve.

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COVID-19 effects by broad industry

This section outlines the expected economic effects of the COVID-19 pandemic and response on some of New Zealand’s key industries.

Accommodation and food services

Accommodation and food services will be arguably the most heavily affected part of the economy by the COVID-19 pandemic and its aftermath. The disappearance of international tourism and declines in domestic tourism and other discretionary spending are key factors in the industry’s contraction. Activity will continue to be severely constrained under COVID Alert Level 3, while domestic travel will also remain restricted under Alert Level 2.

Retail and wholesale trade

Retail and wholesale trade has experienced a significant drop in demand under Level 4, and restrictions will remain in place under Level 3 as well. These effects are not being felt equally, with supermarkets enjoying periods of higher-than-usual demand. Other businesses that can sell online will be able to operate under Level 3, although we do not expect spending patterns during this period to be normal. The declines in tourism activity and other discretionary spending will also be felt disproportionately by retailers selling more luxury or higher-end products.

Transport, postal, and warehousing

Transport, postal, and warehousing has been significantly affected by the pandemic. The largest effects are on air transport and scenic and sightseeing transport due to the downturn in tourism activity. As is the case for accommodation and food services, these effects will continue long after the lockdown ends. Other parts of the transport and logistics industry have been weakened by factors such as reduced commuter travel and cutbacks in distribution and freight requirements caused by the lockdown. Some of these effects will start to reverse out with a pick-up in online spending outside Level 4, but this positive influence on activity is likely to be outweighed by the reduction in overall spending caused by the weaker labour market and incomes.

Arts and recreation services

Arts and recreation services are suffering the twin effects of a reduction in discretionary spending and restraints on what services and products can actually be offered to consumers. Performing arts, professional and community sports, horse racing, casinos, and other entertainment and events will continue to be constrained at Alert Levels 2 and 3, with restrictions on gathering numbers at both indoor and outdoor events. Ongoing border restrictions are also set to disrupt the ability of promoters to run events where they are reliant on entertainers or sportspeople coming into New Zealand from overseas.

58 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

19 Additional insights on the economic impacts of the COVID-19 pandemic– April 2020

Construction

Construction activity was close to peaking even before the COVID-19 pandemic occurred. Rising unemployment, falling house prices, slower population growth, and tighter bank lending conditions will all weigh on activity over the next 1-2 years across both the residential and non-residential subindustries. Prospects for infrastructure look more promising given the government’s desire to use this channel to try and stimulate the economy’s recovery. We also note that strong growth in the population and building stock over recent years has increased the baseline level of maintenance work that needs to be done, mitigating the downturn for those parts of the industry that tend to be less cyclical.

Professional, scientific, and technical services

Professional, scientific, and technical services is the fourth-largest industry by employment in the New Zealand economy. So despite the industry being less directly affected by COVID-19 than many other industries, the forecast drop in job numbers is still large. Cost-cutting by firms and a reduction in business numbers across the economy will negatively influence demand for services within this industry across the board. Areas that are likely to be most heavily affected include those subindustries that are closely linked with construction activity.

Non-food manufacturing

Non-food manufacturing tends to be less labour-intensive than many other industries, but the downturn in the global economy will have a significant negative effect on demand for the industry. Manufactured exports are expected to be squeezed by weak demand conditions across much of Europe, North America, and Australia. The Global Financial Crisis also demonstrated the strong links between parts of non-food manufacturing and building work within New Zealand. Consequently, the forecast downturn in construction activity will also contribute to a decline in employment and output in this industry.

Administrative and support services

Administrative and support services are expected to mirror broader economic trends in business activity, with cost cutting, business failures, and the weak labour market negatively affecting this industry. Given the downturn in tourism, travel agents will be by far the most heavily hit, with modest declines in employment across other parts of the industry.

Information media and telecommunications

Information media and telecommunications activity will also come under pressure, despite the short-term boost to selected businesses from the increase in remote working that has taken place. Traditional media such as newspapers and magazines were already under significant pressure prior to COVID-19. Substantial drops in advertising revenue have exacerbated this situation and will lead to job losses, despite

59 1 Council - Extraordinary (5 May 2020) - Impact of Covid-19 on the Taranaki Economy

20 Additional insights on the economic impacts of the COVID-19 pandemic– April 2020

government support. Significant job losses in areas such as libraries, movie theatres, and some parts of telecommunications are also possible.

Financial and insurance services

Financial and insurance services will be squeezed by the downturn in economic activity. Lockdown conditions are likely to have increased the amount of work being done electronically across parts of this industry, and this shift could potentially hasten the trend towards reduced job numbers for some occupations. More difficult business and financial market conditions could also negatively affect the viability of some firms in this industry. However, we note that the overall strength and robustness of the financial system is much better than it was between 2006 and 2010 when the industry grappled with the finance company collapses and the Global Financial Crisis.

60 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

PROPOSED ANNUAL PLAN 2020/21 – “GET US BACK ON OUR FEET” PLAN

MATTER

1. The matter for consideration by the Council is to reconsider the Council decisions (10 March 2020) on the Proposed Annual Plan 2020/21 in light of the Covid-19 pandemic in order to reflect the economic downturn, and consider a suite of new policy initiatives.

RECOMMENDATION FOR CONSIDERATION That having considered all matters raised in the report, the Council: a) Notes the forecast economic implications of the Covid-19 pandemic see an economic decline of around 8 per cent nationally and unemployment reach 10 per cent or higher, and Taranaki is expected to see similar levels of decline b) Notes that the Proposed Annual Plan 2020/21 has been revised in light of the Covid-19 pandemic through the forecast net reduction of $5.4 million in revenue ($7.0 million reduction in revenue offset by $1.6 million in lower costs) c) Notes that adding rates funding of the net reduction in revenue to the Proposed Annual Plan 2020/21 as agreed on 10 March 2020 the total rates rise would be approximately 11.82 per cent. d) Revokes the decisions made at the extraordinary Council meeting of 10 March 2020 on the Proposed Annual Plan 2020/21 (that set a rate of 6.47 per cent). e) Adopts the 3.95 per cent rates rise option as outlined in the report for the Proposed Annual Plan 2020/21 f) Notes that this results in the average residential rate increasing by 2.54 per cent ($59.36 per year or $1.14 per week additional) g) Adopts the following initiatives for the “Get Us Back On Our Feet” Plan, funded by the Covid-19 and Economic Development Reserve and debt, for engagement with the community:

i) Establishing the Ngā Whare Ora Taiao o Ngāmotu Scheme as an expansion on the Voluntary Targeted Rate for Home Energy Scheme

ii) Temporary Use Licences fee reductions

61 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

iii) Earthquake prone buildings and main street package

iv) Fee relief to business owners in the hospitality industry

v) Fee reductions for building consents

vi) Fee reductions for resource consents

vii) Delaying payments on development contributions

viii) Expanded community funding h) Notes it has already expedited supplier payments and adopted the temporary Rates Remission and Postponement Policies. It is also considering other options for stimulus through Rent Relief for Council’s Commercial and Community Group Tenants and a Procurement Recovery Plan (Covid-19) elsewhere in this agenda. i) Determines:

i) That it is financially prudent to have a lower projected operating revenue than projected operating expenditure, in order to address the projected reduction in revenue and to fund the “Get Us Back On Our Feet” initiatives, having considered the matters specified in section 100 of the Local Government Act 2002.

ii) To fund operating expenditure through borrowing, in order to fund the reduction in revenue and the “Get Us Back On Our Feet” initiatives, which is inconsistent with the Revenue and Financing Policy, having considered the matters specified in section 81 of the Local Government Act 2002.

iii) That debt funding is the only reasonably practicable option for the variation caused by the reduction in revenue and therefore shall not be consulted on.

iv) That none of the other variations to the Proposed Annual Plan 2020/21 are significant or material variations from the Long- Term Plan and consultation on the Annual Plan is not required. j) Notes the Council will be provided with a finalised Annual Plan for adoption before 30 June 2020. k) Agrees that any general rates surplus from the 2019/20 financial year be applied to the Covid-19 and Economic Development Reserve.

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l) Approves the Council undertaking any additional capital expenditure funded by Central Government as part of the economic recovery through to 30 June 2022. m) Delegates authority to the Chief Executive through to 30 June 2022 to approve up to $20 million in Council funded capital expenditure if the Council is required to co-fund any project with Central Government or to cover any other costs for projects or initiatives substantively funded by Central Government. n) Approves an increase in the borrowing limit up to $270 million for the 2020/21 financial year.

COMPLIANCE Significance This matter is assessed as being critical This report identifies and assesses the following reasonably practicable options for addressing the matter:

Issue 1: Proposed Annual Plan 2020/21 Adopt Proposed Annual Plan 2020/21 with a

1. 6.47 per cent rates rise

2. 4.75 per cent rates rise

3. 3.95 per cent rates rise Options 4. 2.88 per cent rates rise

5. a zero per cent rates rise

Issue 2: Consultation 1. Consult the community on the Proposed Annual Plan 2020/21

2. Engage the community on relief and stimulus items

3. Do not consult or engage the community The persons who are affected by or interested in this matter Affected persons are all residents and ratepayers of New Plymouth district. This report recommends option 3 for issue 1 and option 2 for Recommendation issue 2 for addressing the matters. Long-Term Plan / Annual Plan Yes Implications

63 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

COMPLIANCE Yes, having an Annual Plan where operating expenditure exceeds operating revenue is not consistent with the Significant Council’s funding and financial policies and funding operating Policy and Plan expenditure from debt is inconsistent with the Revenue and Inconsistencies Financing Policy. The options for the Proposed Annual Plan 2020/21 are all different from the position of the Long-Term Plan.

EXECUTIVE SUMMARY

2. Officers recommend the Council adopt a further revision to the Proposed Annual Plan 2020/21 to provide a short term response to the Covid-19 pandemic’s social and economic impact. If supported the Council will provide a range of economic support mechanisms while addressing the financial deficit caused by lost revenue.

3. This report outlines an estimated $5.4 million net reduction in user charges. This deficit is proposed to be filled through debt borrowing.

4. The report further recommends changes to the Proposed Annual Plan 2020/21. There are five options presented for the rates rise (from zero per cent to 6.47 per cent). The report also outlines proposals for the “Get Us Back On Our Feet” programme which are recommended for community engagement.

5. Officers seek approval to undertake capital works funded by the Government as part of its stimulus package, including providing a Council funded capital expenditure buffer in case it is required. Increased financial delegations are also sought in order to reduce delays through the recovery phase.

BACKGROUND

6. At the 10 March 2020 Council meeting (agenda, minutes), the Council considered preliminary decisions to inform the Proposed Annual Plan 2020/21. Council officers presented a baseline budget with a rates increase of 4.50 per cent (resulting in the average residential rate increasing by 3.10 per cent) and a range of options and items for further consideration. The Council decided to begin addressing some of the significant infrastructure underinvestment and planning challenges facing the District. This resulted in a total rates rise of 6.40 per cent, resulting in the average residential rate increasing 4.90 per cent (or $2.21 extra per week). These compare to the Long-Term Plan 2018-28 forecast of a 4.90 per cent rates increase.

64 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

7. Given the local social and economic impact of the global pandemic, the Council has determined to review its Annual Plan.

8. In workshopping options over the last 4 weeks, Council has discussed the importance of providing its community with rates relief whilst wanting to also provide a series of initiatives that responds to and stimulates the local economy. All this had to be done in the context of maintaining and improving its core lifeline utilities and services.

9. This report recommends the Council make a range of short term changes to the 2020/2021 Annual Plan to provide a community relief and response package. These short term changes and initiatives will allow Council time to better understand the likely long term impacts on its Community and how it might better help it respond and ultimately recover. It will also allow time to understand how Central Government will respond to the pandemic and the form of their national recovery plan. This plan is likely to come with a comprehensive economic stimulus and social support package. Council can then make more strategic decisions in the 2021/2031 LTP that reflect the community’s new circumstances and environment. The planning for this has commenced and consultation, engagement and feedback will occur later this year and next.

The economic outlook has changed

10. As noted earlier in the agenda, Infometrics have provided a report to the Council and Venture Taranaki on their early estimations of the impact Covid-19 will have on the Taranaki economy. The Taranaki economy is forecast to sharply contract by around 8.5 per cent. Infometrics consider Taranaki to be ‘mid-pack’ for regions in New Zealand with our strength lying in the agricultural and food production sectors, and that we are not highly exposed to a reduction in international tourism and education. However, our energy sector is likely to see a downturn as a result of lower energy demand.

11. Annual Plans must be based on the best available information. However, the current situation is highly fluid. Forecasts vary considerably. The assumptions being made by Council officers for the Annual Plan are appended to this report. It is important to note that the current assumptions were developed before the Infometrics report was available, and while they generally align in direction of impact the size of the impact varies. Officers do not propose to continuously revise forecasts and instead have developed alternative scenario impacts (see below)

65 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

These changed assumptions forecast a significant reduction in revenue (user charges)

12. Using these updated assumptions, the major impact on the Council is a net loss of 2019/2020 revenue from user charges ($6.0 million), grants sponsorships ($0.6 million), and fines ($0.5 million). However, this is partially offset by reduced expenses ($1.6 million). The table below outlines the forecast net impact on each activity across the Council with significant external revenue.

Activity Net Comment impact Building consents $2.0m Reduced building consent activity Resource consents $0.7m Reduced resource consent activity Parking $1.0m Reduced CBD activity due to lower retail activity Venues $0.9m Venues (including pools) likely to be closed at alert level 2 and 3 Govett-Brewster Art $0.4m Reduced international and domestic Gallery / Len Lye tourism sees fewer entry fees, café visits Centre and shop purchases. Puke Ariki $0.1m iSite bookings and purchases down Environment Health $0.3m Reduced food, alcohol and other applications Property $0.0m In alternative scenarios, Property sees a reduction of up to $0.6m TOTAL $5.4m Development $1.4m Reflects reduced building and subdivision Contributions activity. Does not have immediate impact as it pays off debt rather than reduced operating revenue.

13. Overall the impact is a reduction from user charges and other non-rates sources resulting in a net impact of $5.4 million. There are some savings, such as with fewer shop sales then there is less stock to buy. The Proposed Annual Plan 2020/21 funds this net decrease in revenue through borrowing. While there is a decrease of $1.4 million in Development Contributions revenue, this is treated differently because it is ordinarily used to repay debt.

14. The only other option would be to directly rates fund the $5.4 million net impact. This would require a rates increase of an additional 5.3 per cent on top of whichever rating option the Council determines (see below). This is not considered reasonably practicable due to the impacts on ratepayers during an economic crisis and therefore is not assessed further.

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15. The Council has AA credit rating with a strong balance sheet. The Balance Sheet includes the Perpetual Investment Fund (PIF) which had a balance of $282.6 million on 15 April 2020. This strategic asset is managed by the New Plymouth PIF Guardians who have a founding principle “To at least maintain the real capital of the PIF as a sustainable perpetual investment fund in the long term whilst generating a sufficient return to maintain a sustainable release to the Council.” The annual release payment (of approximately $9 million) is based on a long term formula which will average approximately 3.3 per cent of the fund value over time. The 80 per cent weighting on previous year’s release provides a smoothing mechanism to ensure that the release payment is relatively stable. For the average residential ratepayer this release will reduce their rates requirement in 2020/21 by $167. As this fund has been provided by past generations for future ratepayers is not considered as an option to cover the impacts on ratepayers during an economic crisis. In the current environment it is more appropriate to borrow cheap debt and allow the PIF to recover with the up-swing of the market and therefore is not assessed further.

16. Again, the assumptions are based on the best available information, and the actual net impact achieved may differ from that forecast. If net impact is even higher, the difference will be added to debt; if net impact is lower then less debt will be taken on. In either case Council will be advised if the situation changes.

17. The table below shows a high-level impact of some alternative scenarios based on the Treasury alternate scenarios (released 13 April). Treasury’s Scenario 1 is effectively the same as the core assumption used for the Proposed Annual Plan 2020/21. This shows the net impact of reduced revenue could reach up to $8.5 million next year under the worst case scenario.

Scenario Alert level mix Net impact 1 Level 4 – 1 month $5.4m Level 3 – 1 month Level 1/2 – 10 months

2 Level 4 – 3 months $6.6m Levels 1/2 - 9 months 3 Level 4 – 6 months $8.5m Level 3 – 6 months 4 Level 4 – 3 months $7.6m Level 3 -3 months Levels 1/2 – 6 months 5 Level 4 – 1 month $5.4m Level 3 – 1 month Levels 1/2 – 10 months Higher global economic issues

67 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Five options are being presented for the Proposed Annual Plan 2020/21

18. There are five options being presented for consideration for the Proposed Annual Plan 2020/21. These options are part of the spectrum of decision- making from providing rates relief with minor levels of service reductions, through to an Annual Plan that has a higher rates increase but continues with service level improvements.

19. The five options are set out in the table below. A more detailed assessment of each of these options are set out in the options assessment in this report. Officers recommend that the Council adopt the 3.95 per cent rates option. This option continues retains existing levels of service, and temporarily removes some costs from the organisation without creating a significant ‘bow-wave’ effect into the next year’s rates requirement.

Option Total rates How this is achieved Service requirement level impacts Option 1 $102.6m Same as Council meeting 10 Increased (6.47%) March 2020 Option 2 $100.9m Same as previous, with (4.75%) removal of most additions made on 10 March other than the increase to critical Same maintenance, and opex funded from reserves. $7.5m of lower priority not-shovel ready capex is deferred. Option 3 $100.2m Same as previous, with (3.95%) removal of $0.8m in interest Same (recommended payment option) Option 4 $99.1m Same as previous, with (2.88%) reduction in opex of $0.6m Same (0.3%) Option 5 $96.3m Same as previous, with sub- (0%) options of either $2.8m (1.6%) reduction in opex Decreased (through service reductions (may be noticeable to the public) or through borrowing

20. If the Council determines the 2.88 per cent increase option thre there is expected to be further opex reductions of $0.6 million. These will need to be reconsidered as part of the Long-Term Plan 2021-2031.

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21. The last option (0 per cent) has not been detailed. However, it will likely require some form of deeper budget cuts and service level reductions which will require an amended LTP. These changes take careful planning and staging during the transition to Alert Level 2 and Alert Level 1. This work will require detailed analysis to avoid unnecessary confusion and imposition on the community.

22. Officers also note that Council has had experience in the past in 'sweating' assets by lowering maintenance and investment in core infrastructure as a result of the Global Financial Crisis and financial issues stemming from a reduction in releases from the Perpetual Investment Fund. More recently, through its Long Term Planning, the Council has displayed a preference not to do this and started to re-invest in these core assets. Officers reiterate that careful thought and planning is required if Council determines to choose Option 5.

Impact on rates of various options

23. The Proposed Annual Plan 2020/21 is based on the new property valuations that came into effect in September 2019. This adds a further complication in assessing rate changes. This is because some categories of property can see a significant swing even if rates were not changed. It should also be noted that the Proposed Annual Plan 2020/21 continues with differential changes agreed in the Long-Term Plan 2018-28 (increase small holdings, decrease farmlands and commercial / industrial).

24. The following table and graph show how each of these options impact on a range of property types and values. The table outlines how each option impacts on the average rate, while the graph provides more comparative information on a range of different rates.

Table: Impact of each option on average rate of each differential group

Option 1 Option 2 Option 3 Option 4 Option 5 6.47% 4.75% 3.95% 2.88% 0% Residential 4.85% 3.29% 2.54% 2.07% -0.43% Small 6.54% 4.92% 4.61% 3.74% -0.89% holdings Farmland 5.48% 3.95% 3.63% 2.82% -1.61% Commercial 6.57% 4.39% 3.60% 2.87% -1.03% / industrial

69 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Residential

$3,000

$2,708 $2,708

$2,665 $2,665

$2,646 $2,646 $2,631 $2,631

$2,500 $2,597

$2,554 $2,554

$2,451 $2,451

$2,414 $2,414

$2,397 $2,397

$2,386 $2,386

$2,338 $2,338

$

$2,327 $2,327

$

$

$

$

$

2,267 2,267

2,236 2,236 2,219 2,219

$2,000 2,211

2,166 2,166 2,164 2,164

$1,500

$1,000

$500

$0 $165,000 $215,000 $285,000

2019/20 Option 5 Option 4 Option 3 Option 2 Option 1

Commercial / industrial

$15,000

$14,073 $14,073

$13,802 $13,802

$13,719 $13,719

$13,608 $13,608 $13,053 $13,053 $12,500 $13,017

$10,000

$8,521 $8,521

$8,347 $8,347

$8,284 $8,284 $8,226 $8,226

$7,500 $7,996 $7,914 $7,914

$5,000

$4,172 $4,172 $4,224 $4,392 $4,424 $4,449 $4,521 $2,500

$0 $205,000 $380,000 $720,000

2019/20 Option 5 Option 4 Option 3 Option 2 Option 1

Farmland

$5,000

$4,236 $4,236

$4,204 $4,204 $4,165 $4,165

$4,000 $4,150

$4,113 $4,113 $3,909 $3,909

$3,000

$2,312 $2,312

$2,279 $2,279

$2,272 $2,272

$2,254 $2,254 $2,192 $2,192

$2,000 $2,157

$1,778 $1,778

$1,755 $1,755

$1,750 $1,750

$1,737 $1,737

$1,670 $1,670 $1,667 $1,667 $1,000

$0 $395,000 $570,000 $1,200,000

2019/20 Option 5 Option 4 Option 3 Option 2 Option 1

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Small holdings

$2,000

$1,871 $1,871

$1,841 $1,841

$1,835 $1,835

$1,818 $1,818

$1,740 $1,740

$1,730 $1,730

$1,596 $1,596 $1,572 $1,572

$1,500 $1,567

$1,554 $1,554

$1,498 $1,498

$1,485 $1,485

$1,428 $1,428

$1,408 $1,408

$1,404 $1,404

$1,393 $1,393

$1,347 $1,347 $1,335 $1,335

$1,000

$500

$0 $280,000 $335,000 $425,000

2019/20 Option 5 Option 4 Option 3 Option 2 Option 1

Deferred lower priority non-shovel ready projects

25. Officers have reviewed the capital works programme to revise budgets for the latter three options. Projects have been deferred for consideration to the next Long-Term Plan if they are considered lower priority, non-shovel ready and/or do not provide significant employment opportunities. This includes Council- funded growth related capital improvements for new subdivisions to reflect the downward revised assumptions on new dwelling growth.1 This frees up project management resource for the Council to instead deploy towards Government- funded capital projects (see later in this report), as well as adding debt capacity for the “Get Us Back On Our Feet” plan (see later in this report).

26. Projects which Council officers believe meet the criteria for deferral to the Long- Term Plan can be found in the assessment of Option 2 in this report.

Get Us Back On Our Feet” stimulus plan

27. Officers recommend that the Council approve for community engagement the “Get Us Back On Our Feet” stimulus plan as part of responding to the Covid-19 pandemic.

28. These initiatives will first be funded from the Covid-19 and Economic Development Reserve established at the Council Emergency meeting on 25 March 2020. Once that reserve has been used, the costs of these schemes will be funded from debt. However, the Ngā Whare Ora Taiao o Ngāmotu proposal will be outright debt funded as this is the most appropriate funding source for this scheme.

1 There are no development contribution implications of these changes so long as the project is reconfirmed in the Long-Term Plan 2021-31.

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29. This report seeks the Council’s agreement to add any general rates surplus from the 2019/20 financial year (forecast to be around $2 million, although subject to change) to this reserve. This reduces the debt requirements for these initiatives and is consistent with the Treasury Management Policy’s parameters for the use of any general rates surplus.

30. The following initiatives are recommended for inclusion.

31. Ngā Whare Ora Taiao o Ngāmotu (New Plymouth sustainable homes scheme) is proposed to be established as a significant enhancement of the current Home Energy Voluntary Targeted Rate scheme. This scheme currently provides up to $5,000 in funding for home energy efficiency, repaid over 9 years through a targeted rate. Officers recommend this scheme be expanded to provide up to $10,000 and for any household sustainability capital works (including solar, water efficiency, electric car fast chargers etc.). The $200 administration fee is removed and the interest rate is lowered. . Two repayment options are proposed. Firstly a 5-year loan with no interest or a 9-year loan with 3.25 per cent interest charged. The removal of the administration fee and the interest-free option are only available for the remainder of this financial year and 2020/21 – after which an administration fee and interest would be restored.

32. This provides a stimulus for tradespeople involved in home improvements – i.e. the part of the construction sector that may not readily be able to be redeployed to infrastructure projects. Council officers estimate this could generate 40,000 hours of work for tradespeople in 2020/21. It also provides benefits to homeowners through long-term reduced living costs. There may also be wider community benefits, such as if a substantial number of households use it for water efficiency measures then reticulated water use may decrease.

33. Council officers estimate that approximately 1000 households may take up this scheme in 2020/21. This would then require $7.5 million in additional borrowing (assuming an average application of $7,500). This will be recovered from ratepayers over time, so has no long term implications for borrowing. One full time equivalent staff member (at least) will need to be dedicated to administering this scheme, as well as a new software system to operate this.

34. A proposed policy for this initiative is attached. This will be adopted by the Council for community engagement. After engagement a final policy will be presented for adoption. Officers will undertake to expand the supplier list as soon as possible as people have to apply through an approved supplier. The Medical Officer of Health, Dr Jonathan Jarmin, has forwarded a letter of support for this initiative. The letter is appended to this report.

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35. Council charges various fees for temporary use of Council owned land and road reserve. This includes encroachment licences for on-street dining and use of road reserve; temporary road closures for community events and roadworks/utilities; events on Council administered parks and reserves; reservations for contractor’s parking spaces and temporary obstruction of road reserve. A number of temporary use licence fees can be waived to encourage use of public spaces to support local recovery. These will mostly be encouraged when at Level 1, although some changes can be brought in at Level 2 and 3.

36. The proposed temporary use fee waiver package provides a stimulus for CBD and local centre businesses who provide existing on-street dining and use road reserve. It also provides benefits to tradespeople involved in CBD and local centre construction and services – i.e. the part of the construction sector that may not readily be able to be redeployed to infrastructure projects. There will be wider community benefits, with organisers of events and community gatherings not charged a fee to use Council parks, reserves and roads. The exception to the temporary use fee waiver package is temporary road closures for roadworks/utilities (excavation of the road by utilities companies and road works and maintenance). This work is generally undertaken by larger companies/organisations (who employ local contractors) who have greater ability to absorb fees and charges. Therefore fees for temporary road closures for roadworks/utilities will continue to be charged, noting the amount received (approximately $129,000 in revenue) is already lower than the cost of delivering our legislative requirements.

37. Noting that temporary use licenses are already subsidised by Council through time, resource and low application fees, the loss of annual revenue for the temporary use fees waiver package will be approximately $151,000 that will not be recovered. The fee waiver is proposed for 20/21 year.

38. While fee waivers can occur, compliance with existing Council policy/guidelines/standards (e.g. health and safety, traffic management etc.) will still be required. At this stage it is too early to know what changes, if any, will need to be made to extend/relax use of public space or enact any new social gathering requirements. Any proposed changes to existing Council policy/guidelines/standards will be reported back to the Council.

39. The Earthquake Prone buildings (EPB) and Main Street package is proposed to have three main impacts on our District’s CBD:

i) EPB Project - We are in a position to pause the EPB project for 18 months with the intention of identifying priority EPBs by 1 July 2022. This will provide building owners in our CBD areas with certainty Council will not require engineering reports during this paused stage.

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ii) CBD enhancement fund - The existing CBD enhancement fund of $150,000 with a $50,000 annual top-up will be made available District wide for building owners to utilise for facade enhancement and structural works.

iii) CBD Team - NPDC will offer building owners in our district the services of a dedicated CBD team comprised of industry experts. This new initiative will be put together to provide expert advice for building owners who can utilise the teams skills to determine the future viability of their building in this current and future environment.

40. These initiatives are aimed at helping the District’s CBDs in different ways:

i) EPB Project – With the average cost of a detailed seismic assessment at about $20,000, building owners will not be faced with additional business cost for this 18 month period during the post Covid-19 recovery.

ii) CBD enhancement fund - The CBD enhancement fund will be a cost share model utilised in conjunction with NPDC and would aim to get building owners collaborating together so as to get a number of buildings worked on at once. The aim would be to facilitate activity (building works) happening on our main streets and get the construction sector that may not readily be able to be redeployed onto large infrastructure projects working within our Districts retail cores.

iii) CBD Team - The CBD team will utilise local professional firms and will be based on a matched funding model up to $1,000 from Council, $2,000 in total. The aim is to get building owners working with local professionals in the building and property sectors to help them plan and make investment decisions.

41. The cost of these three initiatives would be funded by $50,000 from the Covid-19 and Economic Development Reserve and utilising the Government’s professional business advice package.

42. The EPB and CBD enhancement initiatives can be facilitated immediately with pre-existing mechanisms for each, the dedicated CBD team will be best suited to a Covid-19 level 2 type of environment. This lead-in time would be required to form the appropriate team (meet with our industry experts and obtain expressions of interest to join our initiative) required to make meaningful contribution to the direction of our District’s main street buildings.

43. It is proposed to provide financial relief to business owners in the hospitality industry operating under the Food Act 2014, such as restaurants, cafes and bars. Financial relief is also proposed for businesses operating under the Health Act 1956, such as hairdressers.

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44. The annual licence renewal fee will be reduced from $155 to $1. The fee of $1 will be charged for legal transactional purposes. The proposed reduction of fees will assist with business cash flow.

45. Council officers estimate the revenue loss from the fee reduction of Food Licence renewals to be approximately $72,861. The revenue loss of health licence renewals will be approximately $32,874. In total there is a loss of $105,735 to Environmental Health revenue.

46. It is recommended that the proposed fee reductions become operative on 1 July 2020 and remain in place until 30 June 2021. Any continuation of fee reductions and waivers from 1 July 2021 would be considered as an integral part of setting 2021/22 fees and charges.

47. It is proposed to offer discounts to building consents through to 30 June 2021. The first $1,000 of a Council building consent fee will be waived. Government charges will still apply.

48. The proposed reduction of building consent fees provides a small stimulus incentive for economic activity. For example about 20 per cent of building consent applications would have no Council fee e.g. small consents such as garages, bathroom alterations and new decks etc. This will apply to any building consents required for Ngā Whare Ora Taiao o Ngāmotu installation applications.

49. Council officers estimate the building consent revenue loss from the fee waiver to be about $850,000 based on 2019 building consent numbers. As economic activity is forecast to drop the actual revenue loss from fee waivers is expected to be significantly less.

50. It is recommended that the proposed fee reductions and waivers become operative immediately and stay in place until 30 June 2021. Any continuation of fee reductions and waivers from 1 July 2021 would be considered as an integral part of setting 2021/22 fees and charges.

51. Fees and Charges for resource consent processes are proposed to be reduced or waived for a temporary period of 12 months. The basis of consent charging is that the cost of consent processing is recovered from the applicant. Generally the charges are based on hourly charge out rates. This initiative is spread over four consent categories.

i) For all resource consents where the cost is based on time incurred, the first two hours of time spent on an application by technical staff will be at no charge.

ii) Deemed Permitted Activities are consents close to boundaries and are often made by the home owner. It is proposed to reduce this set fee by 50per cent.

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iii) Pre-application charges apply to customers wishing to embark on a project who are seeking information on the likely requirements. The charge is currently hourly based. It is proposed that no charge apply.

iv) Land subdivision and development - it is proposed to make changes to the current process where engineering plan approval follows the grant of subdivision/land development and these are charged separately. The proposal will merge consent and engineering plan approval into one process removing engineering plan approval fees. The current process would still be available where requested with no fee change.

52. This provides for savings in consenting cost for a wide sector of the community whether home owner or property developer and as such is a balanced and fair approach. This plan has no impact on the integrity of legislation that manages our built and natural environment. The proposal incentivises land development through looking to reduce/remove constraints and assist the pace of recovery by acknowledging development costs incurred over time.

53. The likely cost of this initiative is a reduction in charges recovered relating to processing of applications and is estimated in a loss in revenue of approximately $188,000. This has been assessed on resource consent application numbers over recent years.

54. Development Contributions are collected to ensure infrastructure and community facilities support the needs of a growing community. They are paid to Council at the first available opportunity during the land development process. In most cases this is at the time of subdivision or building consent. This initiative proposes to introduce flexibility in the timing of collection of payment through developer agreements. A developer agreement is a contractual agreement voluntarily entered into between a developer and the Council.

55. Section affordability is positively related to a steady supply of residential sections to the real estate market. Costs of land development are high, particularly in initial outlay e.g. land purchase and construction costs. Current payment practice applies an additional burden prior to sale of residential land or issue of code compliance certificate for commercial/industrial developments. Flexibility in payment would increase business confidence.

56. While developer agreements can be variable in scope including services and works it is envisaged that the agreements would be for the provision of payment only. An example would be the deferring of payment of the development contribution until the sale of sections. Costs associated with development agreements are generally administrative only. Delay’s in collection of contributions is considered low risk considering a developer has anticipated the level of risk prior to proceeding. There are therefore no anticipated costs as a result of this initiative.

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57. The Development and Financial Contributions Policy was developed as part of the Councils Long Term Plan 2018-2028. This initiative is proposed for a period of 24 months given land development timeframes.

58. It is proposed that community funding investment is expanded. Currently, community funding investment consists of one funding round per year of $730,000. Council has committed $422,000 of funding for Strategic Partner contracts in the 2020/21 financial year, leaving $308,000 of undistributed funds for its budgeted community funding round. It is proposed that funding is increased by a further $453,000. This will allow for the budgeted funding round and a new $300,000 funding round in six months’ time, and an extension of expiring multiyear agreements by another year.

59. An immediate funding round is proposed to allow organisations who have been working in the Level 4 and 3 environment to continue to operate. Many of these organisations will feel the financial effects of their Covid-19 response in the months to come as contracts and donations begin to slow. This funding will allow them to continue with as little disruption as possible. A second round of $300,000 in six months’ time will allow organisations who have been unable to operate during this time to seek support. This will include organisations who generate the majority of their funding through the lockdown period e.g. winter sports clubs. It is also proposed that no new Strategic Partnerships (multiyear funding) are granted, and current expiring Strategic Partnerships are rolled over for another year, at a cost of $153,000.

60. If the proposal is accepted, Council officers will begin an accelerated funding round. Applications will open immediately with decisions made by the Community Funding Investment Committee in six weeks’ time. It is likely a number of the Strategic Partnerships will not be able to operate as they have in the previous 12 months. Council officers will work with them to support their new ways of working.

61. There are two initiatives addressed in separate reports at this Council meeting:

i) The Procurement Recovery Plan (Covid-19) will favour local suppliers and provide greater flexibility to ensure our procurement methods promote economic recovery, and

ii) The Council’s commercial tenants and community group tenants will be able to negotiate a rent reduction to reflect inaccessibility of their business, as appropriate.

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62. This is on top of other initiatives that are not related to the Proposed Annual Plan 2020/21:

i) The Council has already adopted Rates Remission and Postponement for Covid-19 Pandemic Response Temporary Policies to provide focused rates relief on those ratepayers who most need it in light of the Covid-19 pandemic and associated economic downturn.

ii) Council suppliers and contractors are being paid quicker to ensure they retain their cash flow during the downturn. This approach will continue during alert levels 3 and 4, and will be reviewed when alert level 2 is implemented. This is done at a management level and does not require Council decision-making.

63. There may be further initiatives developed through the year. These will be reported to the Council as required.

64. Some of these initiatives can only be active during certain Alert level restrictions. For instance, undertaking the household sustainability improvements in Ngā Whare Ora Taiao o Ngāmotu (New Plymouth Sustainable Homes Scheme) are restricted during alert levels 1 and 2 (or no alert level). This means these financial forecasts are subject to change depending on the nature of the pandemic and the restrictions in place at any given time.

Approval is sought for the Council to undertake government-funded capital works

65. The Government has announced that it is looking for significant infrastructure projects that are ‘shovel ready’ for the economic recovery. Council officers have submitted a number of projects for funding consideration. This report seeks the Council’s approval for officers to undertake any additional capital expenditure funded by the Government without reference back to the Council.

66. Council officers submitted approximately $496 million of works to the Government, made up of the following projects:

i) Three waters - $321.7 million to address renewal backlog on water, wastewater and stormwater assets and to undertake improvements to the networks’ operations

ii) Transport - $108.4 million to address renewal backlog on roads and bridges and improvements to the network

iii) Taranaki Traverse - $13.6 million to construct the Taranaki Traverse

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iv) Airport - $15.3 million for infrastructure improvements

v) NPDC/Hiringa Energy Thermal Dryer Initiative - $37.0 million to replace the thermal dryer with a hydrogen-powered solution.

67. The Government may also create nationwide or regional projects that require the Council to action for our community to benefit from that stimulus project. For the avoidance of doubt, the inclusion of these projects are included within the delegation being sought.

68. The Minister of Economic Development has noted that Councils that freeze their rates and are not willing to invest in stimulus plans may not see Govenrment investment in their communities as the Government expects Councils to also support their communities. This report therefore also recommends the Council delegate authority to the Chief Executive to approve up to $20 million in Council debt-funded capital expenditure. This means the Council can demonstrate it has already made funds available for stimulus programmes. This $20 million fund is to be used in two circumstances. Firstly, the funding could be used to co-invest in projects if required. Secondly, it serves as a buffer to cover any unusually high costs arising from the ‘lumpy’ inflation environment (Appendix 1) for projects substantively funded by the Government. If this is up-taken it may have impacts on future rates but not for 2020/21.

69. The Council will be provided with monitoring and progress reports on any initiatives funded by the Government.

70. These delegations will expire on 30 June 2022 as these are likely to be multi- year projects.

Debt funding of operating expenditure has legal impacts

71. As noted earlier, there are two aspects of operating expenditure being funded through debt in the Proposed Annual Plan 2020/21. The first is the reduction in user charges and other non-rates revenue of approximately net $5.4 million. The second is the stimulus and community support plan of approximately $3.0 million in operating expenditure (although first funded by the Covid-19 and Economic Development Reserve, current balance of $1.4 million).

72. Section 100 of the Local Government Act 2002 requires the Council to have a balanced budget (that is, projected operating revenue must be set at a level sufficient to meet projected operating expenditure). Section 100 enables the Council to set projected operating revenue at a level lower than projected operating expenditure having considered certain matters. These matters, and there considerations, are set out in the table below:

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Matter Consideration Estimated expense of The estimated expense of achieving and maintaining achieving and LTP levels of services are largely unchanged maintaining LTP although inflationary pressures are difficult to levels of service forecast due to uncertainty. Projected revenue Projected revenue from user charges has fallen by at available to fund least $5.4 million. There is likely an increase in late estimated expenses and non-payment of rates due to the economic circumstances and the rates remission and postponement scheme. The Council has also established a Covid-19 and Economic Development Reserve that will first bear the operating costs of the Get Us Back On Our Feet plan. Equitable allocation of There may be an increase in costs within future rate responsibility for strikes to maintain assets and facilities that should funding provision and have been funded or undertaken in the next financial maintenance of year. This is offset through two factors. assets and facilities throughout their Firstly, the Council has applied to the Government for useful life funding to address renewal backlogs as part of the Government’s stimulus package (see later on in the report for detail on this).

Secondly, the response programme should help a faster and/or stronger recovery from the pandemic’s economic impact, thus improving cashflow for future ratepayers to fund the work. Funding and financial The Revenue and Financing Policy provides that policies operating expenditure is not to be funded by borrowing.

73. As noted in the table above, the Revenue and Financing Policy provides that the debt cannot be used to fund operating expenditure. Section 81 of the Local Government Act 2002 requires the Council to identify this inconsistency, the reason for it, and whether the Council intends to alter the relevant policy. This inconsistency is justified due to the unique economic circumstances as a result of the Covid-19 pandemic. There is no intention to amend the policy to accommodate this decision.

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The Council’s borrowing limit will need to increase

74. This report also recommends increasing the Council’s borrowing limit for 2021/22 to $270 million from $216 million (as approved on 10 March 2020). This reflects the worst case scenario for revenue drop and buffers. The table below outlines the maximum forecast debt. It includes the potential additional debt as requested by Papa Rererangi i Puketapu Limited. A further $4.1 million buffer is recommended for contingency purposes (e.g. further initiatives for community and economic support).

Current debt limit for 2020/21 $216.0m Plus worst case forecast for drop in user charges +$8.7m Pus reduced Development Contribution revenue +$1.4m Plus anticipated debt from Get Us Back On Our Feet initiatives +$16.8m Plus buffer for Government funded projects +$20.0m Plus potential Airport additional loan (see separate report on this +$10.0m matter) Minus deferred capital works - $8.0m Total maximum forecast debt $265.9m

75. This new debt will require higher debt repayments in coming years. There will therefore have to be higher rates increases in the future. This will be addressed in the Long-Term Plan 2021-31.

NEXT STEPS

76. This report recommends the Council adopt a Proposed Annual Plan 2020/21. Council officers will then finalise Proposed Annual Plan 2020/21 and present it for adoption in June 2020. The report also recommends the Council engage the community on the “Get Us Back On Our Feet” plan. This will occur as soon as possible, and then be presented to the Council.

Long-Term Plan 2021-31 development

77. During the next 12 months the Council will be developing its Long-Term Plan 2021-31. This will need to consider the Council’s operating state following the Covid-19 pandemic. There may need to be service level adjustments in some Council services to reflect changed economic and social circumstances, as well as increased capital works and operational programmes in the first three years to provide further economic recovery stimulus. The Council may need to create a new operating state to reflect the new economy and society that emerges. These will be longer term responses to the changed circumstances.

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SIGNIFICANCE AND ENGAGEMENT

78. In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as being critical because of the impact on the interests of the district and community, the impact on the social and economic well-being, the financial costs, inconsistencies with policy and standard Local Government Act 2002 obligations, and the wide public interest in the social and economic recovery and the setting of rates.

79. The statutory threshold for Annual Plan consultation is whether the Council considers it is making significant or material changes to that envisaged in year three of the Long-Term Plan 2018-2028. In Council making this determination, officers recommend the following matters should be considered before making a decision on whether to consult or not:

80. It is officers view that options 1 to 4 for setting next year’s rate do not require consultation on the basis that on 10 March 2020 the Council considered the 6.47 per cent option (1.59 per cent higher than the LTP forecast) not to be a significant or material variation. Officers instead recommend that an engagement programme take place to both test some of the initiatives in the community relief and response plan. The reason for this is set out in the following paragraph.

i) The reduction in revenue forecast is proposed to be funded from debt. While this differs from the Long-Term Plan, Officers recommend that debt funding is the only reasonably practicable option given the debt has a minimal impact on overall rates, there is limited time available to decide on the plan and that this is a short term response plan, on the eve of the preparing of the LTP 2021/2031. Officers therefore recommend that the Council determine that the raising of debt is not a significant or material variation and therefore not consult on this matter.

ii) On the matter of the community relief and response plan proposals, these are funded by reserves and have no impact on future rates. It is also proposed to reshuffle capital works programme to allow for more ‘shovel ready’ projects that support current and new jobs. This proposal has a consequential decrease in the value of capital works identified in year three of the LTP 2018/2028 and therefore results in a reduction of the rate requirement. On this basis officers recommend that the above proposals in options 1-4 are not a significant or material variation from the LTP 2018/2028.

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iii) Officers note that if Council were to adopt Option 5 in the report then the variations could be considered to be significant and/or material requiring formal consultation. Whilst detailed work is underway to understand the impacts on Council services as a result of the Covid-19 pandemic, it is the view of Officers that this work will continue and be presented as part of the new LTP 2021/2031 work programme. The results of this work will be consulted, along with the new LTP.

81. Officers therefore recommend that the Council only engage the community on the “Get Us Back On Our Feet” initiatives outlined in this report, unless Option 5 is adopted, with the zero per cent rates increase, and Council consider this to be a significant or material variation to year 3 of LTP2018.

82. If the Council determines to adopt the zero per cent rates increase option, officers recommend the Council formally consult on the variations within the Proposed Annual Plan 2020/21. A Consultation Document will then be developed and presented to the Council for adoption as soon as possible.

OPTIONS FOR ISSUE 1: PROPOSED ANNUAL PLAN 2020/21 CONTENTS

Option 1 Adopt a Proposed Annual Plan 2020/21 with a 6.47 per cent rates increase

83. A sub-option is to adopt this with further minor changes.

84. This option effectively takes the Annual Plan as it was following the 10 March Council meeting and then reserve and debt funds user charges and stimulus / support initiatives. The 10 March Council meeting included the following additional initiatives on top of the baseline budget:

i) Increasing critical maintenance on our three water and roading assets, made up of:

a) Three-waters mechanical maintenance ($180,000 opex, ongoing)

b) Inspections and maintenance of marine outfall pipes ($100,000 opex,ongoing)

c) Increase bridge maintenance ($400,000 opex, 51 per cent NZTA funded, ongoing)

d) Increase electrical engineering capacity ($100,000 opex, ongoing)

e) CCTV through stormwater pipes ($100,000 opex, ongoing)

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ii) High priority infrastructure design and replacement, made up of:

a) Concept design and investigations for the replacement of the one-lane Junction Road and Huatoki Street urban bridges ($400,000 capex, oneoff)

b) Feasibility study into expanding the wastewater reticulation network to include Urenui, Onaero, Okato, Egmont Village and Lepperton ($350,000 opex, one-off)

c) Smoothing reserve for Pukekura Park lake dredging ($200,000 opex into a reserve, ongoing)

iii) Increase strategic planning resources ($350,000 opex, ongoing including the provision of $100,000 to complete a New Plymouth CBD Strategy in FY0/21)

iv) Waitara Stormwater acceleration ($100,000, opex ongoing)

v) Onaero Domain drainage ($75,000 capex, one-off)

vi) District footpaths ($250,000 capex, ongoing with an initial focus on the areas of highest need including Waitara)

vii) Port Taranaki Marina feasibility study review and update ($50,000 opex oneoff)

viii) Inglewood motorhome dump station ($125,000 capex, one-off)

85. This option increases the average residential rate by 4.85 per cent, or $113 per annum (just over $2 per week).

86. This option best allows the Council to make further decisions on additional stimulus. This is because the Council’s debt limits are set as a ratio to its income – so a higher rates intake enables more debt to be taken on.

Financial and Resourcing Implications

87. Under this option the Council would have a total rates revenue of $102.6 million. Operating expenditure will be $178.42 million, and capital expenditure will be $57.76 million.

Risk Analysis

88. This option clearly places most of the additional funding requirements onto ratepayers. It therefore increases the likelihood of more ratepayers looking for assistance under the new rates remission and postponement policies.

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Promotion or Achievement of Community Outcomes

89. This option includes projects in the Proposed Annual Plan 2020/21 that promote all community outcomes.

Statutory Responsibilities

90. Section 95 of the Local Government Act 2002 outlines the requirements for an Annual Plan.

Consistency with Policies and Plans

91. As noted in the report, the Proposed Annual Plan 2020/21 funds some operating expenditure from borrowing so is not consistent with the Revenue and Financing Policy. This option has a noticeable higher rates increase than set out in the Long-Term Plan 2018-28 and Financial Strategy (including by being above the self-imposed 5 per cent rates increase limit).

Participation by Māori

92. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

93. None known.

Advantages and Disadvantages

94. This option provides a significant uplift in maintenance and strategic infrastructure investment and community planning to address long-standing issues for the Council. However, it results in a large rates rise that is considered no longer appropriate in light of the new economic circumstances.

Option 2 Adopt a Proposed Annual Plan 2020/21 with a 4.75 per cent rates increase

95. A sub-option is to adopt the changes with further minor changes.

96. This option takes option 1 and removes:

i) Concept design and investigations for replacing Junction Road and Huatoki Street urban bridges ($400,000 capex)

ii) Feasibility study in expanding wastewater reticulation to Urenui, Onaero, Okato, Egmont Village and Lepperton ($350,000 opex)

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iii) Smoothing reserve for Pukekura Park lake dredging ($200,000 opex)

iv) Increased strategic planning resources ($350,000 opex)

v) Waitara Stormwater acceleration ($100,000 opex)

vi) Onaero Domain drainage ($75,000 capex)

vii) District footpaths ($250,000 capex)

viii) Inglewood motorhome dump station ($127,000 capex)

ix) Zeal Youth Space ($50,000 opex)

x) Social and affordable housing research ($50,000 opex)

xi) $7.4 million of capex as listed below

97. Council officers believe the following projects meet the criteria for deferral to the Long-Term Plan:

Project Cost Establish Commercial and Industrial Material Recovery Facility $1,018k Kawaroa to Belt Rd cliff erosion and seawall $835k Wastewater Treatment Plant Influent Buffer Lagoon $781k Puke Ariki long-term gallery refreshment $447k Parks development Area Q $390k Upper Carrington Growth Area Water Pump Station $313k TSB Stadium renewals $308k Downtown carpark earthquake strengthening $261k Pumped water supply extension to Dudley Road $237k TSB Showplace renewals $228k Puke Ariki renewals $221k Transport services for subdivisions $221k Downtown carpark renewals $217k Entry upgrade for NP Water Treatment Plant and Crematorium $215k Community library re-development $204k Oakura Reservoir seismic strengthening $189k Upper Carrington Road widening $145k Esplanade and local reserve purchase $126k Coastal Walkway partial realignment $119k Festive street lighting renewals $68k TSB Festival of Lights replacement lights $65k Downtown carpark safety barriers $63k

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Project Cost TSB Festival of Lights service level improvements $61k Yarrow Stadium operational asset renewals $61k Water services for subdivisions $53k Pukekura Park Festival of Lights infrastructure renewal $42k Land purchases in Upper Carrington growth area $42k Assessment and minor treatments of structures on minor roads $21k

98. The Port Taranaki Marina feasibility study would be funded from the forestry reserve so it does not have a rates impact. This work continues because it could become an economic stimulus programme in 2021/22.

99. This option increases the average residential rate by 3.29 per cent, or $77 per annum ($1.48 per week).

100. This option continues to enable reasonable scope for the Council to take on additional debt for any further stimulus response decisions throughout the year.

Financial and Resourcing Implications

101. Under this option the Council would have a total rates of $100.9 million. Operating expenditure will be $175.9 million, and capital expenditure will be $49.7 million.

Risk Analysis

102. Council officers have identified known risks below. These are known at the time of writing the report. The Council’s response to the Covid-19 pandemic is a short term response. If risk levels become to great for one or more of the projects below, Council officers will report back to the Council with any necessary project amendments.

i) Feasibility study into expanding the wastewater reticulation to Urenui, Onaero, Okato, Egmont Village and Lepperton – High Risk: The existing communal septic tank systems at Urenui and Onaero are currently breaching their resource consent conditions and are at risk of coastal erosion. In addition, there are widespread issues with private septic tanks in Urenui township that is resulting in E.coli contaminated wastewater entering the Council’s storm water system. Deferring this project will delay the development by 12 months of a long term solution for these issues and may result in the Taranaki Regional Council (TRC) taking enforcement action. Officers will work with TRC to minimise this risk by seeking first the views and preferences of the Urenui Community on the design and funding of a reticulated waste water system.

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ii) Establishment of Commercial Materials Recovery Facility – Low Risk: This will delay the achievement of some of the targets set in the Council’s Waste Management minimisation Plan and the council’s Zero Waste vision. iii) Kawaroa to Belt Rd Cliff Erosion and Sea Wall – Low Risk: the coastline in this area is subject to erosion and there is a risk that, in the medium term, this could threaten sections of the coastal walkway. In the short term (one year deferral) this risk is considered low. iv) Wastewater Treatment Plant Influent Buffer Lagoon – Medium Risk: During a number of storm events, the wastewater treatment plant has got very close to its maximum hydraulic capacity. Deferring this project will delay the preparation of an updated masterplan for the treatment plant that will identify the feasible options for increasing its capacity or buffering inflows. There is an ongoing risk of sewage overflow from the treatment plant if its hydraulic capacity is exceeded. v) Pumped water supply to Dudley Rd – Low Risk: Council currently provides an untreated raw water supply for agricultural use only to customers in the Dudley Rd area for watering stock. There is a risk that if this water is being used for human consumption then Council will not be compliant with the Drinking Water Standards and its responsibilities under the Health Act. Council has repeatedly written to the customers receiving the raw water supply to advise them that the water is provided for animal consumption only and, as such, the risk associated with deferring this project by a year is low. vi) Assorted growth projects including Carrington Road widening, Parks development Area Q, esplanade and reserve land purchases and Transport/Water services for sub-divisions – Low/Medium Risk: these projects are required to provide infrastructure services to land so that it can be developed for residential housing. Whilst the economic impacts of Covid-19 are likely to slow down demand for new residential sections, there is a risk that deferring these projects become a barrier to development and the associated economic activity. vii) Downtown car park earthquake strengthening, renewals & safety barriers – Low Risk: there is currently unspent 2019/20 capital budgets. If these budgets are carried forward to the 2020/21 financial year, these the earthquake strengthening and safety barrier replacement work can be completed without the additional budget in the proposed annual plan.

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viii) Junction Street and Huatoki Street bridge upgrades – Low Risk: these two single lane bridges are approaching the end of their operational lives and will need to be replaced. Based on the latest bridge inspection reports there is still sufficient residual life in the existing bridges to allow this early design work to be delayed by one year without any material increase to the safety of the existing structures. ix) Oakura Reserve Seismic Strengthening – Low Risk: Deferring this project would maintain the status quo. The Oakura treatment plant has two reservoirs the risk if low x) Assessment and treatment of structures on minor roads – Low Risk: Deferring this project will effectively maintain the status quo regarding the council’s risk of owning an unknown number of structures on its network of unformed and paper roads that are not being proactively maintained. The source of this risk is the possibility of a member of public being injured whilst using one of these structures and xi) Todd Energy Aquatic Centre Filtration (TEAC) Project – Medium Risk Potential reputational risk if we close the pool again to do the project. This project has a number of benefits including ability to remove 99.9per cent of crypto in a single pass, improving water quality and saving up to 25 per cent in chemical consumption. The project will reduce the chemical waste sent to landfill and levels of contaminated water through the council sewer. The project will also reduce the requirement for staff and contractors to handle hazardous chemicals in a restricted area on a regular basis. The project requires the pool to be closed and it is likely that TEAC may not be open until alert level 1 is reached. Completion of the project whilst under shutdown represents an efficient use of the shutdown time. xii) TSB Stadium renewals – Low Risk Deferring this project would maintain the status quo for a year. xiii) TSB Showplace renewals – Low Risk Deferring this project would maintain the status quo for a year (assuming carry forward of 2019/20 budget for critical lighting repairs) xiv) Puke Ariki Library and Museum – Low Risk Deferring this project would maintain the status quo for a year.

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xv) Puke Ariki and District Libraries –– Medium Risk This project is part of the implementation of the Library Strategy. Deferring for a year will push out the detailed design work for the redevelopment of Waitara library to the 2021/22 year and result in a delay to the start of any capital works. This project is likely to be a signature project for the regeneration of Waitara so there may be some reputational risk around not meeting community expectations.

xvi) Puke Ariki and District Libraries – Long term gallery refreshment - High Risk The long term gallery refreshment project is an ongoing project jointly funded with external partners with key performance measures attached to the funding. Deferral will result in not achieving agreed performance measures putting at risk ongoing funding. The lack of access to touring exhibitions under Covid-19 places even more importance on the quality of the long term gallery and there may be reputational risk around the Puke Ariki offering.

xvii) TSB Festival of Lights replacement lights – Low Risk Lighting stock is in good condition so no risk to defer for a year.

xviii) TSB Festival of Lights service level improvement – Low Risk Deferring this project would maintain the status quo for a year.

xix) Yarrow Stadium operational assets renewal – Low Risk Deferring this project would maintain the status quo for a year.

Promotion or Achievement of Community Outcomes

103. The Proposed Annual Plan 2020/21 includes programmes and initiatives that support all community outcomes.

Statutory Responsibilities

104. Section 95 of the Local Government Act 2002 outlines the requirements for an Annual Plan.

Consistency with Policies and Plans

105. As noted in the report, the Proposed Annual Plan 2020/21 funds some operating expenditure from borrowing so is not consistent with the Revenue and Financing Policy. This option is also inconsistent with the Long-Term Plan and the Financial Strategy.

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Participation by Māori

106. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

107. None known.

Advantages and Disadvantages

108. This option presents the lowest rates increase that does not include making temporary changes that will have to be reversed in the future. It therefore produces a smoother long-term rating track. This is the closest to the LTP forecast of 4.88 per cent.

Option 3 Adopt a Proposed Annual Plan 2020/21 with a 3.95 per cent rates increase (recommended option)

109. A sub-option is to adopt the changes with further minor changes.

110. This option would be achieved by taking option two and reducing interest costs by $0.8 million.

111. This option increases the average residential rate by 2.54 per cent per cent, or $59 per annum ($1.14 per week).

Financial and Resourcing Implications

112. Under this option the Council would have a total rates revenue of $100.2 million. Operating expenditure will be $175.1 million, and capital expenditure will be $49.7 million.

Risk Analysis

113. This approach reduces interest repayments, which increases risk that there may need to be a future upswing in interest repayments and thus a higher rates increase in a future year.

Promotion or Achievement of Community Outcomes

114. The Proposed Annual Plan 2020/21 will continue to include projects that promote all community outcomes.

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Statutory Responsibilities

115. Section 95 of the Local Government Act 2002 outlines the requirements for an Annual Plan.

116. The Council will continue to meet legal obligations to lenders in relation to debt repayments.

Consistency with Policies and Plans

117. As noted in the report, the Proposed Annual Plan 2020/21 funds some operating expenditure from borrowing so is not consistent with the Revenue and Financing Policy. This option is also inconsistent with the Long-Term Plan and the Financial Strategy.

Participation by Māori

118. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

119. None known.

Advantages and Disadvantages

120. This option will achieve a reduction in the rates requirement through temporary measures that will need to be reversed in the Long-Term Plan 2021-31 and therefore require a larger rates increase in the future.

Option 4 Adopt a Proposed Annual Plan 2020/21 with a 2.88 per cent rates increase

121. A sub-option is to adopt the changes with further minor changes.

122. This option would be achieved by taking option two and making temporary operational budget cuts which will need to be reconsidered as part of the Long- Term Plan 2021-2031.

123. This option increases the average residential rate by 2.07 per cent, or $48 per annum ($0.93 per week).

Financial and Resourcing Implications

124. Under this option the Council would have a total rates of $99.1 million. Operating expenditure will be $174.5 million, and capital expenditure will be $49.7 million.

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Risk Analysis

125. This approach removes budgets that will be required in the future. This means that the next year will require a larger upswing in rates.

Promotion or Achievement of Community Outcomes

126. The Proposed Annual Plan 2020/21 will continue to include projects that promote all community outcomes.

Statutory Responsibilities

127. Section 95 of the Local Government Act 2002 outlines the requirements for an Annual Plan.

Consistency with Policies and Plans

128. As noted in the report, Proposed Annual Plan 2020/21 funds some operating expenditure from borrowing so is not consistent with the Revenue and Financing Policy. This option is also inconsistent with the Long-Term Plan and the Financial Strategy.

Participation by Māori

129. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

130. None known.

Advantages and Disadvantages

131. This option has the lowest 2020/21 rates increase without impacting on levels of service. It does, however, achieve this through temporary measures that will need to be reversed in the Long-Term Plan 2021-31 and therefore require a larger rates increase in the future.

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Option 5 Adopt a Proposed Annual Plan 2020/21 with a zero per cent rates increase

132. There are two sub-options as to how this is achieved:

i) Achieving a zero per cent rates increase by removing $2.8 million in operational expenditure. This would require service level reductions.

ii) Achieving a zero per cent rates increase through adding $2.8 million in debt funding. This would not require service level reductions, but would add to the total debt incurred by the Council.

133. The average residential rate would decrease by -0.43 per cent, or -$10 per year (-$0.19 per week).

Financial and Resourcing Implications

134. Under this option the Council would have a total rates revenue of $96.3 million. Operating expenditure will be $171.3 million, and capital expenditure will be $49.7 million.

Risk Analysis

135. The risk of this option is that the Council is not in a financial position to provide any substantive economic or social support to those struggling as a result of the Covid-19 pandemic. Any support that the Council does take would be limited in scale, debt-funded and unlikely to have substantive impact.

136. This option relies on not adding inflation to Council budgets, despite that there has been an inflationary environment for the Council in 2019/20 indicating that budgets need to be inflated. There is also substantial risk, as noted earlier in the report, of varying inflationary pressures across the Council, with the risk of financial issues as a result being increased through not applying any inflation to budgets.

Promotion or Achievement of Community Outcomes

137. This option would limit the ability to achieve community outcomes.

Statutory Responsibilities

138. Section 95 of the Local Government Act 2002 outlines the requirements for an Annual Plan.

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Consistency with Policies and Plans

139. As noted in the report, the Proposed Annual Plan 2020/21 funds some operating expenditure from borrowing so is not consistent with the Revenue and Financing Policy. This option is also inconsistent with the Long-Term Plan and the Financial Strategy.

Participation by Māori

140. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

141. There has been some correspondence to the Council seeking this option.

Advantages and Disadvantages

142. Officers do not recommend a zero per cent rates increase for the following reasons:

i) This will place the Council under financial pressure and there is a risk that savings cannot be found thereby result in adding to the deficit for debt funding

ii) This option could result in a significant ‘bow-wave’ effect in 2021/22 requiring a double-digit rates increase

iii) The Council has already agreed to rates remission and postponement policies for Covid-19 relief providing a more targeted approach to those in most need. The Minister of Economic Development has noted that Councils that freeze their rates may not see Government investment in their communities as the Government expects Councils to also support their communities.

143. Officers do accept that any rates increase needs to be limited, well justified and new spending must be focused on critical issues. However, a zero per cent rates increase has serious risks and may cause more harm to the community than it is trying to solve. Officers strongly advise against this option.

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OPTIONS FOR ISSUE 2: CONSULTATION

144. The table below shows how the determination of Issue One Options influences officer advice for Issue Two. Officers recommend that the Council not formally consult on the Proposed Annual Plan 2020/21 for the first three Issue One Options and instead seek community feedback on the Get us Back On Our Feet Initiatives (where appropriate). If the Council determines to adopt the zero per cent option officers advice is that this reaches the statutory threshold for consultation on an Annual Plan and therefore further reporting and information would be required to enable consultation.

Consult or Key issues Engage 6.47 per Engage Covid-19 relief support cent 4.75 per Engage Covid-19 relief support cent 3.95 per Engage Covid-19 relief support cent 2.88 per Engage Covid-19 relief support cent Zero per Consult Reduction in service levels to achieve zero per cent cent and Covid-19 relief support

Option 1 Consult the community

145. This option would see formal statutory consultation on the significant and material variations identified by the Council. This is the recommended option if the Council determined the zero per cent rate increase option.

146. Officers would develop a Consultation Document and present it to the Council for adoption as soon as possible. A short and sharp consultation would be required in order to meet adoption timeframes (and even then it is likely these will not be met).

Financial and Resourcing Implications

147. There will be resources required to consult with the community, particularly in assessing and considering submissions from the community (including holding hearings, drafting reports, and making revisions to the Proposed Annual Plan 2020/21). These may place additional pressures on resources due to the short timeframes involved and may divert some resources from undertaking other tasks required to address Covid-19 pandemic responses.

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Risk Analysis

148. There is considerable risk that the Council will not be able to adopt the Proposed Annual Plan 2020/21 before 30 June 2020 due to the timeframes involved in consultation, analysis of feedback, hearings, deliberations and revisions. Simpson Grierson, Lawyers, have provided advice to the local government sector that an Annual Plan adopted on or after 1 July 2020 is legal until a Court declares otherwise, and that a Court would likely give strong consideration to the extraordinary circumstances presented by the Covid-19 pandemic.

Promotion or Achievement of Community Outcomes

149. Consultation helps promote People.

Statutory Responsibilities

150. The Local Government Act 2002 requires the Council to formally consult the community if there are significant or material variations from the Long-Term Plan to the Annual Plan.

Consistency with Policies and Plans

151. This option is consistent with the Significance and Engagement Policy.

Participation by Māori

152. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

153. None known.

Advantages and Disadvantages

154. This option ensures the community has its say on what the Council adopts for the Proposed Annual Plan 2020/21.

Option 2 Engage the community on the “Get Us Back On Our Feet” initiatives

155. This option would mean the Proposed Annual Plan 2020/21 position taken above is then finalised for adoption without reference to the community. However, the Council would instead undertake community engagement on a selection of the “Get Us Back On Our Feet” options. There would no change to the Proposed Annual Plan 2020/21 per se.

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156. The content of the engagement would vary depending on the option selected.

157. Officers would undertake the engagement in the coming weeks. The results would be presented as soon as reasonably practical after the engagement period has finished.

158. This is the preferred option for all rate increases other than the zero per cent option.

Financial and Resourcing Implications

159. This would have no additional financial and resourcing implications.

160. Community engagement would be undertaken and processed within existing resources.

Risk Analysis

161. This option means the Council will be able to adopt the Proposed Annual Plan 2020/21 before 30 June 2020.

Promotion or Achievement of Community Outcomes

162. This option promotes People through seeking the community’s feedback on key initiatives. It also enables the Council to be aware of ideas that may support all community outcomes.

Statutory Responsibilities

163. The Local Government Act 2002 requires the Council to formally consult the community if there are significant or material variations from the Long-Term Plan to the Annual Plan. Staff recommend this obligation applies to the zero per cent option only.

Consistency with Policies and Plans

164. This option is consistent with the Significance and Engagement Policy.

Participation by Māori

165. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

166. None known. This option would enable the community to provide their views and preferences on the selected initiatives.

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Advantages and Disadvantages

167. This option provides a balanced approach between the desire to seek the community’s feedback on the Proposed Annual Plan 2020/21 and the practicalities of doing so and finalising the Annual Plan by 30 June 2020.

Option 3 Do not consult or engage the community

168. This option would mean the Proposed Annual Plan 2020/21 position taken above is then finalised for adoption without reference to the community.

Financial and Resourcing Implications

169. This would have no additional financial and resourcing implications. Finalisation of the Proposed Annual Plan 2020/21 would be undertaken by Council officers within existing resources and with little impact on the ability to complete other Covid-19 response work.

Risk Analysis

170. This option means the Council will be able to adopt the Proposed Annual Plan 2020/21 before 30 June 2020.

Promotion or Achievement of Community Outcomes

171. This option is not considered to promote any community outcomes.

Statutory Responsibilities

172. The Local Government Act 2002 requires the Council to formally consult the community if there are significant or material variations from the Long-Term Plan to the Annual Plan.

Consistency with Policies and Plans

173. This option is consistent with the Significance and Engagement Policy.

Participation by Māori

174. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

175. None known. This option would not enable the community to provide their views and preferences.

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Advantages and Disadvantages

176. This option enables the Council to efficiently adopt the Proposed Annual Plan 2020/21 and the Get Us Back On Our Feet initiatives immediately to provide benefit as soon as possible from these stimulus initiatives. However, it does mean that the Council will not have the opportunity to understand the various views and preferences of the community in making final decisions on the Get Us Back On Our Feet initiatives.

Recommended Option This report recommends option 3 for Issue 1 (Adopt a Proposed Annual Plan 2020/21 with a 3.95 per cent rates increase) and option 2 for Issue 2 (Engage the community on the “Get Us Back On Our Feet” initiatives) for addressing the matter.

APPENDICES

Appendix 1 Proposed Annual Plan 2020/21 assumptions

Appendix 2 Supporting information for Proposed Annual Plan 2020/21 based on 3.95 per cent options:

 Council Services

 Financial Information

Appendix 3 Proposed Ngā Whare Ora Taiao o Ngāmotu Voluntary Targeted Rate Scheme Policy

Appendix 4 Letter of support – Medical Officer of Health (ECM8278283)

Report Details Prepared By: Greg Stephens (Senior Policy Adviser) Team: Policy Development Team Approved By: Craig Stevenson (Chief Executive) Ward/Community: District-wide Date: 30 April 2020 File Reference: ECM 8274989

------End of Report ------

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APPENDIX 1: REVISED ANNUAL PLAN ASSUMPTIONS

1. In light of the forecasted economic impacts of Covid-19, officers have built a series of revised and new assumptions for the Annual Plan 2020/21. These are scenarios before the Council’s “Get Us Back On Our Feet” stimulus plan is taken in account and before the Government’s stimulus plan is known.

2. There are two tables below. The first revises LTP18-28 assumptions in light of Covid-19, while the second table is a set of new assumptions that have no correlation in the LTP.

Long-Term Plan 2018-28 Revised Annual Plan 2020/21 assumptions assumptions Population growth of 940 No net migration, population grows from natural increase only Dwelling growth of 387 new Significant reduction in dwelling growth dwellings Tourism – around 600,000 guest No international guest nights, significant nights reduction in domestic guest nights Economic growth of 2.3 per cent Economic decline of around 7 per cent Unemployment rate will have Unemployment to grow up to 10 per cent minimal changes Inflation – LGCI Capex 2.2 per LGCI Capex and Opex both remain at 2.2 cent, Opex 2.2 per cent per cent but expectation for inflation to vary significantly over the year and across different goods and services Interest rates vary from 5.25 to Interest rates at 3.25 per cent per 6 per cent p.a. annum

New Annual Plan 2020/21 assumptions Restrictions, but not Level 3 or 4 lockdowns, to occur in 2020/21 New Plymouth CBD retail to significantly reduce Commercial and industrial investment to significantly decline CBD office space utilisation to decline Hospitality sector to significantly reduce Food production sector to show modest growth Infrastructure investment from Government to focus first on areas not needing resource or building consents, with streamlined process for resource and/or building consents used for second wave. House prices and sales volume decline 10 per cent, while there is a larger decline in commercial prices and sales volumes. There is no decline in rural prices or volumes. Waitara freeholding rates drops by around 10 per cent, and land values remain at December 2018 levels.

3. The inflationary environment for 2020/21 is likely to be dynamic due to multiple factors at play:

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a) First, the Reserve Bank has undertaken quantitative easing (increasing money supply, thus likely to lead to inflationary pressure)

b) Second, while general demand is likely to be low due the economic circumstances (thus leading to deflationary pressure) the Government’s stimulus package may lead to inflationary pressure on key infrastructure inputs

c) Third, international supply chains may be interrupted or compromised due to pandemic responses globally (this again increases inflationary pressure).

4. Combined, these suggest that there may be high inflation in parts of the Local Government Cost Index (LGCI) and low inflation in others parts of the LGCI. The Consumer Price Index (CPI) is likely to be overall lower than the LGCI, although again with some areas spiking higher. Treasury forecasts see CPI somewhere between -0.75 per cent (i.e. deflation) and +0.25 per cent for 2020/21 (compared to an earlier forecast of 2 per cent for 2020/21).

5. There is, therefore, greater than normal risk that budgets and cost estimates are inaccurate as a result of inflation differing from forecast.

6. Officers will continue to maintain a watching brief on economic indicators and advice to determine whether further revisions may be necessary in light of the Covid-19 pandemic up until the Annual Plan 2020/21 is adopted.

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Council Services

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 9

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Community Partnerships

The community partnerships service works alongside community organisations, educational institutions, iwi, and business and government agencies to build a strong and connected community.

We off er advice and support to our partners to help them plan for the future and respond to the changing needs of the community. We also fund some key partnerships.

Community partnerships manages the Council’s community grants funding scheme, off ering contestable funding to organisations and groups whose projects align with our strategic vision and meet funding criteria.

We also provide aff ordable housing for eligible elderly people in the district. As part of this service, a Council Housing Offi cer makes regular visits to monitor the wellbeing of our tenants.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We build strategic The percentage of partners satisfi ed with the Council’s 95% relationships that support advice and involvement in community initiatives. collaboration, capability and The percentage of residents satisfi ed with the Council’s Exceeds peer capacity in the community assistance and support to community groups (NRB group average sector. survey*). We provide a ‘start-up’ The number of initiatives receiving ‘start-up’ fi nancial 3 fund to support creativity support. and collaboration in new community initiatives. We provide eff ective funding The percentage of key performance indicators achieved 95% support for community by recipients of the Council’s grants (as set out in funding organisations and initiatives. contracts). We eff ectively coordinate The percentage of tenants satisfi ed with the service. 90% and administer the housing for the elderly service.

* All NRB survey targets are excluding ‘don’t know’ responses.

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Community Partnerships

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 3.48 3.34 3.71 Targeted rates --- Subsidies and grants for operating purposes 0.06 0.06 0.06 Fees and charges 1.06 1.12 1.12 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 4.60 4.51 4.88 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (3.41) (3.38) (3.68) Finance costs (0.01) (0.03) (0.01) Internal charges and overheads applied (0.84) (0.59) (0.74) Other operating funding applications - - - Total applications of operating funding (B) (4.26) (4.00) (4.43) Surplus/(defi cit) of operating funding (A - B) 0.35 0.51 0.45 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt (0.02) (0.02) (0.03) Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) (0.02) (0.02) (0.03)

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service --- - to replace existing assets (0.10) (0.11) (0.11) (Increase)/decrease in reserves (0.23) (0.38) (0.32) (Increase)/decrease of investments --- Total applications of capital funding (D) (0.33) (0.48) (0.43) Surplus/(defi cit) of capital funding (C - D) (0.35) (0.51) (0.45) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.31 0.33 0.21 less deferred/unfunded (0.17) (0.15) (0.03) Net funding transferred to renewals reserves 0.14 0.18 0.18

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 11

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Customer and Regulatory Solutions

The fi rst point of contact for the Council’s regulatory services is our Customer Services Team, who assist customers by telephone, email or in person at the Civic Centre. Enquiries that need further input are recorded as service requests and forwarded to the relevant teams in the organisation.

Our regulatory teams process building, land use and subdivision consents, food, alcohol, health and encroachment licences and issue dog licences. We monitor and enforce legislation and bylaws for all of these functions as well as parking control, and health and noise nuisances. We develop the District Plan and other policies that guide the future development of the district. We also provide case management for projects and events that require involvement of multiple Council teams.

The Central City Facilitator is included within this service, with responsibility for facilitating and enabling projects and policy across Council to ensure a coordinated and prioritised delivery of outcomes that support a vibrant and prosperous New Plymouth Central Business District (CBD).

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 Our animal control processes The percentage of animal control emergency situations* 100% contribute to a safe and responded to within two hours. healthy community. The percentage of known dogs registered. 95% The percentage of residents satisfi ed with animal control Exceeds peer activities (NRB survey**). group average We respond to formal The percentage of formal complaints that receive an 90% complaints in a timely interim reply or are resolved within fi ve working days. manner. We process requests for The percentage of requests for offi cial information 100% offi cial information within completed within statutory timeframe. timeframes set under Local Government Offi cial Information and Meetings Act (1987). We conduct licensing All businesses required to be licensed are inspected in 100% inspections in accordance accordance with statutory requirements. with statutory requirements. We process consent The percentage of building applications processed within 100% applications within statutory statutory timeframes (consents and code compliance timeframes. certifi cates). The percentage of non-notifi ed resource management 100% consents processed within statutory timeframes.

* Animal control emergency situations: assisting emergency services, attacks by dogs, stock on the roads and injured animals. ** All NRB survey targets are excluding ‘don’t know’ responses.

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Customer and Regulatory Solutions

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 4.69 4.26 4.59 Targeted rates --- Subsidies and grants for operating purposes --- Fees and charges 8.58 8.61 4.99 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts 0.76 0.72 0.32 Total operating funding (A) 14.03 13.59 9.91 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (8.46) (7.38) (7.84) Finance costs (0.04) - Internal charges and overheads applied (4.84) (5.44) (5.34) Other operating funding applications - - - Total applications of operating funding (B) (13.29) (12.86) (13.18) Surplus/(defi cit) of operating funding (A - B) 0.74 0.73 (3.27) SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt (0.02) (0.03) 3.97 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) (0.02) (0.03) 3.97

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service --- - to replace existing assets (0.62) (0.54) - (Increase)/decrease in reserves (0.09) (0.15) (0.70) (Increase)/decrease of investments --- Total applications of capital funding (D) (0.71) (0.69) (0.70) Surplus/(defi cit) of capital funding (C - D) (0.74) (0.73) 3.27 Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.40 0.42 0.66 less deferred/unfunded 0.31 0.27 0.04 Net funding transferred to renewals reserves 0.71 0.70 0.70

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 13

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Economic Development

We work collaboratively with the Taranaki councils, central government and other agencies in the region to develop and improve the local economy. This includes directly funding and overseeing Venture Taranaki Trust, the Council-controlled organisation responsible for economic development and tourism industry support services in the district. Venture Taranaki Trust also has agreements with South Taranaki District Council and Stratford District Council to deliver similar services in those districts.

The Council’s priorities for economic development are set out in Tapuae Roa: Make Way for Taranaki – the Regional Economic Development Strategy and Action Plan adopted in February 2018. The Strategy takes a cross-regional approach, focusing on unlocking opportunities for economic growth in the region. The Strategy’s mission statement: Taranaki, where talent becomes enterprise – Kia eke panuku, captures the regional vision for Taranaki as a place that off ers an attractive lifestyle for talented people, in a high value economy.

In April 2018, the Government announced a ban on any new off shore oil and gas exploration permits. This was followed in 2019 with the announcement of the Climate Change Response (Zero Carbon) Amendment Act to be fully enacted by 2021. Recognising the signifi cant potential economic impact of the announcements, Venture Taranaki responded quickly in developing the Taranaki 2050 Roadmap in 2019. In late 2019 Government also released the Draft National Policy Statement for Freshwater Management, with potential for further economic impact of the Taranaki agricultural sector. The change in Government policy will continue to be a focus for Venture Taranaki in 2020/21 in relation to the future of the Taranaki economy.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We promote the New The number of major events attracted or retained. 4 major events Plymouth District and the Taranaki region as a vibrant and desirable place to live, work and visit. We facilitate, promote, and The level of annual investment in regional businesses $1,000,000 support sustainable business (subject to central government policy). growth, investment and The annual percentage of clients satisfi ed with Venture >85% employment opportunities Taranaki business support services. in Taranaki. The level of annual investment in the management $240,000 capability of Taranaki’s small and medium sized businesses.

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Economic Development

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 3.79 3.99 3.93 Targeted rates --- Subsidies and grants for operating purposes --- Fees and charges --- Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 3.79 3.99 3.93 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (3.33) (3.38) (3.40) Finance costs - (0.02) - Internal charges and overheads applied (0.41) (0.51) (0.62) Other operating funding applications - - - Total applications of operating funding (B) (3.74) (3.90) (4.02) Surplus/(defi cit) of operating funding (A - B) 0.05 0.09 (0.09) SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt (0.01) (0.01) - Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) (0.01) (0.01) -

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service --- - to replace existing assets --- (Increase)/decrease in reserves (0.04) (0.07) 0.09 (Increase)/decrease of investments --- Total applications of capital funding (D) (0.04) (0.07) 0.09 Surplus/(defi cit) of capital funding (C - D) (0.05) (0.09) 0.09 Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.08 0.09 - less deferred/unfunded (0.05) (0.02) 0.07 Net funding transferred to renewals reserves 0.04 0.07 0.07

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 15

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Emergency Management and Business Continuance As a member of the Taranaki Civil Defence Emergency Management Group, the Council works with the other Taranaki councils, the community and other agencies to plan for and manage the response to emergency events scaling from isolated incidents and business continuity events to wide-scale multi agency events. These activities include disaster risk reduction to reduce the impact of emergencies, readiness to train and prepare to respond to events, and the implementation of strategic recovery from emergencies. This includes ensuring the Council can continue to operate as well as possible during an emergency event, both major and minor.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We plan for emergency Emergency processes and plans are up to date. Emergency plans events. are reviewed

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Emergency Management and Business Continuance

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 1.04 1.17 1.17 Targeted rates --- Subsidies and grants for operating purposes 1.21 1.26 1.45 Fees and charges --- Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 2.25 2.44 2.62 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (1.62) (1.67) (2.02) Finance costs (0.01) (0.03) (0.05) Internal charges and overheads applied (0.56) (0.62) (0.51) Other operating funding applications - - - Total applications of operating funding (B) (2.18) (2.32) (2.58) Surplus/(defi cit) of operating funding (A - B) 0.07 0.12 0.04 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt - 0.11 (0.05) Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) - 0.11 (0.05)

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service (0.06) (0.20) (0.05) - to replace existing assets --- (Increase)/decrease in reserves (0.01) (0.02) 0.05 (Increase)/decrease of investments --- Total applications of capital funding (D) (0.07) (0.23) 0.01 Surplus/(defi cit) of capital funding (C - D) (0.07) (0.12) (0.04) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.11 0.05 0.03 less deferred/unfunded (0.09) (0.03) (0.01) Net funding transferred to renewals reserves 0.01 0.03 0.03

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 17

111 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Flood Protection and Control Works

The Council’s fl ood protection and control works service provides fl ood protection systems to urban areas in the district. We monitor and maintain three fl ood protection dams, three diversion tunnels, several bunded ponding areas and a weir.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We eff ectively maintain the Major fl ood protection and control works are maintained, Achieved Council’s fl ood protection repaired and renewed in accordance with the Asset and control works. Management Plan and annual works programme.

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112 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Flood Protection and Control Works

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 0.17 0.11 0.30 Targeted rates --- Subsidies and grants for operating purposes --- Fees and charges --- Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 0.17 0.11 0.30 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (0.10) (0.04) (0.10) Finance costs (0.01) (0.01) (0.01) Internal charges and overheads applied (0.02) (0.02) (0.15) Other operating funding applications - - - Total applications of operating funding (B) (0.13) (0.07) (0.26) Surplus/(defi cit) of operating funding (A - B) 0.04 0.04 0.04 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt - (0.01) (0.01) Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) - (0.01) (0.01)

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service --- - to replace existing assets (0.02) (0.03) (0.03) (Increase)/decrease in reserves - (0.01) - (Increase)/decrease of investments --- Total applications of capital funding (D) (0.03) (0.04) (0.03) Surplus/(defi cit) of capital funding (C - D) (0.04) (0.04) (0.04) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.13 0.14 0.12 less deferred/unfunded (0.10) (0.11) (0.09) Net funding transferred to renewals reserves 0.03 0.03 0.03

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113 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Govett-Brewster Art Gallery/ Len Lye Centre The Govett-Brewster Art Gallery is Aotearoa’s leading contemporary art museum. Recognised nationally and internationally for its dedication to contemporary art and commitment to art from the Pacifi c, the gallery off ers a wide range of dynamic exhibitions, community events and education programmes.

In 2015, the Len Lye Centre opened as an extension to the Govett-Brewster Art Gallery. New Zealand’s fi rst institution dedicated to a single artist, it is a facility of local, national and international signifi cance. The Len Lye Centre provides a continuous, accessible and stimulating programme that explores the art and ideas of this pioneering fi lmmaker and kinetic sculptor.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We provide access to The annual number of exhibitions on off er. 7 an engaging range of The annual number of visitor entries. 116,000 contemporary art from NZ The percentage of residents satisfi ed with the service (NRB Meets or exceeds and around the world. survey*). peer group average The percentage of customers satisfi ed with their overall 82% experience at the Govett-Brewster Art Gallery and Len Lye Centre (in-house surveys).

* All NRB survey targets are excluding ‘don’t know’ responses.

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Govett-Brewster Art Gallery/Len Lye Centre

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 4.47 4.75 4.67 Targeted rates --- Subsidies and grants for operating purposes 0.26 0.38 0.25 Fees and charges 0.73 0.72 0.31 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 5.47 5.85 5.23 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (3.77) (4.03) (3.86) Finance costs (0.01) (0.03) (0.01) Internal charges and overheads applied (1.45) (1.51) (1.49) Other operating funding applications - - - Total applications of operating funding (B) (5.23) (5.56) (5.36) Surplus/(defi cit) of operating funding (A - B) 0.24 0.29 (0.13) SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt 0.03 0.02 0.44 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 0.03 0.02 0.44

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service (0.05) (0.05) (0.05) - to replace existing assets (0.16) (0.17) (0.17) (Increase)/decrease in reserves (0.07) (0.10) (0.10) (Increase)/decrease of investments --- Total applications of capital funding (D) (0.27) (0.31) (0.31) Surplus/(defi cit) of capital funding (C - D) (0.24) (0.29) 0.13 Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.59 0.62 0.53 less deferred/unfunded (0.37) (0.36) (0.27) Net funding transferred to renewals reserves 0.23 0.26 0.26

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 21

115 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Governance

The governance service supports the Mayor, councillors and community board members to be eff ective, representative and accountable decision-makers. We facilitate and administer Council, committee and community board meetings and coordinate a range of civic functions. We also manage local authority elections.

We make sure that people have easy access to the information they need to be involved in Council decision- making.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We eff ectively manage local Elections and polls comply with the provisions of the Local * elections in accordance with Electoral Act 2001 and are without successful petitions for statutory requirements. inquiry into the conduct of elections. Council processes comply The Long-Term Plan, Annual Plan and Annual Report are Full compliance with statutory requirements. each adopted within statutory timeframes. Meeting agendas are available as specifi ed by legislation. Full compliance

* No triennial elections in this year.

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Governance

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 4.04 4.63 4.38 Targeted rates --- Subsidies and grants for operating purposes --- Fees and charges 0.01 0.01 0.01 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 3.98 4.64 4.39 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (1.99) (2.25) (2.02) Finance costs - (0.01) - Internal charges and overheads applied (2.16) (2.31) (2.37) Other operating funding applications - - - Total applications of operating funding (B) (4.14) (4.58) (4.38) Surplus/(defi cit) of operating funding (A - B) (0.09) 0.06 0.01 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt (0.01) (0.01) - Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) (0.01) (0.01) -

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service --- - to replace existing assets --- (Increase)/decrease in reserves 0.09 (0.05) (0.01) (Increase)/decrease of investments --- Total applications of capital funding (D) 0.09 (0.05) (0.01) Surplus/(defi cit) of capital funding (C - D) 0.09 (0.06) (0.01) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.13 0.13 - less deferred/unfunded (0.10) (0.08) 0.05 Net funding transferred to renewals reserves 0.03 0.05 0.05

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 23

117 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Management of Investments and Funding

This service manages all Council-owned investments, all income not assigned to other Council activities and all of Council’s borrowing. This includes: • The Council’s Perpetual Investment Fund (PIF), managed by the New Plymouth PIF Guardians Ltd. • One hundred per cent ownership of Papa Rererangi i Puketapu Limited, the Council-Controlled Organisation that runs the New Plymouth Airport. • Administration of 1,500 property leases and agreements. • Production forestry on Council-owned land and two joint venture forestry investments. • Minor equity investments in Civic Assurance Limited and the Local Government Funding Agency.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We manage the Perpetual The annual return from the PIF received by the Council. 3.3% + CPI Investment Fund (PIF) to + management provide sustainable Council fees and costs revenue. We manage the Council’s Debt levels comply with limits set by policy. All measures met borrowing programme in accordance with the Liability Management Policy.

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Management of Investments and Funding

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties (9.59) (9.98) (9.62) Targeted rates --- Subsidies and grants for operating purposes --- Fees and charges 2.03 2.52 1.68 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts 11.88 12.80 12.46 Total operating funding (A) 4.32 5.35 4.52 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (2.04) (1.55) (19.92) Finance costs (0.23) (1.31) (0.40) Internal charges and overheads applied (0.73) (0.34) (0.76) Other operating funding applications - - - Total applications of operating funding (B) (3.00) (3.19) (21.09) Surplus/(defi cit) of operating funding (A - B) 1.32 2.15 (16.57) SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt (0.25) (0.14) (0.88) Gross proceeds from sale of assets 19.30 - 17.40 Lump sum contributions (7.90) - - Other dedicated capital funding - - - Total sources of capital funding (C) 11.15 (0.14) 16.52

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service --- - to replace existing assets --- (Increase)/decrease in reserves (12.48) (2.02) 0.06 (Increase)/decrease of investments --- Total applications of capital funding (D) (12.48) (2.02) 0.06 Surplus/(defi cit) of capital funding (C - D) (1.33) (2.15) 16.57 Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 0.04 0.04 - less deferred/unfunded (0.02) (0.01) 0.03 Net funding transferred to renewals reserves 0.02 0.03 0.03

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 25

119 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Parks and Open Spaces

New Plymouth District has a reputation for the quality of its public parks and open spaces. The places, spaces and assets we manage and maintain include: • 1,600ha of park and reserve land. • 82km of walkways, including 12.7km of Coastal Walkway. • Forty-eight playgrounds. • Nine skate park sites. • Twenty-four sports parks for use by residents and visitors. • The regional crematorium and administer 15 operational cemeteries. • Brooklands Zoo. • Public art and monuments. • Forty-seven public toilets.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We maintain quality district The percentage of residents satisfi ed with the quality of the 95% parks, reserves and open district’s parks and reserves, including the Coastal Walkway spaces. and Pukekura Park (NRB survey*). The percentage of residents satisfi ed with the quality of the 95% district’s urban landscapes and streets (NRB survey*). The percentage of residents satisfi ed with the quality of the 95% district’s sports parks (NRB survey*). The percentage of residents satisfi ed with the quality of the 95% district’s playgrounds (NRB survey*). The percentage of Brooklands Zoo visitors satisfi ed with 90% the zoo (in-house survey). We maintain access to the The percentage of households in the district that are within 71% district’s parks, reserves and 500 metres of a park, reserve or neighbourhood open open spaces. space. We provide quality public The percentage of the community satisfi ed with the quality 80% toilets across the district. of the district’s public toilets (NRB survey*).

* All NRB survey targets are excluding ‘don’t know’ responses.

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120 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Parks and Open Spaces

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 14.38 15.60 15.09 Targeted rates --- Subsidies and grants for operating purposes 0.01 0.01 0.01 Fees and charges 2.02 2.03 2.10 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 16.41 17.64 17.20 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (13.38) (11.14) (11.19) Finance costs (0.56) (0.90) (0.59) Internal charges and overheads applied (2.80) (2.76) (2.68) Other operating funding applications - - - Total applications of operating funding (B) (16.74) (14.80) (14.45) Surplus/(defi cit) of operating funding (A - B) (0.33) 2.84 2.74 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure 0.07 - - Development and fi nancial contributions 0.81 0.92 0.58 Increase (decrease) in debt 4.43 2.74 0.64 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 5.31 3.65 1.22

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand (0.84) (0.43) - - to improve the level of service (1.52) (3.82) (0.80) - to replace existing assets (1.60) (1.73) (1.52) (Increase)/decrease in reserves (1.02) (0.51) (1.64) (Increase)/decrease of investments --- Total applications of capital funding (D) (4.98) (6.49) (3.96) Surplus/(defi cit) of capital funding (C - D) 0.33 (2.84) (2.74) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 3.00 3.14 2.55 less deferred/unfunded (0.85) (0.90) (0.31) Net funding transferred to renewals reserves 2.14 2.24 2.24

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 27

121 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Puke Ariki and Community Libraries

Puke Ariki’s central library, fi ve community libraries, mobile library, museum and visitor information centre connect Taranaki residents and out-of-region visitors to a wealth of knowledge, exhibitions, experiences and resources. We are a dynamic people-orientated centre, protecting and promoting access to the heritage of the district and our country. We provide an accessible mix of print and digital lending and reference resources to meet the changing needs of our community.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We provide an accessible The percentage of customers satisfi ed with the i-SITE Visitor 95% and informative point of Information Centre (in-house survey). contact and booking service for visitors to New Plymouth District. We provide an accessible The percentage of customers who are satisfi ed with the 95% mix of lending and reference library collections (in-house surveys). resources that meet the The number of library members. 29,000 changing needs of the community. The annual number of library items loaned. 795,000 We off er widely accessible The annual number of programmed learning opportunities 1,200 and engaging education on off er. programmes programmes. The number of participants attending. 29,000 The percentage of participants satisfi ed with programmes 95% ( in-house). We provide 24/7 online The number of digital heritage records created or improved 11,000 access to the heritage annually. collection.

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Puke Ariki and Community Libraries

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 11.25 11.00 12.01 Targeted rates --- Subsidies and grants for operating purposes 0.40 0.40 0.30 Fees and charges 0.51 0.42 0.30 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 12.16 11.83 12.62 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (6.38) (6.01) (6.54) Finance costs (0.07) (0.16) (0.07) Internal charges and overheads applied (3.74) (3.61) (3.75) Other operating funding applications - - - Total applications of operating funding (B) (10.19) (9.78) (10.36) Surplus/(defi cit) of operating funding (A - B) 1.96 2.05 2.26 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions 0.23 0.25 0.16 Increase (decrease) in debt 0.24 1.16 0.22 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 0.47 1.41 0.38

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand - (0.24) - - to improve the level of service (0.29) (1.24) - - to replace existing assets (1.51) (2.03) (0.94) (Increase)/decrease in reserves (0.64) 0.05 (1.69) (Increase)/decrease of investments --- Total applications of capital funding (D) (2.43) (3.46) (2.63) Surplus/(defi cit) of capital funding (C - D) (1.96) (2.05) (2.26) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 1.73 1.82 2.08 less deferred/unfunded 0.18 0.16 (0.10) Net funding transferred to renewals reserves 1.92 1.98 1.98

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 29

123 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Stormwater Management

Stormwater is rainwater that fl ows from surfaces like roofs, gardens, footpaths and roads. The Council’s stormwater drainage schemes collect, manage and dispose of stormwater run-off from around 6,600 hectares of urban area in the district, covering New Plymouth, Bell Block, Waitara, Inglewood, Urenui, Onaero, Lepperton, Egmont Village, Ōākura and Okato.

We operate and maintain 296 kilometres of stormwater pipes and a number of detention areas and engineered wetlands to help manage stormwater in the district. WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We provide a stormwater The number of fl ooding events in the district per fi nancial 0 management system year. that protects people and property. The number of habitable fl oors aff ected in each fl ooding 1 or less event (per 1,000 properties connected to the Council’s stormwater system) We comply with all resource The number of abatement notices, infringement notices, 0 consents for discharges from enforcement orders and convictions received. our stormwater system. We respond to service The median response time to a fl ooding event (from the one hour requests in a timely manner. time that the Council receives notifi cation to the time service personnel reach the site). Customers are satisfi ed with The number of complaints received about the performance 7 or less the performance of our of the Council’s stormwater system (per 1,000 properties stormwater system. connected).

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Stormwater Management

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 1.63 1.82 1.71 Targeted rates --- Subsidies and grants for operating purposes --- Fees and charges 0.01 0.01 0.01 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 1.64 1.83 1.72 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (0.56) (0.76) (0.74) Finance costs (0.16) (0.48) (0.18) Internal charges and overheads applied (0.55) (0.17) (0.38) Other operating funding applications - - - Total applications of operating funding (B) (1.27) (1.42) (1.30) Surplus/(defi cit) of operating funding (A - B) 0.37 0.42 0.42 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions 0.32 0.36 0.23 Increase (decrease) in debt 0.70 5.70 1.62 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 1.02 6.06 1.85

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand (0.07) (1.55) (0.09) - to improve the level of service (0.75) (4.66) (1.54) - to replace existing assets (0.22) (0.33) (0.33) (Increase)/decrease in reserves (0.37) 0.06 (0.30) (Increase)/decrease of investments --- Total applications of capital funding (D) (1.40) (6.48) (2.27) Surplus/(defi cit) of capital funding (C - D) (0.37) (0.42) (0.42) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 2.65 2.78 3.65 less deferred/unfunded (2.38) (2.50) (3.38) Net funding transferred to renewals reserves 0.27 0.27 0.27

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125 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Transportation

The Council’s transportation service manages a safe and effi cient transport network that enables eff ective movement of people, goods and services around the district. We operate and maintain the district’s existing transport network and plan for the future growth and development of the network.

Transportation activities are infl uenced by a complex mix of policy, legislation and national and regional strategies. We work within this framework to develop, maintain and renew assets in the network and conduct traffi c management on all roads, except state highways. Our service covers: • 1,278km of roads. • 272 bridges. • 8,039 street lights. • 11,178 traffi c signs. • Five tunnels.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We provide a local roading The change from the previous fi nancial year1 in the number Reducing network that is safe for all of fatalities and serious injury crashes on the district’s local road users. roading network, expressed as a number. We provide good quality The average quality of ride on the district’s sealed local 88% district roads. road network, as measured by smooth travel exposure. The percentage of residents satisfi ed with the overall 85% quality of the district’s roads (NRB survey*). We appropriately maintain The percentage of the sealed local road network that is 5.7% the district’s sealed roads. resurfaced (target based on reseal cycle of 16.5 years). We provide a high quality The percentage of footpaths that meet the levels of service More than 90% of and safe footpath network. and service standards in current condition surveys, as set footpath length out in the Transportation Asset Management Plan. surveyed in good or excellent condition Less than 1% of footpath length recorded as failed We respond to service The percentage of roading and footpath related customer 95% requests in a timely manner. service requests responded to within target timeframes.2 We provide a quality and safe The percentage of residents satisfi ed with the quality and 85% cycle network. safety of the district’s cycle network (NRB Survey*).

1 Measured 1 April to 31 March to refl ect the delay in data processing. 2 Service request timeframes: • one day for an electrical fault with traffi c signals, fl ooding, diesel spills, chemical spills or a slip to be cleared; • three days for street lighting faults and potholes; • fi ve days for traffi c counts, bus shelter repairs, road marking enquiries, culvert maintenance, rubbish bins, reinstatement of footpaths and debris in the roadside channel; • ten days for road surface faults, kerb and channel repairs, new kerb and channel, missing road signs and vegetation clearing.

* All NRB survey targets are excluding ‘don’t know’ responses.

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Transportation

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 9.63 10.10 9.63 Targeted rates 4.23 4.37 4.39 Subsidies and grants for operating purposes 3.87 4.27 4.11 Fees and charges 0.35 0.35 0.35 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts 0.53 0.53 0.53 Total operating funding (A) 18.60 19.62 19.02 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (9.11) (9.89) (9.32) Finance costs (1.20) (1.11) (1.01) Internal charges and overheads applied (2.45) (2.46) (2.44) Other operating funding applications - - - Total applications of operating funding (B) (12.76) (13.45) (12.77) Surplus/(defi cit) of operating funding (A - B) 5.85 6.16 6.25 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure 6.04 8.41 8.63 Development and fi nancial contributions 0.46 0.51 0.32 Increase (decrease) in debt 1.59 0.88 3.03 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 8.08 9.80 11.98

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand (0.42) (0.47) (1.44) - to improve the level of service (3.31) (2.90) (4.66) - to replace existing assets (9.87) (15.50) (16.62) (Increase)/decrease in reserves (0.34) 2.91 4.48 (Increase)/decrease of investments --- Total applications of capital funding (D) (13.93) (15.97) (18.23) Surplus/(defi cit) of capital funding (C - D) (5.85) (6.16) (6.25) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 12.55 13.17 11.30 less deferred/unfunded (7.51) (7.98) (6.10) Net funding transferred to renewals reserves 5.05 5.19 5.19

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127 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Venues and Events

The venues and events service comprises a broad group of activities, including attracting and managing a diverse programme of events at the TSB Bowl of Brooklands, TSB Showplace, TSB Stadium and Yarrow Stadium.

Our events include the annual TSB Festival of Lights, the Home and Lifestyle Expo, local Waitangi Day celebrations and other civic events. We also support other local events such as WOMAD.

The Todd Energy Aquatic Centre caters for a range of ages and activities, including learn to swim and fi tness classes. The district’s four community pools operate seasonally, over the summer months. The Council provides fi nancial support to the Bell Block Community Pool Society Incorporated for the Bell Block Community Pool.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We provide high quality The percentage of residents satisfi ed with the Council’s 94% community pools that swimming facilities (NRB survey*). encourage community The number of pool patrons per year. 390,000 participation in aquatic activities. We provide a range of The percentage of residents satisfi ed with Council’s events 95% appealing events at high (NRB survey*). quality venues. The percentage of residents satisfi ed with the Council’s 95% events venues (NRB survey*). We provide a network of The number of attendees and events/bookings across all 300,000 high quality venues that venues.1 attendees create opportunities for 1,100 events the community to attend arts, cultural, sporting and recreation activities.

1 The Council has reduced the expected number of attendees and events/bookings as a result of the closure of Yarrow Stadium’s east and west stands. * All NRB survey targets are excluding ‘don’t know’ responses.

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Venues and Events

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 8.79 9.10 9.44 Targeted rates --- Subsidies and grants for operating purposes 0.73 0.76 0.71 Fees and charges 3.25 3.56 2.13 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 12.76 13.43 12.28 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (7.87) (8.58) (8.02) Finance costs (0.09) (0.10) (0.08) Internal charges and overheads applied (3.19) (3.02) (3.49) Other operating funding applications - - - Total applications of operating funding (B) (11.15) (11.71) (11.59) Surplus/(defi cit) of operating funding (A - B) 1.61 1.72 0.69 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt 0.25 (0.02) 0.95 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 0.25 (0.02) 0.95

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service (0.32) (0.06) (0.01) - to replace existing assets (1.43) (1.28) (0.61) (Increase)/decrease in reserves (0.12) (0.36) (1.02) (Increase)/decrease of investments --- Total applications of capital funding (D) (1.87) (1.70) (1.64) Surplus/(defi cit) of capital funding (C - D) (1.61) (1.72) (0.69) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 1.91 2.00 1.38 less deferred/unfunded (0.36) (0.36) 0.25 Net funding transferred to renewals reserves 1.55 1.64 1.64

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129 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Waste Management and Minimisation

The waste management and minimisation service includes waste and recycling collection from households and schools within defi ned areas of the district. Our kerbside collection includes mixed recyclables, glass and solid waste. We also operate four transfer stations, the Colson Road Regional Landfi ll and the New Plymouth Resource Recovery Facility (which includes a transfer station run by a private operator).

The service collects around 6,700 tonnes of solid waste and 5,800 tonnes of recyclable materials from more than 28,100 residential premises each year. Our transfer stations and the Resource Recovery Facility handle non- hazardous solid waste, including around 950 tonnes of green waste, 1,000 tonnes of recyclable materials and 17,500 tonnes of solid waste per year. The Resource Recovery Facility also accepts 2,500 tonnes of recycling from the Stratford and South Taranaki districts.

The Colson Road Regional Landfi ll takes around 42,000 tonnes of waste from the New Plymouth, Stratford and South Taranaki districts annually, disposing of it to an environmentally acceptable standard. We also promote waste minimisation, delivering educational programmes to businesses and schools across the district.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We encourage district wide The reduction in landfi ll waste generated per household 1% waste minimisation. (measured as a year on year percentage). We comply with all resource The number of abatement notices, infringement notices, 0 consents related to solid enforcement orders, and convictions received. waste collection and management. Customers are satisfi ed with The number of complaints about the Council’s solid waste 3 or less our solid waste collection service received (per 1,000 customers). and management service.

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130 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Waste Management and Minimisation

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 2.69 3.13 2.83 Targeted rates 5.05 5.25 4.94 Subsidies and grants for operating purposes --- Fees and charges 2.00 6.27 2.52 Internal charges and overheads recovered 0.42 0.60 - Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 10.16 15.24 10.30 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (8.12) (10.75) (8.80) Finance costs (0.06) (0.26) (0.12) Internal charges and overheads applied (2.24) (2.57) (1.32) Other operating funding applications - - - Total applications of operating funding (B) (10.42) (13.58) (10.25) Surplus/(defi cit) of operating funding (A - B) (0.26) 1.66 0.05 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions - - - Increase (decrease) in debt (0.04) 3.54 0.05 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) (0.04) 3.54 0.05

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand --- - to improve the level of service (1.54) (3.60) (0.05) - to replace existing assets (1.05) (0.13) (0.13) (Increase)/decrease in reserves 2.90 (1.48) 0.08 (Increase)/decrease of investments --- Total applications of capital funding (D) 0.31 (5.20) (0.10) Surplus/(defi cit) of capital funding (C - D) 0.26 (1.66) (0.05) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 1.01 1.06 0.44 less deferred/unfunded (0.62) (0.39) 0.23 Net funding transferred to renewals reserves 0.40 0.67 0.67

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131 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Wastewater Treatment

The wastewater treatment service provides a network of infrastructure to manage domestic and industrial wastewater in the district. We collect and treat sewage from the urban areas of New Plymouth, Bell Block, Waitara, Inglewood and Ōākura and return clean water to the environment

Our activities include operating and maintaining a centralised treatment plant, 37 pump stations and 737 kilometres of sewer network. We also monitor the fl ow of trade waste into the network. On average, we handle 22 million litres of wastewater each day, servicing around 27,000 properties.

WHAT YOU CAN EXPECT FROM US

Level of Service Performance Measure Target 2020/21 We provide an eff ective The number of dry weather sewerage overfl ows per 1,000 1 or less wastewater treatment and connections to the wastewater system. disposal system. We comply with all resource The number of abatement notices, infringement notices, 0 consents for wastewater enforcement orders, and convictions received. discharge from our system. We respond to customer and The median response time to sewerage overfl ow callouts 1 hour or less maintenance requests in a (from the time the Council receives notifi cation to the time timely manner. that service personnel reach the site). The median resolution time for sewerage overfl ow callouts 4 hours or less for (from the time the Council receives notifi cation to the time sewers that service personnel confi rm resolution of the fault or < 250 dia interruption). 8 hours or less for sewers ≥ 250 dia Customers are satisfi ed with The total number of complaints received about sewerage 13 or less the wastewater treatment odour; system faults or blockages, or the Council’s response and disposal service. to issues with the sewerage system (per 1,000 connected properties).

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Wastewater Treatment

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties --- Targeted rates 14.35 14.76 14.38 Subsidies and grants for operating purposes --- Fees and charges 2.10 2.15 2.15 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 16.45 16.91 16.53 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (5.25) (5.58) (5.50) Finance costs (3.02) (2.89) (2.53) Internal charges and overheads applied (3.54) (3.35) (3.46) Other operating funding applications - - - Total applications of operating funding (B) (11.82) (11.82) (11.48) Surplus/(defi cit) of operating funding (A - B) 4.63 5.09 5.04 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions 1.05 1.18 0.75 Increase (decrease) in debt 0.95 0.49 0.16 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 2.00 1.67 0.90

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand (1.70) (3.25) (1.11) - to improve the level of service (1.51) (1.23) (1.37) - to replace existing assets (5.75) (9.88) (4.81) (Increase)/decrease in reserves 2.31 7.60 1.34 (Increase)/decrease of investments --- Total applications of capital funding (D) (6.64) (6.76) (5.95) Surplus/(defi cit) of capital funding (C - D) (4.63) (5.09) (5.04) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 5.97 6.27 9.23 less deferred/unfunded (3.59) (3.99) (6.95) Net funding transferred to renewals reserves 2.38 2.28 2.28

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133 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Water Supply

The Council’s water supply service treats and distributes water that we source from groundwater bores and rivers in the district. We develop, operate and maintain water treatment plants to meet water quality standards. We also manage pump stations, pipe networks and storage facilities such as reservoirs, to ensure our community has a reliable and sustainable supply of fresh water. There are four separate water supplies in the district: New Plymouth (includes Omata, Bell Block, Waitara and Urenui), Inglewood, Ōākura and Okato. Combined, these facilities supply approximately 33 million litres of water per day to just over 31,000 households and businesses in defi ned urban and rural areas. We ensure our water supply complies with the New Zealand Drinking Water Standards and that it is used sustainably, particularly when demand is high. We also make sure there is water available for fi refi ghting in urban areas. WHAT YOU CAN EXPECT FROM US Level of Service Performance Measure Target 2020/21 We provide water that is safe Our level of compliance with Part 4 of the Drinking-water Full compliance to drink. Standards (bacteria compliance criteria). Our level of compliance with Part 5 of the Drinking-water Full compliance Standards (protozoal compliance criteria). We maintain the reticulated The percentage of real water loss from the Council’s 25% or less water network in good networked reticulation system.1 condition. We respond to faults and The median response time to urgent callouts (from the 1 hour or less unplanned interruptions to time that the Council receives notifi cation to the time that the water supply network in service personnel reach the site). a timely manner. The median resolution time for urgent callouts (from 4 hours or less for the time the Council receives notifi cation, to the time mains < 250 dia that service personnel confi rm resolution of the fault or 8 hours or less for interruption). mains ≥ 250 dia The median response time to non-urgent callouts (from 24 hours or less the time the Council receives notifi cation to the time that service personnel reach the site). The median resolution time for non-urgent callouts (from 48 hours or less the time the Council receives notifi cation to the time that service personnel confi rm resolution of the fault or interruption). Customers are satisfi ed with The total number of complaints (per 1,000 connections) 10 or less our water supply service. received about any of the following: • drinking water clarity, taste, or odour; • drinking water pressure or fl ow; • continuity of supply; and • the Council’s response to any of these issues. We manage demand to The average consumption of drinking water per day per 315 litres per day minimise the impact of water resident within New Plymouth District. supply activities on the The number of abatement notices, infringement notices 0 environment. enforcement orders, and convictions received.

1 We calculate water loss following the method contained within Water New Zealand’s Benchmarking of Water Losses in New Zealand Manual.

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Water Supply

FUNDING IMPACT STATEMENT

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties --- Targeted rates 11.97 13.26 12.79 Subsidies and grants for operating purposes --- Fees and charges 0.23 0.23 0.23 Internal charges and overheads recovered --- Local authorities fuel tax, fi nes, infringement fees and other receipts --- Total operating funding (A) 12.20 13.49 13.02 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (4.40) (4.30) (4.21) Finance costs (1.59) (2.16) (1.51) Internal charges and overheads applied (3.18) (2.84) (3.06) Other operating funding applications - - - Total applications of operating funding (B) (9.17) (9.30) (8.78) Surplus/(defi cit) of operating funding (A - B) 3.02 4.18 4.24 SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure - - - Development and fi nancial contributions 0.46 0.52 0.33 Increase (decrease) in debt 8.43 6.10 4.33 Gross proceeds from sale of assets - - - Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 8.90 6.62 4.66

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand (3.54) (4.25) (3.21) - to improve the level of service (6.00) (4.18) (2.74) - to replace existing assets (3.38) (4.37) (4.41) (Increase)/decrease in reserves 1.01 2.00 1.47 (Increase)/decrease of investments --- Total applications of capital funding (D) (11.92) (10.80) (8.90) Surplus/(defi cit) of capital funding (C - D) (3.02) (4.18) (4.24) Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 4.77 5.06 6.54 less deferred/unfunded (2.16) (2.37) (3.85) Net funding transferred to renewals reserves 2.61 2.69 2.69

SUPPORTING INFORMATION I ANNUAL PLAN 2020/21 41

135 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

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136 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Financial Information and Statements

137 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Statement of Accounting Policies and Basis of Preparation New Plymouth District Council (the Council) is a territorial authority established under the Local Government Act 2002 (LGA) and is domiciled and operates in New Zealand. The relevant legislation governing the Council’s operations includes the LGA and the Local Government (Rating) Act 2002 (LG(R)A).

The Group consists of the ultimate parent, New Plymouth District Council and its Council Controlled Entities (CCOs) and Joint Ventures:

• Papa Rererangi i Puketapu Limited (100% owned). • New Plymouth PIF Guardians Limited (100% owned). • Venture Taranaki Trust (100% owned). • Tasmanian Land Company Limited (100% owned). • McKay Family Joint Venture (56.5% owned). • Duthie Joint Venture (54.82% owned). •

Statement of Compliance The Prospective Financial Statements (fi nancial statements) of the Council and Group have been prepared in accordance with the requirements of the LGA and the Local Government (Financial Reporting and Prudence) Regulations 2014, which include the requirement to comply with New Zealand Generally Accepted Accounting Practice (NZ GAAP).

The Council’s primary objective is to provide goods or services and benefi t for the community, rather than making a fi nancial return. Accordingly, the Council designates itself and the Group as public benefi t entities (PBEs) and applies tier 1 PBE Accounting Standards. These standards are based on International Public Sector Accounting Standards (IPSAS), with amendments for the New Zealand Environment.

The fi nancial information contained within these policies and documents is prospective fi nancial information in terms of PBE FRS 42 Prospective Financial Statements.

For the purposes of the plan, the fi nancial statements cover all the activities of the Council as a separate legal entity. The Group prospective fi nancial statements have not been presented as the Council believes that parent statements are more relevant to users.

The main purpose of these statements is to provide users with information about the core services that the Council intends to provide to ratepayers, the expected cost of those services and the consequent requirement for rate funding. The level of rate funding required is not aff ected by subsidiaries except to the extent that the Council obtains distributions from, borrows money on behalf of, or further invests in, those subsidiaries and such eff ects are included in these parent prospective fi nancial statements.

The fi nancial statements include a Prospective Statement of Comprehensive Revenue and Expense, a Prospective Statement of Changes in Net Assets/Equity, a Prospective Statement of Financial Position and a Prospective Statement of Cash Flows.

The fi nancial statements of the Council are for the years ending 30 June. The Prospective Financial Statements were authorised for issue by the Council on the date the Plan was adopted. Whilst there is no current intent to update these Prospective Financial Statements, the Council reserves the right to update this plan in the future.

The information in the Prospective Financial Statements is uncertain and the preparation requires the exercise of judgement. Actual fi nancial results achieved for the period covered are likely to vary from the information presented, and the variations may be material. Events and circumstances may not occur as expected or may not have been predicted or Council may subsequently take actions that diff er from the proposed courses of action on which the Prospective Financial Statements are based.

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138 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Statement of Accounting Policies and Basis of Preparation

The information contained within these Prospective Financial Statements may not be suitable for use in another capacity.

The accounting policies set out below have been applied consistently to all periods presented in these Prospective Financial Statements.

Measurement base The Prospective Financial Statements have been prepared on a historical cost basis except for certain classes of property, plant and equipment which have been subsequently measured at fair value.

The Prospective Financial Statements are presented in New Zealand dollars (functional and reporting currency) and all values are rounded to the nearest thousand dollars ($000), unless otherwise stated.

SIGNIFICANT ACCOUNTING POLICIES a) Basis of consolidation The consolidated fi nancial statements of assets, liabilities, equity, revenue and expenses on a line-by-line basis. Signifi cant transactions and balances between the Council and its CCOs are eliminated in preparing the group statements. The Council’s investment in the following subsidiaries are carried at cost in the parent entity fi nancial statements: Papa Rererangi i Puketapu Limited, New Plymouth PIF Guardians Limited and Venture Taranaki Trust. The Council’s investment in Tasmanian Land Company Limited has been classifi ed as a fi nancial asset at fair value through surplus or defi cit. b) Critical accounting estimates and assumptions Financial statement preparation requires judgements, estimates and assumptions that aff ect the application of policies and reported amounts of assets and liabilities, revenue and expenses. Actual results may diff er from these estimates. Estimates are continually evaluated and are based on historical experience and other factors including expectations or future events that are considered. The signifi cant estimates and assumptions that have the greatest risk of causing a material adjustment to the reported amounts are: • Estimating the fair value of infrastructural assets. • Estimating the fair value of buildings. • Estimating the fair value of forestry assets. • Estimating the landfi ll afercare provision. c) Property, plant and equipment The Council has the following classes of property, plant and equipment: • Operational assets. • Restricted assets. • Infrastructural assets. Operational assets include land, buildings (including any improvements), vehicles, furniture, fi ttings and equipment and library books. Restricted assets include land and buildings that are subject to either restrictions on use, or disposal, or both. This includes restrictions from legislation (such as land declared as a reserve under the Reserves Act 1977) or other restrictions (such as land or buildings under bequest or donation that restricts the purpose for which the assets can be used).

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139 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Statement of Accounting Policies and Basis of Preparation

Infrastructural assets are the fi xed utility systems owned by the Council. They usually display some or all of the following characteristics: part of a system or network, specialised in nature and usually do not have alternative uses, immoveable and they may be subject to constraints on disposal. Examples are road networks, sewer systems and water systems.

Additions The cost of an item of property, plant and equipment is recognised as an asset only when it is probable that future economic benefi ts or service potential associated with the item will fl ow to the Council and the cost of the item can be measured reliably. Work in progress is recognised at cost less impairment and is not depreciated. In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired at no cost, or a nominal cost (e.g. vested asset), it is recognised at fair value at the date of acquisition. Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefi ts or service potential associated with the item will fl ow to the Council and group and the cost of the item can be measured reliably. The costs of servicing property, plant and equipment are recognised in the surplus or defi cit as they are incurred.

Disposals Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount of the asset. Gains and losses on disposals are reported net in the surplus or defi cit. When revalued assets are sold, the amounts included in asset revaluation reserves in respect of those assets are transferred to accumulated funds.

Revaluation All property, plant and equipment except for operational motor vehicles, furniture, fi ttings and equipment and work-in- progress are re-valued with suffi cient regularity to ensure that their carrying amount does not diff er materially from fair value, at least every three years. Fair value is determined by reference to the depreciated replacement cost or market value on an asset class basis. The carrying values of revalued assets are assessed annually to ensure they do not diff er materially from the assets’ fair values. The carrying value of revalued assets are assessed annually to make sure they do not diff er materially from the assets’ fair values. If there is a material diff erence then the off -cycle asset classes are revalued. Revaluation movements are accounted for on a class-of-asset basis. The net revaluation results are credited or debited to other comprehensive revenue and expense and are accumulated to an asset revaluation reserve in equity for that class of asset. Where this would result in a debit balance in the asset revaluation reserve, this balance is not recognised in other comprehensive revenue and expense but is recognised in the surplus or defi cit. Any subsequent increase on revaluation that reverses a previous decrease in value recognised in the surplus or defi cit will be recognised fi rst in the surplus or defi cit up to the amount previously expenses and then recognised in other comprehensive revenue and expense. .

Depreciation Depreciation is provided on a straight line basis on all property, plant and equipment other than land and restricted assets, at rates which will write off the cost (or valuation) of the assets to their estimated residual values over their useful lives. Depreciation of these assets commences when the assets are ready for their intended use. Depreciation rates and useful lives are reviewed annually. Depreciation on assets is charged to the surplus and defi cit. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows:

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Statement of Accounting Policies and Basis of Preparation

Years Depreciation Infrastructural assets Roading 5 - 100 1% - 20% Laboratory 8 - 30 3.3% - 12.5% Waste management and minimisation 35 - 100 1% - 2.9% Stormwater 50 - 140 0.7% - 2% Flood protection 50 - 200 0.5% - 2% Water 10 - 120 0.8% - 10% Wastewater 10 - 140 0.7% - 10% New Plymouth Airport runway/services 5 - 100 1% - 20% Work in progress Not depreciated Operational assets Land Not depreciated Buildings/improvements 20 to 100 years 1% - 5% Vehicles 3 to 20 years 5% - 33.3% Furniture, fi ttings and equipment 3 to 10 years 10% - 33.3% Puke Ariki book collection (general in-use) 2 to 15 years 6.7% - 50% Work in progress Not depreciated Restricted assets Parks and reserves Not depreciated Waitara Lands Act land Not depreciated Puke Ariki museum collection Not depreciated Govett-Brewster Art Gallery/Len Lye Centre collection Not depreciated d) Non-current assets held for sale Non-current assets are classifi ed as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets held for sale are separately disclosed in the Statement of fi nancial position at the lower of their carrying amount and fair value less costs to sell. They are not depreciated or amortised. Any impairment losses for write-downs are recognised in the surplus or defi cit. Any increases in fair value (less costs to sell) are recognised up to the level of any impairment losses that have been previously recognised. e) Equity The LGA requires the Council to manage its revenues, expenses, assets, liabilities, investments, and general fi nancial dealings prudently, and in a manner that promotes the current and future interests of the community. Ratepayers’ funds are largely managed as a by-product of managing revenues, expenses, assets, liabilities, investments, and general fi nancial dealings. Equity is the community’s interest in the Council and is measured as the diff erence between total assets and total liabilities. Equity is disaggregated and classifi ed into the following components: • Accumulated Funds. • Ordinary Reserves. • Restricted Reserves. • Property Revaluation Reserves.

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141 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Statement of Accounting Policies and Basis of Preparation

Accumulated funds Accumulated funds are the capital fund made up of accumulated surpluses and defi cits. A surplus in any year is added to the fund and a defi cit in any year and deducted from the fund. Ordinary reserves are reserves created by Council decision. The Council may alter the purpose of a reserve without reference to a third party or the Courts. Transfers to and from these reserves is at the discretion of the Council.

Restricted reserves Restricted reserves are those reserves subject to specifi c conditions accepted as binding by the Council and which may not be revised by the Council without reference to the Courts or a third party. Transfer from these reserves can be made by certain specifi ed purposes or when certain specifi ed conditions are met.

Asset revaluation reserves Asset revaluation reserves relate to the revaluation of property, plant and equipment to fair value. f) Rates General rates and uniform annual general charges (UAC) are recognised at the start of the fi nancial year to which the Council rates resolution relates. They are recognised at the amounts due. The Council considers the eff ect of payment of rates by instalments is not suffi cient to require discounting of rates receivables and subsequent recognition of interest revenue. Revenue from late payment penalties is recognised when rates become overdue. Revenue from water by meter rates is recognised on an accrual basis. Revenue is based on the actual usage as a result of meter reading. Unbilled usage as a result of unread meters at year end is accrued on an average usage basis. Rates remissions are recognised as a reduction of rates revenue when the Council has received an application that satisfi es its rates remission policy. Rates collected on behalf of the Taranaki Regional Council (TRC) are not recognised in the fi nancial statements as the Council is acting as an agent for TRC. g) Subsidies and grants The Council receives funding assistance from the NZTA, which subsidises part of the maintenance costs and capital expenditure on the local roading infrastructure. The NZTA roading claim payments (reimbursements) are recognised as revenue upon entitlement, which is when conditions pertaining to eligible expenditure have been fulfi lled. Other grants are recognised as revenue when they become receivable. When there is an obligation in substance to return the funds if conditions of the grant are not met, the grants are initially recorded as grants received in advance and recognised as revenue when conditions of the grant are satisfi ed. h) Other revenue Fines and levies, which mostly relate to traffi c and parking infringements, are recognised when the infringement notice is issued. User fees and charges are recognised on the basis of actual services provided. Any fees and charges received in advance are recognised as unearned income in advance. Fees for disposing of waste at the Council’s landfi ll are recognised as waste is disposed by users. i) Vested assets For assets received for no or nominal consideration, the asset is recognised when the Council obtains control of the asset. The fair value of the asset is recognised as revenue, unless there is a use or return condition attached to the asset. The fair value of vested or donated assets is usually determined by reference to the cost of constructing the asset. For assets received from property developments, the fair value is based on construction price information provided by the property developer.

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Statement of Accounting Policies and Basis of Preparation

For long-lived assets that must be used for a specifi c use (for example, land that must be used as a recreation reserve), the Council immediately recognises the fair value of the asset as revenue. Financial/development contributions are recognised as revenue when received. If the service for which the contribution is charged is not undertaken in the same year it’s received, the contribution is allocated to the appropriate reserve until such time that the Council provides, or is able to provide, the service. j) Forestry assets Standing forestry assets are independently revalued annually at fair value less estimated costs to sell for one growth cycle. Gains or losses arising on initial recognition of forestry assets at fair value less costs to sell and from a change in fair value less costs to sell are recognised in the surplus or defi cit. Forestry maintenance costs are recognised in the surplus or defi cit when incurred. k) Intangible assets An intangible asset is an identifi able non-monetary asset without physical substance. Amortisation is the systematic allocation of the depreciable amount of an intengible asset over its useful life.

Software acquisition and development Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specifi c software. Costs that are directly attributable to the development of software for internal use are recognised as an intangible asset. Direct costs include the software development employee costs and an appropriate portion of relevant overheads. Staff training costs, maintenance and web related costs are recognised in the surplus or defi cit when incurred.

Carbon credits Purchased carbon credits are recognised at cost on acquisition. Free carbon credits received from the Crown are recognised at fair value on receipt. They are not amortised, but are instead tested for impairment annually. They are derecognised when they are used to satisfy carbon emission obligations.

Amortisation The carrying value of an intangible asset with a fi nite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each fi nancial year is recognised in the surplus or defi cit. The useful lives and associated amortisation rates of computer software, the major class of intangible assets, is three to fi ve years (20% to 33.3%). l) Joint ventures A joint venture is a binding arrangement whereby two or more parties are committed to undertake an activity that is subject to joint control. Joint control is the agreed sharing of control over an activity. For jointly controlled operations, the Council recognises in its fi nancial statements the assets it controls, the liabilities and expenses it incurs and the share of revenue it earns from the joint venture. m) Cash and cash equivalents Cash and cash equivalents are made up of cash on hand, on-demand deposits and other short-term highly liquid investments, net of bank overdrafts classifi ed under current liabilities. The carrying value of cash at bank and short-term deposits with original maturities less than three months approximates their fair value. n) Trade and other receivables Debtors short-term receivables are recorded at the amount due less any provision for uncollectability. Provision for uncollectability A receivable is considered to be uncollectable when there is evidence that the amount due will not be fully collected. The amount that is uncollectable is the diff erence between the amount due and the present value of the amount expected to be collected.

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143 Council - Extraordinary (5 May 2020) - Proposed Annual Plan 2020-2021 2

Statement of Accounting Policies and Basis of Preparation

The Council does not provide for any provision for uncollectability on rates receivable as it has various powers under the LG(R)A to recover any outstanding debts. Provision has been made in respect of all other receivables where there is objective evidence that the Council will not be able to collect the amounts as per the original terms of the receivables.

Fair value Receivables are generally short-term and non-interest bearing and receipt is normally on 30-day terms. Therefore, the carrying value of receivables approximates their fair value. o) Creditors and other payables Trade and other payables are non-interest bearing and are normally settled on 30 day terms. Therefore, the carrying value of trade and other payables approximates their fair value. All amounts in trade and other payables are assessed as exchange as these balances arose from transactions carried out on normal business terms. p) Borrowings All loans and borrowings are initially recognised at fair value of the consideration received plus transaction costs. All borrowing costs are recognised as an expense in the period in which they are incurred and are calculated using eff ective interest method. q) Derivative fi nancial instruments Derivative fi nancial instruments are initially recognised at fair value on the date the contract is entered into. They are subsequently re-measured to fair value each month with the associated gains or losses recognised in the surplus or defi cit. Derivative fi nancial instruments are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Derivative fi nancials instruments that are settled within 12 months are treated as current. The Council does not designate any derivatives as hedging instruments. r) Other fi nancial assets Financial assets (other than shares in subsidiaries) are initially recognised at fair value plus transaction costs unless they are carried at fair value though surplus or defi cit, in which case the transaction costs are recognised in surplus or defi cit. The Council classifi es its fi nancial assets into the following categories for the purpose of measurement: • fair value through surplus or defi cit, or • loans and receivables, or • fair value through other comprehensive revenue and expense. Financial assets at fair value through surplus or defi cit Financial assets at fair value through surplus or defi cit include fi nancial assets held for trading. A fi nancial asset is classifi ed in this category if acquired principally for the purpose of selling in the short term or if it is part of a portfolio of identifi ed fi nancial instruments that are managed together and for which there is evidence of short term profi t taking. Financial assets acquired principally for the purpose of selling in the short term or part of a portfolio classifi ed as held-for-trading are classifi ed as a current asset. After initial recognition, fi nancial assets in this category are measured at their fair values with gains or losses on re- measurement recognised in the surplus or defi cit. Included in this category is the Council’s investment in Tasmanian Land Company Limited and the Perpetual Investment Fund.

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Statement of Accounting Policies and Basis of Preparation

Loans and receivables Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance date, which are included in non-current assets. After initial recognition they are measured at amortised cost using the eff ective interest rate method less impairment. Gains and losses when the asset is impaired or derecognised are recognised in the surplus or defi cit. These loans are measured at amortised cost using the eff ective interest rate method. The diff erence between the face value and present value of the expected future cash fl ows of the loan is recognised in the surplus or defi cit as interest. The Council’s loans and receivables comprise debtors and other receivables, LGFA borrower notes, term deposits, related party loans and community loans. Fair value through other comprehensive revenue and expense Financial assets at fair value through other comprehensive revenue and expense are those that are designated into the category of initial recognition or are not classifi ed in any of the other categories above. They are included in non-current assets unless management intends to dispose of, or realise, the investment within 12 months of balance date. These investments are measured at their fair value, with gains and losses recognised in other comprehensive revenue and expense. On derecognition, the cumulative gain or loss previously recognised in other comprehensive revenue and expenditure is reclassifi ed from equity to the surplus or defi cit. The Council includes in this category: • investments that it intends to hold long term but which may be realised before maturity; and • bonds and shareholdings in NZ Local Government Funding Agency (NZ LGFA) and shareholdings in Civic Financial Services Limited. Impairment Financial assets are assessed for objective evidence of impairment at each balance date. Impairment losses are recognised in the surplus or defi cit. Impairment is established when there is objective evidence that the Council will not be able to collect amounts due according to the original terms of the debt. s) Impairment of assets At each balance date the carrying amounts of tangible and intangible assets are reviewed to determine whether there is any indication that those assets have suff ered an impairment loss. If any such indication exists (including indefi nite life intangibles) the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, estimates are made of the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the greater of market value less costs to sell and value-in-use. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount with the expense being recognised in the surplus or defi cit. For non-revalued assets impairment losses are recognised as an expense immediately. For revalued assets, other than investment property, the impairment loss is treated as a revaluation decrease to the extent it reverses previously accumulated revaluation increments for that asset class. The reversal of an impairment loss on a revalued asset is credited to other comprehensive revenue and expense and increases the asset revaluation reserve for that class of asset. However, to the extent that an impairment loss for that class of asset was previously recognised in the surplus or defi cit, a reversal of the impairment loss is also recognised in the surplus or defi cit.

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Statement of Accounting Policies and Basis of Preparation

Value in use for non-cash-generating assets Non-cash-generating assets are those assets that are not held with the primary objective of generating a commercial return. For non-cash-generating assets, value in use is determined using an approach based on either a depreciated replacement cost approach, a restoration cost approach, or a service units approach. The most appropriate approach used to measure value in use depends on the nature of the impairment and availability of information.

Value in use cash-generating assets Cash generating assets are those assets held with the primary objective of generating a commercial return. The value in use for cash-generating assets and cash-generating units is the present value of expected future cash fl ows. t) Provisions Provisions are recognised when the Council has a present obligation as a result of a past event, a reliable estimate can be made for the amount of the obligation and it is probable that the Council will be required to settle that obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at balance date and are discounted to present value where the eff ect is material. u) Employee benefi ts Provision is made in respect of the Council’s liability for retiring gratuity allowances, annual and long service leave and sick leave. The retirement gratuity liability and long service leave liability is assessed on an actuarial basis using current rates of pay taking into account years of service, years to entitlement and the likelihood staff will reach the point of entitlement. Liabilities for accumulating short-term compensated absences (e.g. annual and sick leave) are measured as the additional amount of unused entitlement accumulated at the balance sheet date. Sick leave, annual leave, vested long service leave and non-vested long service leave and retirement gratuities that are expected to be settled within 12 months of balance date are classifi ed as current. v) Income tax Income tax expense includes components relating to current tax and deferred tax. Current tax is the amount of income tax payable based on the taxable profi t for the current year and any adjustments in respect of prior years. w) Deferred tax Deferred tax is the amount of income tax payable or recoverable in future periods in respect of temporary diff erences and unused tax losses. Temporary diff erences are diff erences between the carrying amount of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred tax liabilities are generally recognised for all taxable temporary diff erences. Deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be available against which the deductible temporary diff erences or tax losses can be utilised. Deferred tax is not recognised if the temporary diff erence arises from the initial recognition of goodwill or from the initial recognition of an asset or liability in a transaction that aff ects neither accounting profi t nor taxable profi t. Current tax and deferred tax are measured using tax rates (and tax laws) that have been enacted or substantively enacted at balance date. Current and deferred tax is recognised against the profi t or loss for the period, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. x)

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Statement of Accounting Policies and Basis of Preparation

y) Cost allocation The costs of providing support services for the Council are accumulated and are allocated to each Council activity using appropriate allocation bases which refl ect the usage and/or capacity for each. Direct costs are those costs directly attributable to a signifi cant activity. Direct costs are charged directly to signifi cant activities. Indirect costs are those costs that cannot be identifi ed in an economically feasible manner with a specifi c signifi cant activity. Indirect costs are charged to signifi cant activities using appropriate cost drivers such as actual usage, staff numbers, and fl oor area. z) Dividends Dividends are recognised when the right to receive payment has been established. aa) Foreign currency transactions Foreign currency transactions are translated into NZD (the functional currency) using the spot exchange rate at the dates of the transactions. Foreign exchanges gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the surplus or defi cit. ab) Goods and services tax (GST) All items in the fi nancial statements are stated exclusive of GST, except billed receivables and payables, which include GST where GST is not recoverable as input tax then it is recognised as part of the related asset or expense. The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables. The net GST paid to, or received from the IRD, including the GST relating to investing and fi nancing activities, is classifi ed as an operating cash fl ow in the Statement of Cash Flows. Commitments and contingencies are disclosed exclusive of GST. ac) Budget fi gures The Annual Plan 2019/20 fi gures are those approved by the Council on adoption of this plan. The plan fi gures have been prepared in accordance with NZ GAAP, using accounting policies that are, or will be, consistent with those adopted by the Council for the preparation of the fi nancial statements.

CHANGES IN ACCOUNTING POLICIES There has been no change in accounting policies since adoption of the Annual Report 2018/19.

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Prospective Financial Statements

Prospective Statement of Comprehensive Revenue and Expense

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) OPERATING REVENUE Revenue from exchange transactions Finance revenue 2.19 2.69 2.26 Investment revenue 15.01 14.83 14.91 Other revenue 23.91 28.63 27.30 Revenue from non-exchange transactions Rates 94.25 99.00 97.91 Subsidies and grants 12.17 15.05 14.77 Development and fi nancial contributions 3.33 3.74 2.36 Vested assets 4.12 4.21 4.21 Fines and levies 1.47 1.48 1.02 Total operating revenue 156.44 169.63 164.73 OPERATING EXPENDITURE Personnel costs 45.48 44.41 45.13 Depreciation and amortisation expenses 36.74 38.54 41.28 Finance costs 7.43 9.51 7.00 Other expenses 64.72 65.45 81.72 Total operating expenditure 154.37 157.91 175.12 Surplus/(defi cit) before taxation 2.06 11.71 (10.39) Taxation refund/(expense) - - - Surplus/(defi cit) after taxation 2.06 11.71 (10.39) Comprising surplus/(defi cit) attributable to: New Plymouth District Council 2.06 11.71 (10.39) OTHER COMPREHENSIVE REVENUE AND EXPENSE Gain/(loss) on property, plant and equipment and equipment revaluations - - - Total other comprehensive revenue and expense - - - TOTAL COMPREHENSIVE REVENUE AND EXPENSE 2.06 11.71 (10.39) Total comprehensive revenue and expense attributable to: New Plymouth District Council 2.06 11.71 (10.39)

Prospective Statement of Changes in Equity A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) EQUITY AT THE BEGINNING OF THE YEAR 2,535.95 2,539.45 2,535.95 Total comprehensive revenue and expense 2.06 11.71 (10.39) Equity adjustment - - EQUITY AT THE END OF THE YEAR 2,538.02 2,551.16 2,525.56 Total comprehensive revenue and expense attributable to: New Plymouth District Council 2.06 11.71 (10.39)

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Prospective Financial Statements

Prospective Statement of Financial Position

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) NON-CURRENT ASSETS Property, plant and equipment 2,334.35 2,391.91 2,910.66 Intangible assets 5.67 5.13 2.80 Forestry assets 3.57 3.70 5.06 Investments in CCOs and similar entities 10.00 10.00 43.32 Other fi nancial assets 25.30 24.55 54.81 Derivative fi nancial assets 0.64 0.64 0.76 Total non-current assets 2,379.52 2,435.92 3,017.41 CURRENT ASSETS Cash and cash equivalents 5.03 3.21 18.75 Debtors and other receivables 15.75 16.43 34.42 Non-current assets held for sale 1.26 1.29 0.09 Investments in CCOs and similar entities - - 4.15 Other fi nancial assets 327.51 321.51 298.79 Intangible assets 0.62 0.62 0.63 Inventory 0.14 0.14 0.15 Total current assets 350.31 343.19 356.96 TOTAL ASSETS 2,729.83 2,779.11 3,374.37 NON-CURRENT LIABILITIES Borrowings 158.87 184.94 169.35 Derivative fi nancial liabilities 5.91 5.91 15.18 Other provisions 1.73 1.75 1.77 Employee entitlements 0.63 0.63 0.52 Total non-current liabilities 167.13 193.23 186.81 CURRENT LIABILITIES Creditor and other payables 12.90 13.50 34.82 Revenue in advance 3.62 3.62 - Borrowings 11.40 12.99 55.40 Provisions 0.79 0.79 1.02 Employee entitlements 3.54 3.61 3.73 Derivative fi nancial liabilities 0.20 0.20 0.30 Total current liabilities 32.45 34.72 95.26 TOTAL LIABILITIES 199.59 227.95 282.07 PUBLIC EQUITY Other reserves 81.09 70.50 58.96 Asset revaluation reserve 910.11 910.11 1,456.47 Retained earnings 1,539.04 1,570.56 1,576.88 Total public equity 2,530.25 2,551.16 3,092.30 TOTAL EQUITY AND LIABILITIES 2,729.83 2,779.11 3,374.37

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Prospective Financial Statements

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from rates revenue 94.25 99.00 89.78 Interest received 2.19 2.69 2.26 Other revenue received 40.87 48.90 37.60 Payments to suppliers and employees (110.20) (109.96) (108.43) Distributions related to Waitara Lands Act - - (8.45) Interest paid (7.43) (9.51) (7.00) Net cash fl ows from operating activities 19.67 31.11 5.76 CASH FLOWS FROM INVESTING ACTIVITIES Receipts from sale of property, plant and equipment 12.73 1.26 18.67 PIF release to Council 9.89 10.20 10.28 Receipts from sale of other fi nancial assets 0.25 0.75 0.75 Purchase of property, plant and equipment (51.31) (71.45) (49.76) Purchase of other fi nancial assets (10.63) - (9.97) Net cash fl ows from investing activities (39.07) (59.24) (30.03) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 24.69 39.52 45.71 Repayment of borrowings (8.72) (11.40) (10.10) Net cash fl ows from fi nancing activities 15.98 28.13 35.61 Net increase/(decrease) in cash and cash equivalents (3.42) 0.00 11.34 Cash and cash equivalents at the beginning of the year 8.45 3.19 7.40 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 5.03 3.19 18.75

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Notes to the Financial Statements

1. Revenue from targeted rates for metered water supply LTP LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) Targeted rates for metered water supply 4.18 4.49 4.36

2. Group of activities combined depreciation and amortisation expense LTP LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) Community Partnerships 0.32 0.21 0.33 Customer and Regulatory Solutions 0.41 0.66 0.42 Economic Development 0.09 - 0.09 Emergency Management and Business Continuance 0.05 0.03 0.05 Flood Protection and Control Works 0.13 0.12 0.14 Govett-Brewster Art Gallery/Len Lye Centre 0.61 0.53 0.62 Governance 0.13 - 0.13 Management of Investments and Funding 0.04 - 0.04 Parks and Open Spaces 3.06 2.55 3.14 Puke Ariki and Community Libraries 1.77 2.08 1.82 Stormwater Management 2.70 3.65 2.78 Transportation 12.81 11.30 13.17 Venues and Events 1.95 1.38 2.00 Waste Management and Minimisation 1.03 0.44 1.06 Wastewater Treatment 6.10 9.23 6.27 Water Supply 4.87 6.54 5.06 Other 1.38 2.56 1.42 Total depreciation and amortisation expense 37.45 41.28 38.54

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Statement of Reserve Funds

The Council maintains reserve funds as a sub-part of its equity – refer to statement of accounting policies earlier in this section. Schedule 10 Clause 16 requires certain information to be included pertaining to these reserve funds. The following presents a summary of reserve funds over the period of this plan and is followed by a breakdown into the various reserve fund types giving a brief explanation of the types of funds under each category and a table giving the opening balances, movements and closing balances.

Summary of Reserve Funds The following is a summary of the Council’s expected reserve funds over the life of this plan.

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) Opening balances 75.65 76.07 72.83 Deposits to reserves 32.29 26.11 19.63 Withdrawals from reserves (26.85) (31.68) (33.44) Closing balances 81.09 70.50 59.01

Note. Opening balances for Budget 2018/19 have been adjusted to refl ect the actual opening position at 1 July 2017 and impacts of carry-forwards from 2017/18.

1. Operating reserve funds. These are set aside to fund short-term operational matters, such as some loan repayments, or to hold short-term surpluses arising from operations. If not required can be transferred to renewal reserves.

Opening balances 12.42 10.66 16.04 Deposits to reserves (0.26) 0.00 0.00 Withdrawals from reserves (1.58) (0.43) (1.50) Closing balances 10.59 10.23 14.54

2. Restricted reserves, trust and bequest funds. These are funds subject to specifi c conditions accepted as binding by the Council, such as bequests or operations in trust under specifi c acts, and which may not be revised by the Council without reference to the courts or third party. Transfers from these reserves may be made only for certain specifi ed purposes or when certain specifi ed conditions are met. These include the Waitara Harbour Trust, heritage funds, proceeds from sale of Junction Road leases, solid waste development fund, Central Landfi ll develoment fund, Ngamotu Masonic Lodge Bursary Fund, and certain bequest funds: Monica Brewster, Molly Morpeth Canaday, J T Gibson. These funds are applied to infrastructural asset activities, Puke Ariki and Govett-Brewster Art Gallery.

Opening balances 17.15 17.84 21.25 Deposits to reserves 13.63 4.25 0.45 Withdrawals from reserves (4.11) (3.59) (0.22) Closing balances 26.67 18.50 21.48

3. Development funds. These include from Development and Financial Contributions levied by the Council for capital works and are intended to contribute to the growth related capital expenditure in the infrastructural asset activities of Roads, Water Supply, Wastewater Management, Stormwater Drainage, Flood Protection and Control Works, Parks, Venues and Events, Puke Ariki and Govett-Brewster Art Gallery.

Opening balances 1.08 1.08 1.33 Deposits to reserves - - - Withdrawals from reserves - - - Closing balances 1.08 1.08 1.33

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Statement of Reserve Funds

4. Renewal and disaster funds. The Council sets aside funding to meet the renewal of its infrastructural and operating assets to ensure the continued ability of the Council to provide services. In addition the Council maintains a disaster fund as a part of its insurance strategies. The renewal funds are applied to all activities throughout the Council.

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) Opening balances 45.00 43.03 34.20 Deposits to reserves 18.92 19.71 19.18 Withdrawals from reserves (21.16) (27.67) (31.72) Closing balances 42.76 35.07 21.66

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Disclosure Statement for the period commencing 1 July 2020

WHAT IS THE PURPOSE OF THIS STATEMENT? The purpose of this statement is to disclose the Council’s planned fi nancial performance in relation to various benchmarks to enable the assessment of whether the Council is prudently managing its revenues, expenses, assets, liabilities, and general fi nancial dealings.

The Council is required to include this statement in its annual plan in accordance with the Local Government (Financial Reporting and Prudence) Regulations 2014 (the regulations). Refer to the regulations for more information, including defi nitions of some of the terms used in this statement. Benchmark Planned Met Rates increases aff ordability benchmark <= the prior year rates income plus 5% 3.95% Yes Rates income aff ordability benchmark <= the prior year rates income plus 5% $100.1m Yes Debt aff ordability benchmark: - Annual interest expense on external borrowings <= 12.5% of rates income 7.7% Yes - Net external debt to be <= 135% of total revenue 103.9% Yes Balanced budget benchmark >=100% 90.3% No Essential services benchmark >=100% 154.6% Yes Debt servicing benchmark <=10% 4.4% Yes

Rates increases aff ordability benchmark The Council’s planned rates increases for the year are compared with a quantifi ed limit on rates contained in the Financial Strategy included in the Council’s LTP. The quantifi ed limit is set at the prior year rates income plus fi ve per cent.

Rates income aff ordability benchmark For this benchmark, the Council’s planned rates for the year are compared with a quantifi ed limit on rates contained in the Financial Strategy included in the Council’s LTP. The quantifi ed limit is set at the prior year rates income plus fi ve per cent.

Debt aff ordability benchmark For this benchmark, the Council’s proposed borrowing is compared with quantifi ed limits on borrowing contained in the fi nancial strategy included in the Council’s LTP.

Benchmark One - debt (expense) aff ordability The quantifi ed limit on this benchmark is proposed annual interest expense on external borrowings cannot exceed 12.5 per cent of rates income and is measured as a percentage.

Benchmark Two - debt aff ordability The quantifi ed limit on this benchmark is net debt to be no more than 135 per cent of total revenue and is measured as a percentage.

Balanced budget benchmark For this benchmark, the Council’s planned revenue (excluding development contributions, vested assets, fi nancial contributions, gains on derivative fi nancial instruments, and revaluations of property, plant, or equipment) is presented as a proportion of its planned operating expenses (excluding losses on derivative fi nancial instruments and revaluations of property, plant, or equipment).

The Council meets the balanced budget benchmark if its revenue equals or is greater than its operating expenses.

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Disclosure Statement

Essential services benchmark The Council meets the essential services benchmark if its planned capital expenditure on network services equals or is greater than expected depreciation on network services.

Essential services benchmark For this benchmark, the Council’s planned capital expenditure on network services is presented as a proportion of expected depreciation on network services.

The Council meets the essential services benchmark if its planned capital expenditure on network services equals or is greater than expected depreciation on network services.

Debt servicing benchmark For this benchmark, the Council’s planned borrowing costs are presented as a proportion of planned revenue (excluding development contributions, fi nancial contributions, vested assets, gains on derivative fi nancial instruments, and revaluations of property, plant, or equipment).

Because Statistics New Zealand projects the Council’s population will grow more slowly than the national population growth, it meets the debt servicing benchmark if its borrowing costs are equal or less than 10 per cent of its revenue.

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Rating System and Information

RATING POLICIES, SYSTEM AND INDICATIVE RATES This section complies with the requirements under Schedule 10 clauses 15(3)-(5) and 15A of the Local Government Act 2002. It should be read in conjunction with the Council’s Revenue and Financing Policy. Figures quoted are exclusive of GST unless otherwise stated.

Defi nition of Separately Used or Inhabited Part of a Rating Unit (SUIP) A SUIP is defi ned as a separately used or inhabited part of a rating unit and includes any part of a rating unit that is used or occupied by any person, other than the ratepayer, having a right to use or inhabit that part by virtue of a tenancy, lease, licence, or other agreement, or any part or parts of a rating unit that are used or occupied by the ratepayer for more than one single use. Separately used or inhabited parts include: • A residential, small holding, or farmland property that contains two or more separately occupiable units, fl ats or houses each of which is separately inhabited or is capable of separate inhabitation i.e. has independent kitchen facilities. • A commercial premise that contains separate shops, kiosks, other retail or wholesale outlets, or offi ces, each of which is operated as a separate business or is capable of operation as a separate business.

1. General rates The Council will set a general rate based on the land value of rateable land in the district together with a Uniform Annual General Charge (UAGC) applied to all separately used or inhabited parts (SUIPs) of a rating unit.

Diff erential land value categories The Council diff erentiates the general rate based on land use (Schedule 2 Local Government (Rating) Act 2002). The diff erential categories and percentages of total general rate requirement that apply to each group are:

2019/20 2020/21 Group 1: Commercial/industrial. All rating units that are used primarily for any 27.00% 26.90% commercial or industrial purpose. Group 2: Residential. All rating units with a land area of one hectare or less, not 54.00% 54.00% being rating units in Group 1, used for residential and related purposes. Group 3: Small holdings. All rating units, not being rating units included in Groups 1 3.40% 3.60% or 2, having a land area of more than one hectare but no greater than four hectares. Group 4: Farmland. All rating units, not being rating units included in Group 1, 2 or 3, 15.60% 15.50% having a land area in excess of four hectares. TOTAL 100.00% 100.00% Note. The fi gures for 2019/20 and 2020/21 will be confi rmed and set as part of the relevant annual plan processes.

Diff erential Category Rate cents/$ Diff erential factor Commercial/Industrial 1.3453 4.35 Residential 0.3093 1.00 Small holdings 0.2584 0.84 Farmland 0.2593 0.84

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Rating System and Information

Application of diff erential calculation The diff erential percentages are applied to the total general rate required. The UAGC component is then deducted and the balance is allocated based on individual land values within each category. Refer to the example below: Residential calculation ($) Total general rates 63,709,282 Residential diff erential 54.0% 34,403,012 less UAGC 30,951 @ $381.69 (11,813,687) Residential requirement from land value calculation 22,589,325

2. Uniform annual general charge The Council will set a UAGC which is a fi xed amount assessed on every separately used or inhabited part of a rating unit. The amount per SUIP (excluding GST) is set in the table below.

2019/20 2020/21 UAGC (excluding GST) $373.48 $381.69

Both the general rate and the UAGC will be used to fund, or assist with funding, all Council activities other than those funded by way of targeted rates for roading, water supply, sewage treatment and disposal, refuse collection and kerbside recycling, swimming pool compliance and voluntary targeted rate for the New Plymouth Home Energy Scheme.

3. Targeted roading rate The Council will set a targeted rate - the Uniform Annual Roading Charge (UARC) to partially fund the roading activity on all rateable land in the district of a fi xed amount per SUIP. The amount per SUIP (excluding GST) is set in the table below.

2019/20 2020/21 UARC (excluding GST) $113.04 $115.53

4. Targeted service charge rates The Council will charge the following targeted rates: • Water supply (non metered and metered). • Sewage treatment and disposal. • Refuse collection and disposal. • Swimming pool compliance. • Voluntary targeted rate - New Plymouth Home Energy Scheme. Unless otherwise noted, only those properties that actually receive the service are liable for these charges, irrespective of diff erential category.

5. Water supply (non metered and metered) The Council has three mechanisms of payment for water supply. These are: a) Annual water charge is made up of two rates: i) Network fi xed charge targeted rate being a targeted amount per separately used or inhabited part of a rating unit which is connected to an urban water supply but not metered. The amount per SUIP is $32.00 for 2020/21. ii) Consumption charge targeted rate (standardised per unmetered household) being a fi xed amount per separately used or inhabited part of a rating unit which is connected to an urban water supply but not metered. The amount per SUIP is $271.00 for 2020/21.

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Rating System and Information

b) On demand supplies of water by meter is made up of two rates: i) A supply charge targeted rate per connection of $32.00 for 2020/21 (except bypass meters) for each separately used or inhabited part of a rating unit which is metered and connected to an urban or rural water supply. ii) A rate per cubic metre of water supplied to each connection which is metered and connected to an urban or rural water supply. A scale of charges is applied as follows for supplies excluding Waitara industrial supply: • Standard rate for consumption up to or equal to 50,000m3 per annum $1.20 (per cubic metre) for 2020/21. • Rate for consumption in excess of 50,000m3 per annum $1.22 (per cubic metre) for 2020/21. • Waitara industrial - untreated supply $0.82 (per cubic metre) for 2020/21. c) Restricted fl ow targeted rate A restricted fl ow targeted rate is determined by the (user-nominated) volume of water able to be supplied within a fi xed time period to a separately used or inhabited part of a rating unit for properties that are not metered and are connected to a rural water supply (in accordance with the Council’s Bylaw Part 14 - Water, Wastewater and Stormwater Services). For 2020/21, the amount per 1m3 unit is $192.62. For properties that are not connected to an urban or rural water supply, a targeted rate is not assessed.

6. Sewage treatment and disposal All rating units other than commercial/industrial and schools The Council will set a targeted rate for sewage treatment and disposal as a fi xed amount per separately used or inhabited part of a rating unit in respect of rating units (other than commercial/industrial rating units and schools) connected either directly or through a private drain to a public sewerage drain. The amount per SUIP is $453.91 for 2020/21. Commercial/industrial and schools The Council will set a targeted rate per water closet or urinal connected either directly or through a private drain to a public sewerage drain or commercial/industrial properties and schools as per the following scale per water closet or urinal. • One to two $453.91 • Three $380.00 • Four $332.17 • Five $288.70 • Six to 10 $258.26 • 11 to 15 $240.87 • 16 to 20 $232.17 • 21 or more $227.83

Ōākura sewerage scheme For rating units in the area to which the Ōākura sewerage scheme is available where an agreement to connect was obtained but the rating unit has not yet connected, a targeted rate per separately used or inhabited part of a rating unit will be set as a fi xed amount (which is half the full amount). The amount per SUIP for 2020/21 is $236.52. Once connected the full amount will apply in the next fi nancial year. All rating units in the district which are neither connected to the sewerage system or are not serviceable are not liable for these rates.

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Rating System and Information

7. Refuse collection and disposal including kerbside recycling The Council will set a targeted rate for refuse collection and disposal (including kerbside recycling and food waste) as a fi xed amount per separately used or inhabited part of a rating unit used as a household unit situated in defi ned areas1 of the district in which the Council provides the service for which the charge is assessed. The amount per SUIP is $165.11 for 2020/21.

8. Swimming pool compliance (registration and audit inspection pursuant to the Building Act 2004) The Council will set a targeted rate for swimming pool compliance as a fi xed amount per separately used or inhabited part of a rating unit which have a swimming pool/spa pool on the rating unit. The amount per SUIP is $42.19 for 2020/21.

9. Voluntary Targeted Rate - New Plymouth Home Energy Scheme New Plymouth Home Energy Scheme rate is a targeted rate set on properties that have benefi ted from the installation of clean heat or insulation funded (partially/fully) by New Plymouth District Council in respect of the property. The rate is calculated at 11.1 per cent of the service amount (the cost of the installation and fi nance charges) until the service amount and the costs of servicing the service amount are recovered and is charged on a rating unit basis.

Due dates and penalties The Council’s rates (excluding metered water rates) for the 2020/21 year (1 July 2020 to 30 June 2021) will become due and payable by four equal instalments on the following dates: Instalment 1: 1 August 2020 Instalment 2: 1 November 2020 Instalment 3: 1 February 2021 Instalment 4: 1 May 2021

The Council will charge a penalty of 10 per cent on any part of each respective instalment (for rates excluding metered water rates) that remains unpaid after the due dates listed above. The date that the penalty will be applied is: Instalment 1 (penalty date): 26 August 2020 Instalment 2 (penalty date): 25 November 2020 Instalment 3 (penalty date): 24 February 2021 Instalment 4 (penalty date): 26 May 2021

In addition, the Council will charge a penalty of 10 per cent on any portion of rates (for rates excluding metered water rates) that were assessed or levied in any previous fi nancial years prior to 1 July 2020 and which remain unpaid on 1 July 2020. The penalty will be applied on 30 September 2020 and a further additional penalty of 10 per cent on any portion of rates that were assessed or levied in any previous fi nancial years and which remain unpaid on 31 March 2021.

Metered water rates for the 2020/21 year (1 July 2020 to 30 June 2021) will generally be invoiced on a quarterly basis. However, rating units may be invoiced monthly if the unit has previously been invoiced monthly or the Council has been notifi ed before 30 June 2020 to be invoiced monthly.

1 Defi ned areas shown on page 31, to be extended subject to consultation with community.

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Rating System and Information

Invoices for metered water invoiced quarterly will become due and payable on the following dates:

Instalment 1: 25 November 2020 Instalment 2: 24 February 2021 Instalment 3: 26 May 2021 Instalment 4: 25 August 2021

Invoices for metered water invoiced monthly will become due and payable on the following dates:

Instalment 1: 20 August 2020 Instalment 2: 21 September 2020 Instalment 3: 20 October 2020 Instalment 4: 20 November 2020 Instalment 5: 21 December 2020 Instalment 6: 20 January 2021 Instalment 7: 22 February 2021 Instalment 8: 22 March 2021 Instalment 9: 20 April 2021 Instalment 10: 20 May 2021 Instalment 11: 21 June 2021 Instalment 12: 20 July 2021

Rating base information

2019/20* 2020/21 Projected number of rating units 35,766 36,265 Projected total capital value of rating units ($m) 20,419 23,061 Projected total land value of rating units ($m) 10,581 12,444 * These are the actual rates strike fi gures.

Lump sum contributions The Council may accept lump sum contributions in respect of any targeted rate.

Examples of the impact of the rating proposals (GST inclusive) The following examples show the impact of the rating proposals on low, medium and high valued properties for each diff erential. They are required to be provided under clause 15(5) of Schedule 10 of the Local Government Act 2002 and are indicative only. (Plus, approximate average case for each group based on average land value and pans for commercial/industrial.) The examples exclude the swimming pool compliance targeted rate and the voluntary New Plymouth Home Energy Scheme targeted rate. More information about these rates can be found on page 29.

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Rating System and Information

Residential * Average land value percentage increase for residential category 25%, individual properties will vary.

Land Value (LV) $111,000* GST inclusive Residential LV $285,000* GST inclusive (2019/20: $91,000) (2019/20: $230,000)

2019/20 2020/21 2019/20 2020/21 ($) ($) ($) ($) General rate 393.69 394.82 General rate 995.05 1,013.73 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 Uniform annual sewage charge 522.00 522.00 Uniform annual sewage charge 522.00 522.00 Uniform annual water charge: Uniform annual water charge: - Network fi xed charge 36.80 36.80 - Network fi xed charge 36.80 36.80 - Standardised consumption charge 295.75 311.65 - Standardised consumption charge 295.75 311.65 Uniform annual refuse charge 188.00 189.88 Uniform annual refuse charge 188.00 189.88 1,995.74 2,026.95 2,597.09 2,645.86

LV $165,000* GST inclusive LV $500,000* GST inclusive (2019/20: $130,000) (2019/20: $400,000)

2019/20 2020/21 2019/20 2020/21 ($) ($) ($) ($) General rate 562.42 586.90 General rate 1,730.52 1,778.48 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 Uniform annual sewage charge 522.00 522.00 Uniform annual sewage charge 522.00 522.00 Uniform annual water charge: Uniform annual water charge: - Network fi xed charge 36.80 36.80 - Network fi xed charge 36.80 36.80 - Standardised consumption charge 295.75 311.65 - Standardised consumption charge 295.75 311.65 Uniform annual refuse charge 188.00 189.88 Uniform annual refuse charge 188.00 189.88 2,164.46 2,219.02 3,332.56 3,410.60

LV $215,000* GST inclusive (2019/20: $170,000)

2019/20 2020/21 ($) ($) General rate 735.47 764.74 Uniform annual general charge 429.50 438.94 Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual sewage charge 522.00 522.00 Uniform annual water charge: - Network fi xed charge 36.80 36.80 - Standardised consumption charge 295.75 311.65 Uniform annual refuse charge 188.00 189.88 2,337.51 2,396.87

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Rating System and Information

Commercial/Industrial * Average land value percentage increase for commercial/industrial category 24%, individual properties will vary.

LV $42,000 *GST inclusive LV $720,000* GST inclusive (2019/20: $32,000) (2019/20: $570,000)

2019/20 2020/21 2019/20 2020/21 ($) ($) ($) ($) General rate 589.54 649.78 General rate 10,501.11 11,139.08 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 Uniform annual sewage charge 522.00 522.00 Uniform annual sewage charge 1,660.03 1,660.03 Uniform annual water charge: Uniform annual water charge: - Network fi xed charge 36.80 36.80 - Network fi xed charge 36.80 36.80 - Standardised consumption charge 295.75 311.65 - Standardised consumption charge 295.75 311.65 2,003.58 2,092.03 13,053.18 13,719.36

LV $205,000* GST inclusive LV $1,930,000* GST inclusive (2019/20: $160,000) (2019/20: $1,540,000)

2019/20 2020/21 2019/20 2020/21 ($) ($) ($) ($) General rate 2,947.68 3,171.54 General rate 28,371.42 29,858.93 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 Uniform annual sewage charge 332.01 332.01 Uniform annual sewage charge 2,970.00 2,970.00 Uniform annual water charge: Uniform annual water charge: - Network fi xed charge 36.80 36.80 - Network fi xed charge 36.80 36.80 - Standardised consumption charge 295.75 311.65 - Standardised consumption charge 295.75 311.65 4,171.73 4,423.80 32,233.46 33,749.18

LV $380,000* GST inclusive (2019/20: $305,000)

2019/20 2020/21 ($) ($) General rate 5,619.02 5,878.96 Uniform annual general charge 429.50 438.94 Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual sewage charge 1,485.00 1,485.00 Uniform annual water charge: - Network fi xed charge 36.80 36.80 - Standardised consumption charge 295.75 311.65 7,996.06 8,284.21

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Rating System and Information

Small Holdings * Average land value percentage increase for small holdings category 13%, individual properties will vary.

LV $170,000* GST inclusive LV $425,000* GST inclusive (2019/20: $150,000) (2019/20: $390,000)

2019/20 2020/21 2019/20 2020/21 ($) ($) ($) ($) General rate 454.19 505.17 General rate 1,180.90 1,262.93 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 1,013.69 1,076.98 1,740.40 1,834.73

LV $280,000* GST inclusive LV $640,000* GST inclusive (2019/20: $260,000) (2019/20: $560,000) 2019/20 2020/21 2019/20 2020/21 ($) ($) ($) ($) General rate 787.27 832.05 General rate 1,695.65 1,901.82 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 1,346.77 1,403.85 2,255.15 2,473.63

LV $335,000* GST inclusive (2019/20: $310,000)

2019/20 2020/21 ($) ($) General rate 938.66 995.49 Uniform annual general charge 429.50 438.94 Targeted rates Uniform annual roading charge 130.00 132.86 1,498.16 1,567.29

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Rating System and Information

Farmlands * Average land value percentage increase for farmlands category 3%, individual properties will vary.

LV $150,000* GST inclusive LV $1,200,000* GST inclusive (2019/20: $66,300) (2019/20: $1,250,000)

2019/20 2020/21 2019/20 2020/21 ($) ($) ($) ($) General rate 193.28 447.29 General rate 3,644.06 3,578.34 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 752.78 1,019.10 4,203.56 4,150.14

LV $395,000* GST inclusive (2019/20: $380,000) LV $4,020,000* GST inclusive (2019/20: $4,000,000) 2019/20 2020/21 ($) ($) 2019/20 2020/21 ($) ($) General rate 1,107.80 1,177.87 General rate 11,661.00 11,987.44 Uniform annual general charge 429.50 438.94 Uniform annual general charge 429.50 438.94 Targeted rates Targeted rates Uniform annual roading charge 130.00 132.86 Uniform annual roading charge 130.00 132.86 1,667.29 1,749.67 12,220.50 12,559.24

LV $570,000* GST inclusive (2019/20: $560,000)

2019/20 2020/21 ($) ($) General rate 1,632.54 1,699.71 Uniform annual general charge 429.50 438.94 Targeted rates Uniform annual roading charge 130.00 132.86 2,192.04 2,271.51

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Rating System and Information

TOTAL RATES

A/Plan A/Plan 2019/20 2020/21 ($) ($) Uniform annual general charge (UAGC) 13,982,344 14,495,441 General rate 47,029,292 49,213,841 Sub total (general rates) 61,011,637 63,709,282 Uniform annual roading charge (UARC) 4,228,617 4,385,189 Uniform annual sewage charge (UADC) 14,351,450 14,381,106 Uniform annual water charge (UAWC) 8,033,111 8,438,575 Water by meter charges 3,938,889 4,358,052 Uniform annual refuse charge (UARC) 4,785,708 4,885,121 Swimming pool compliance charge (UAPC) - - Sub total (targeted rates/charges) 35,337,775 36,448,043 Total 96,349,412 100,157,325

The fi gures above do not include GST. GST will be added at applicable rates.

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Rating System and Information

Rates and Charges The fi gures below do not include GST. GST will be added at applicable rates.

2019/20 2020/21 ($) ($) General rates Uniform annual general charge 373.48 438.94 Diff erential rates (cents per $ of rateable value) - Group 1 (Commercial/Industrial) 1.6020c 1.5471c - Group 2 (Residential) 0.3762c 0.3557c - Group 3 (Small Holdings) 0.2633c 0.2972c - Group 4 (Farmland) 0.2535c 0.2982c Targeted rates/charges Uniform annual roading charge 113.04 132.86 Uniform annual refuse charge per serviced household 163.48 189.88 Uniform annual sewage charge - all rating units other than commercial/industrial 453.91 522.00 Uniform annual sewage charge - commercial/industrial (including schools) (scale of charges per water closet or urinal): - One to two 453.91 522.00 - Three 380.00 437.00 - Four 332.17 382.00 - Five 288.70 332.01 - Six to 10 258.26 297.00 - 11 to 15 240.87 277.00 - 16 to 20 232.17 267.00 - 21 or more 227.83 262.01 Ōākura part charge 236.52 272.00 Uniform annual water charge: - Network fi xed charge 32.00 36.80 - Consumption variable charge 257.17 311.65 Swimming pool compliance charge 41.36 48.52 New Plymouth Home Energy Scheme - funding assistance depending on each funding arrangement Water charges - On demand supplies by water by meter (WBM): : Supply charge (for all metered customers) 32.00 36.80 : Standard rate for consumption up to 50,000m3 (per cubic metre) 1.138 1.38 : Industrial rate for consumption in excess of 50,000m3 per annum (per cubic 1.158 1.40 metre)* - Waitara industrial - untreated supply (per cubic metre) 0.82 0.94 - Restricted fl ow connections (per water unit as defi ned by Water Supply Bylaw 182.67 221.52 (Part 15)) * large users are charged the standard WBM rate to 50,000m3 and the industrial rate for amounts in excess of 50,000m3

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Funding Impact Statement

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING General rates, uniform annual charges, rates penalties 58.46 61.37 61.92 Targeted rates 35.89 37.63 36.04 Subsidies and grants for operating purposes 6.09 6.64 6.61 Fees and charges 27.67 28.63 18.24 Internal charges and overheads recovered 12.60 12.88 12.54 Local authorities fuel tax, fi nes, infringement fees and other receipts 1.48 1.48 0.85 Total operating funding (A) 142.20 148.63 136.20 APPLICATIONS OF OPERATING FUNDING Payments to staff and suppliers (110.17) (109.96) (131.41) Finance costs (8.43) (9.54) (7.04) Other operating funding applications - - - Total applications of operating funding (B) (118.61) (119.50) (138.46) Surplus/(defi cit) of operating funding (A - B) 23.60 29.13 (2.25) SOURCES OF CAPITAL FUNDING Subsidies and grants for capital expenditure 6.66 8.41 8.63 Development and fi nancial contributions 3.33 3.74 2.36 Increase (decrease) in debt 15.37 28.13 12.33 Gross proceeds from sale of assets 1.33 1.26 17.40 Lump sum contributions - - - Other dedicated capital funding - - - Total sources of capital funding (C) 26.68 41.55 40.72

APPLICATIONS OF CAPITAL FUNDING Capital expenditure - to meet additional demand (7.80) (10.19) (5.61) - to improve the level of service (13.97) (22.35) (12.42) - to replace existing assets (28.07) (38.91) (31.74) (Increase)/decrease in reserves (0.44) 0.77 11.30 (Increase)/decrease of investments --- Total applications of capital funding (D) (50.28) (70.68) (38.46) Surplus/(defi cit) of capital funding (C - D) (23.60) (29.13) 2.25 Funding balance (A - B) + (C - D) ---

Other information to be provided Clause 5(4) Local Government (Financial Reporting and Prudence) Regulations 2014

Depreciation and amortisation expense Depreciation expense 37.44 38.54 36.74 less deferred/unfunded (18.99) (19.36) (18.30) Net funding transferred to renewals reserves 18.45 19.18 18.45

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Reconciliation Summary

Reconciliation of prospective fi nancial plan, summary funding impact statement and prospective fi nancial statements PBE FRS 42: Prospective Financial Statements (specifi cally paragraph 40) requires reconciliation or narrative explaining diff erences in presentation of prospective fi nancial information. Earlier in this section, the Council presented its prospective fi nancial plan, prospective fi nancial statements and summary funding impact statement. The following reconciliation explains the diff erences in accounting treatment of the operating sections of each of the prospective fi nancial statements.

A/Plan LTP A/Plan 2019/20 2020/21 2020/21 ($m) ($m) ($m) SOURCES OF OPERATING FUNDING Total operating funding (A) 142.20 148.63 136.20 add sources of capital funding: - Subsidies and grants for capital expenditure 6.66 8.41 8.63 - Development and fi nancial contributions 3.33 3.74 2.36 add Statement of comprehensive revenue and expense Unrealised gain/(loss) on PIF 5.12 4.63 4.63 Disposals gain/(loss) from sale of assets - - 8.70 Vested assets 4.12 4.21 4.21 Total operating revenue as per statement of comprehensive revenue and 161.42 169.63 164.73 expense APPLICATIONS OF OPERATING FUNDING Total applications of operating funding (B) 118.61 119.50 138.46 add Statement of comprehensive revenue and expense Depreciation and amortisation expenses 37.44 38.54 36.74 Revaluation (gain)/loss on forestry (0.12) (0.13) (0.12) Total operating expenditure as per statement of comprehensive revenue 155.93 157.91 175.08 and expense

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THE NGĀ WHARE ORA TAIAO O NGĀMOTU (NEW PLYMOUTH SUSTAINABLE HOMES VOLUNTARY TARGETED RATE SCHEME) POLICY

Policy purpose

This policy provides parameters for the Council’s Ngā Whare Ora Taiao o Ngāmotu scheme. Ngā Whare Ora Taiao o Ngāmotu is a voluntary targeted rate scheme which provides support to households to undertake a wide range of sustainability improvements to their house and property, and to repay the costs through a voluntary targeted rate over a five or nine year period.

Policy statements

Who may apply?

1. Funding may be applied for a residential rating unit1 (dwelling), including a residential dwelling on farmland or small holding. Commercial/industrial properties are excluded from this Policy.

2. The owner2 must not be in rates arrears, and must not have a history of late or non-payment of rates over the past three years. Owners that do not meet this criteria may be approved following a credit check to the satisfaction of the Council.

3. The owner is not eligible for funding if the dwelling has an existing voluntary targeted rate applying to it.

4. Rating unit comprising more than one separately used or inhabited part and where the rating unit is used for residential purposes: the owner may apply for only one funding loan unless Council agrees otherwise (considering the nature of the rating unit).

What can be applied for?

5. Owners can apply for a minimum of $1,000 up to a maximum of $10,000 (funding).

6. The funding can be used to undertake capital improvements to the dwelling that provide household sustainability improvements, including:

a. Home energy efficiency (including insulation, double glazing, draught sealing, and insulation of hot water cylinders and piping)

1 Rating unit means a rating unit for the purposes of the Rating Valuations Act 1998 2 Owner means the person who, whether jointly or separately, is seized or possessed of, or entitled to, any estate or interest in land constituting a rating unit (Local Government (Rating) Act 2002)

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b. Water conservation (including rain water collection systems, significant leak repairs, water efficient toilets [four or more stars in the Water Efficiency Labelling Scheme], low pressure systems, low flow shower heads and flow restrictors, grey water systems for gardens, and composting toilets [outside of wastewater reticulated areas only])

c. Replacement or upgrade of inefficient inbuilt heating and hot water systems (including solar hot water system, heat pump water heating, wetback system, efficient electric hot water system, and EECA- approved heat pump, wood burner and pellet burner)

d. Ventilation systems (including extractor fan and full-house ventilation systems) and ground vapour barriers

e. Energy conservation and generation systems (including solar photovoltaic panels and micro-hydro systems)

f. Lighting efficiency improvements (including LED lighting and sky lights)

g. Self-sustainability and food resilience measures (including green houses, edible garden and landscaping, raised bed systems, rainwater/greywater tanks irrigation, and home orchards), and

h. Electric vehicle charging infrastructure (including high voltage fast charger outlets in garages).

7. Council will determine appropriate suitable products that meet the above requirements.

8. The owner may apply for more than one type of capital improvement at one time, up to the total value of $10,000. In this instance, Council will recommend the owner seek advice from a suitably qualified designer to ensure integration and efficiency of the products being chosen to optimise of the benefits of the scheme. For applications received before 30 June 2021 the Council will provide a 20 per cent subsidy of the designer’s fee.

9. Insulation products must be listed as an accepted insulation product by the Energy Efficiency and Conservation Authority (EECA), and be installed in accordance with EECA standards. The owner shall not be granted funding for an EECA accepted clean heating product unless the dwelling is sufficiently insulated, or funding is also being sought for insulation.

10. Funding is provided directly to the supplier and not to the owner.

Who are the suppliers?

11. The Council will approve suppliers to provide the capital improvements.

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12. Funding is not available for businesses that are not an approved supplier, or for ‘do-it-yourself’ owners.

13. Suppliers must enter into an agreement with the Council, and must meet the agreement’s terms and conditions of that agreement. Under the agreement the supplier must follow good business practices. A breach, by the supplier, of the terms and conditions of the agreement will result in cancellation of the agreement by the Council.

How will the loan be repaid?

14. Applications pre 30 June 2021: the owner may choose one of two repayment options:

a. A nine year repayment term. Interest shall be charged 3.25 per cent per annum. The interest rate is fixed for the term of the loan.

b. A five year repayment term. No interest shall be charged for the five years of this loan.

15. Applications from 1 July 2021: the owner may choose to either repay through a five year term or a nine year term. In both cases, interest shall be charged at the Council’s average rate of borrowing stated in the relevant Annual Plan year.

16. The interest rate is fixed for the term of the loan. The interest rate will not be lowered if the average rate of borrowing decreases, nor increased if the average rate of borrowing increases.

17. The owner must agree to pay all rates by direct debit.

18. Repayment of the loan will be through a targeted rate applied to the relevant separately used or inhabited part of the dwelling. That rate shall be set at:

a. For those repaying over 9 years, calculated at 11.11 per cent of the total borrowing (including interest) owed or

b. For those repaying over 5 years, calculated at 20 per cent of the total borrowing (including interest if applicable) owed.

19. The loan repayment will commence as an additional rate on the 1 July following acceptance, by the Council, of the application.

20. The owner may, at any time, repay the entire loan balance; however, partial lump sum payments cannot be accepted.

21. If the owner intends to sell the dwelling during the period after this agreement has been entered into and while the Targeted Rate is still being

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assessed against the dwelling, the owner must, in writing, give notice of that intention to the Council, and advise the owner’s solicitor and the prospective purchaser about the Targeted Rate and terms and conditions of the rate.

22. Upon sale of the property, either:

a. the balance must be settled at the point of sale, or

b. the Council may approve the transfer of debt to the new owner, in which case the terms and conditions of the loan must be listed on the sale and purchase agreement and signed by both parties.

Other matters

23. The Council may charge an application fee to cover administrative costs in accordance with the Council’s schedule of fees and charges. The application fee may be added to the loan. No administration fee will be charged from adoption of this policy until 30 June 2021.

24. The owner is responsible for obtaining and paying all necessary resource consents, building consents, and meeting any other applicable legal requirements (additional costs).

25. The administration fee and additional costs may be added to the loan, so long as the total loan does not exceed $10,000.

Policy contact

The policy holder is the Policy Development Team in the Strategy Group.

Policy review

This policy shall next be reviewed within six years of adoption.

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Letter of Support for Ngā Whare Ora Taiao o Ngāmotu (New Plymouth Sustainable Homes Voluntary Targeted Rate Scheme) Proposal

As Medical Officer of Health, I provide advice to Territorial Authorities on matters relating to public health under the Health Act 1956. I wish to comment on the Ngā Whare Ora Taiao o Ngāmotu (New Plymouth Sustainable Homes Voluntary Targeted Rate Scheme) Proposal.

Ngā Whare Ora Taiao o Ngāmotu is a scheme which will provide support to households to undertake a wide range of sustainability improvements to their homes and property. Households can then repay the costs through a voluntary targeted rate over a five or nine year period. This will allow financial support for health-promoting improvements to homes and properties which may otherwise not happen because of the cost. For example the proposed scheme would allow for those on low and fixed incomes, such as superannuitants, to improve the quality of their homes and properties.

Housing is key factor impacting on the health and wellbeing of people. A number of homes in the New Plymouth district are not adequately insulated, are poorly ventilated and have inadequate or inefficient heating. Improving housing quality and affordable energy-efficient heating has a significant protective impact on health and wellbeing, particularly for those most vulnerable; Māori, children, the elderly, people on low incomes, and people with chronic health conditions, such as respiratory illness and cardiovascular disease.

The proposed scheme provides an opportunity to rectify these issues. This financial relief is particularly important in the current economic uncertainty caused by COVID-19 and would be a proactive good news story for those on low or fixed incomes.

In summary I believe that the Ngā Whare Ora Taiao o Ngāmotu (New Plymouth Sustainable Homes Voluntary Targeted Rates Scheme) proposal has the potential to significantly improve health and wellbeing within the New Plymouth District.

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SHORT TERM FINANCIAL SUPPORT FOR PAPA RERERANGI I PUKETAPU LIMITED

MATTER

1. The matter for consideration by the Council is approval of short term financial support of Papa Rererangi i Puketapu Ltd required as a result of the impact Covid-19 has had on its operations.

RECOMMENDATION FOR CONSIDERATION That having considered all matters raised in the report the Council: i) Approve short term financial support by delegating authority to the Chief Executive to execute an amendment to the Facility Agreement increasing the limit of Tranche B by $2.6 million to $5.6 million. ii) Notes the funding to action this resolution has been included in the Proposed Annual Plan 2020/21 report also in this agenda.

COMPLIANCE Significance This matter is assessed as significant. This report identifies and assesses the following reasonably practicable options for addressing the matter:

1. Approve the short-term financial support of Papa Options Rererangi i Puketapu Ltd.

2. Decline the short-term financial support of Papa Rererangi i Puketapu Ltd.

The persons who are affected by or interested in this matter Affected persons are all residents of the New Plymouth district. This report recommends option one for addressing the Recommendation matter. Long-Term Plan / Annual Plan Yes Implications Significant Policy and Plan No Inconsistencies

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EXECUTIVE SUMMARY

2. Papa Rererangi i Puketapu Ltd (PRIP) provides essential infrastructural assets, in the form of an Airport, for the benefit of the District and Taranaki region. The airport is a strategic asset and of significant interest to the community.

3. The Covid-19 pandemic has had a damaging impact on the aviation industry, with Air New Zealand currently operating at approximately one per cent of their previous domestic capacity.

4. As a result, PRIP are forecasting a significant reduction in revenue for the remainder of this financial year.

5. In response to the decline in revenue, PRIP are forecasting a 40 per cent reduction in operational expenditure for the remainder of this financial year.

6. PRIP have forecasted that additional financial support is needed to alleviate the negative impacts it is suffering from the Covid-19 pandemic and to ensure that that New Plymouth Airport is ready and able to safely manage air services once operations restart.

7. This report recommends that the Council approve the short-term financial support needed by PRIP by amending the Facility Agreement between PRIP and Council (refer Appendix 1 and 2) to increase the facility limit of Tranche B (working capital loan) by $2.6 million to $5.6 million. The facility limit of Tranche A (long-term loan) remains at $29.5 million.

8. Council officers will undertake to investigate and present appropriate options for supporting the Airport’s operations in the long-term. These options will be presented to Council at the June 2020 meeting.

BACKGROUND

9. The Council is the sole shareholder of PRIP, the company that operates the New Plymouth Airport. PRIP is a Council-Controlled Trading Organisation under the Local Government Act 2002.

10. On 20 April 2020, PRIP’s Chief Executive, with the support of its Board of Directors, made a formal request to Council for financial support in light of the negative impacts it is suffering from the Covid-19 pandemic. This support is needed to ensure that New Plymouth Airport is ready and able to safely manage air services once operations restart.

The impact of Covid-19 on the aviation industry

11. Air New Zealand announced that, as of 4 April 2020, they would cease all regional services, as well as many of the jet domestic flights between main hubs. Since that date the New Plymouth Airport terminal has been closed.

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12. Air New Zealand are currently operating at approximately one per cent of their previous domestic capacity and have indicated that this will increase to two per cent once the alert level is lowered from four to three.

13. Current forecasting predicts that over the next 15 to 18 months domestic air travel will increase to around 60 per cent of pre-pandemic numbers and 80 to 90 percent of pre-pandemic numbers within 24 to 30 months.

14. These predictions assume that international travel (particularly with Australia) resumes within the same time period.

Cash flow forecast and key underlying assumptions – Short term

15. A summary of PRIP’s cash flow forecast over the next three months is provided below:

FY20 FY20 FY21 May Jun Jul $000 $000 $000

Opening cash balance 635 395 376 Add: total revenue 281 120 121 Less: total expenditure 184 184 1,002 Operating (shortfall)/excess 97 (64) (881) Less: capital expenditure 736 656 575 Total (shortfall)/excess (640) (720) (1,456) Finance requested 400 700 1,500 Closing cash balance 395 376 420

16. Key assumptions:

i) Operational expenditure for quarter four of FY20 has been reduced by approximately 40 per cent, including all staff and directors agreeing to a 20 per cent reduction in salaries and fees.

ii) Flights resuming towards the end of quarter four, increasing at a steady rate to around sixty percent of pre-pandemic levels by June 2021.

iii) All programmed capital expenditure projects to remain as planned on the basis that this work will generate employment for the construction industry.

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Financial support – short-term

17. The cash flow forecast highlights the need for additional financial support from Council over the next three months to July 2020. This will come in the form of an amendment to the current Facility Agreement increasing the limit of Tranche B (working capital loan) by $2.6 million to $5.6 million. The facility limit of Tranche A (long-term loan) remains at $29.5 million.

Financial support – long-term

18. Based on longer-term cash flow forecasts through to the end of FY2021, PRIP have requested a number of financial support measures. These measures include increasing the limit of Tranche A (long-term loan) by up to $10m, as well as suspending interest payments until 1 July 2022 and postponing principal payments until 1 July 2023.

19. Given the significance of these measures, Council officers will undertake to investigate and present appropriate options for supporting the Airport’s operations in the longer-term. These options will be presented to Council at the June 2020 meeting.

NEXT STEPS

20. If approved, an amendment to the current Facility Agreement will be executed between the Council and PRIP to action the limit increase.

SIGNIFICANCE AND ENGAGEMENT

21. In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as being significant. PRIP provides essential infrastructural assets, in the form of an Airport, for the benefit of the District and Taranaki region. The airport is a strategic asset and of significant interest to the community.

OPTIONS

22. The following matters apply to all options:

Promotion or Achievement of Community Outcomes

23. Ensuring that Taranaki has an operating Airport benefits the district and as such promotes the People, Place and Prosperity community outcomes.

Consistency with Policies and Plans

24. The options are consistent with the Council’s plans and policies.

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Participation by Māori

25. Council officers have briefed the Chief Executives of the five Iwi on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

26. The community have expressed the need for there to be a safe, well operated Airport in the region.

Option 1 Approve PRIP’s short-term financial support

Financial and Resourcing Implications

27. The impact of the amendments to the facility agreement will be taken into account in the Annual Plan and Long-Term Plan. This is not expected to have a significant impact on Council.

28. PRIP is expected to deliver their updated Statement of Intent to Council by 30 June 2020 to reflect changes and the financial impact Covid-19 has had on the business. PRIP’s budget for 2020/21 in included in their Statement of Intent.

Risk Analysis

29. There is significant uncertainty regarding the impact of Covid-19 on the aviation industry, in particular the timing and extent of its recovery. This in turn impacts the assumptions used in PRIP’s cash flow forecast. As such, there is a risk that the increase to the facility limit may not be adequate.

Statutory Responsibilities

30. The Local Government Act 2002 s63 notes that a Council cannot lend money to a Council-Controlled Trading Organisation on terms and conditions more favourable than those that would apply if Council were borrowing the money itself. The amendments to the Facility Agreement will not breach this requirement.

Advantages and Disadvantages

31. The main advantage is that financial support will allow PRIP to safely manage air services at New Plymouth Airport once operations restart and continue operating into the future.

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Option 2 Decline PRIP’s short-term financial support

Financial and Resourcing Implications

32. Based on PRIPs cash flow forecast, if Council does not approve the amendments to the Facility Agreement it can no longer be a going concern and could be considered insolvent.

Risk Analysis

33. PRIP will not be able to provide the essential infrastructural assets, in the form of an Airport, for the benefit of the District and Taranaki region.

34. As the shareholder of PRIP, Council may have to consider alternative ways of managing this strategic asset which is of significant interest to the community.

Statutory Responsibilities

35. Not applicable

Advantages and Disadvantages

36. The main disadvantage is that it is unlikely PRIP will be able to safely manage air services at New Plymouth Airport once operations restart or continue operating into the future.

37. No advantages have been identified.

Recommended Option This report recommends option one for addressing the matter.

APPENDICES

Appendix 1 Original Facility Agreement (ECM 7619607)

Appendix 2 Variation of Facility Agreement 24 September 2019 (ECM 8129052)

Report Details Prepared By: Carla Freeman (Finance and Reporting Lead) Team: Business Performance Group Approved By: Kelvin Wright (Chief Operating Officer) Ward/Community: District Wide Date: 30 April 2020 File Reference: ECM 8277680 ------End of Report ------

181 The attachments to this report have been extracted to reduce the digital size of this agenda.

Copies are available on request. Council - Extraordinary (5 May 2020) - Procurement Recovery Plan (Covid-19)

ADOPTION OF PROCUREMENT RECOVERY PLAN (COVID-19) 4

MATTER

1. The matter for consideration by the Council is a proposed Procurement Recovery Plan (Covid-19). The temporary plan will work as a recovery document that is underpinned by the current Procurement Policy. Community engagement on the plan is proposed.

RECOMMENDATION FOR CONSIDERATION That having considered all matters raised in the report the Council: a) Adopt the Proposed Procurement Recovery Plan (Covid-19) for community engagement. b) Note that when the results of the community engagement are reported back, amendments to the financial delegations register will be sought for the period that the Procurement Recovery Plan (Covid- 19) is in existence.

COMPLIANCE Significance This matter is assessed as being of some importance. This report identifies and assesses the following reasonably practicable options for addressing the matter:

1. Undertake community engagement on the Proposed Procurement Recovery Plan (Covid-19).

Options 2. Adopt (or amend) the Proposed Procurement Recovery Plan (Covid-19) and amend the delegations register.

3. Not adopt the Procurement Recovery Plan (Covid-19) or amend the delegations register

The persons who are affected by or interested in this matter Affected persons are suppliers of goods and services to the New Plymouth District Council and the wider community. Recommendation This report recommends option 1 for addressing the matter. Long-Term Plan / Annual Plan No Implications Significant No. This report is consistent with current policy which Policy and Plan envisages adoption of a proposed recovery plan. Inconsistencies

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4 EXECUTIVE SUMMARY

2. This report proposes that the Council considers the adoption of a Proposed Procurement Recovery Plan (Covid-19) for community engagement. Consequential amendments would be required to the delegations register.

3. The Proposed Procurement Recovery Plan (Covid-19) is planned to work as a Covid-19 Pandemic recovery document that is underpinned by the existing procurement policy to aid the effectiveness of Taranaki’s economic recovery.

4. The proposed plan would remove time constraints for decision making and result in greater speed, simplicity and flexibility in procurement processes. In addition, a ten per cent evaluation discount on price would favour a supplier who can demonstrate their impact on the local supply chain and employment of local resources.

BACKGROUND

Impacts of Covid-19

5. The Covid-19 pandemic has created unprecedented economic and social circumstances. The impact will not be even across the board with some sectors (such as tourism and retail) impacted more than others. The economic recovery will take several years. The community’s well-being is therefore being tested.

6. In response to the impacts of Covid-19, including a forecasted decline in GDP and rise in unemployment the Council is developing a “Get us Back On Our Feet” plan. The plan provides a range of options to help the district and its residents. The short term response is largely through the period of Annual Plan 2020/21. The medium term response and Recovery Planning will inform development of the Long-Term Plan 2021-2031.

7. The Get Us Back On Our Feet Plan comprises a number of proposals. Proposals are based on current understanding of the social and economic impacts of Covid-19. It is acknowledged that many of these impacts and their outcomes are unknown and the Council and community are in one of the most dynamic planning phases seen in recent history.

8. One of the proposals being presented to Council relates to implementing a Procurement Recovery Plan. The Council’s current Procurement Policy references the establishment of a recovery plan to authorise necessary procurement activity during, and immediately after, genuine emergencies. The content of the proposed recovery plan is designed to expedite process, contract extensions and other ‘to market’ time improvements to benefit the community through assisting the Council’s goods and services suppliers.

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9. New Plymouth District Council adopted a Procurement Policy in 2019. The 4 purpose of the policy is to provide guidance to suppliers and staff of New Plymouth District Council to achieve its long-term plan outcomes and vision for the future. The policy provides clear intentions to suppliers, contractors and the community on the key areas the Council will consider throughout the procurement process.

10. The existing procurement policy and strategy of the long term, two-stage tendering process is considered inappropriate at present and would impact on the economic recovery of Taranaki. The current policy may prevent officers making balanced decisions without delay.

The Proposed Procurement Recovery Plan (Covid-19) Aims to Aid Taranaki’s Economic Recovery

11. The purpose of the Proposed Procurement Recovery Plan (Covid-19) is to aid the effectiveness of Taranaki’s economic recovery from the Covid-19 pandemic. The plan is intended to facilitate the planning and execution of procurement actions needed during the recovery phase of the pandemic.

12. Council officers recommend the proposed plan as a practical way to remove procurement process blockages in order to support the community’s socio- economic objectives. In addition to supporting small and medium sized businesses the proposals also enable the creation of new employment opportunities. The proposed plan will reduce timeframes, while maintaining the integrity of the whole of life costs and good quality procurement outcomes.

13. To expedite Taranaki’s and New Plymouth District’s economic recovery, Council officers recommend that the existing two-stage tendering process be suspended. In addition, other methods of accelerating procurement (such as sole sourcing) should be considered.

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Timeframes 4

14. The active timeframe of the Proposed Procurement Recovery Plan (Covid-19) is estimated to be up to 12 months, dependant on the recovery model applied to Taranaki.

Level 4 Lockdown Level 1 Advance preparedness for Continue with accelerated procurement activities. Adoption of procurement policy, while reverting policy changes. Identification of to normal processes for non-essential critical/essential projects. projects.

Level 3 and 2 Post Covid-19 Levels

Procurement prepared for Phase-out accelerated

immediate response. Identify procurement, revert to best projects for special practice, taking into consideration

procurement procedures to be lessons learned. shovel ready.

Proposed Procurement Recovery Plan (Covid-19) inclusions

Multi-sourcing procurement strategies

15. The proposed plan enables Supplier Category Panels to be established with a flexible approach. Category panels are comprised of pre-approved suppliers of goods and/or services. Once established the Council can source goods and services directly from the panel without openly advertising. This expedites the procurement process and reduces tender application costs for suppliers.

16. In order to establish suitable Supplier Category Panels, Council officers will review previous project evaluations that have taken place over the past 24 months and review existing contracts with the Council. Officers will consider each supplier’s current financial status, available resources and ability to complete work before inviting a supplier to join a panel.

17. Category Panels allow goods, works and services to be evenly distributed in several identified ways e.g. taking it in turns, or operating a lowest price conforming evaluation to maintain market competition. Panels reduce the risk of monopolies and achieves an overall increase in employment. This shares the workload and utilises the full potential of Council’s cash flow.

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Apply Local Supply Chain Evaluation Discount 4

18. To assist in recovery of the local economy, and where feasible, Council officers consider it advantageous to seek quotes for goods, works or services from local suppliers. Local is defined as suppliers that use Taranaki’s supply chain and employ regional resources which impact on the New Plymouth District and Taranaki’s Regional economy.

19. In particular, supplier evaluation criteria for projects will have a focus on the number of employees, coupled with how the supplier’s proposal identifies further employment opportunities. The opportunities include such initiatives as retraining resources from other sectors, utilising apprenticeships and/or employing staff with less experience, different ethnicities or lower socio- economic background.

20. The Proposed Procurement Recovery Plan (Covid-19) would result in a ten per cent evaluation discount on price to favour a supplier who can demonstrate their impact on the local supply chain and employment of local resources. This is aimed at projects that can be mobilised quickly. Adopting this initiative as part of the evaluation criteria acknowledges the “Get us Back On Our Feet” Plan, as it provides an opportunity to directly support and encourage local suppliers through a non-monetary mechanism.

21. The discount is applied for evaluations purposes only. This will ensure that the Council is placing value on the benefits that a local supplier creates socially, economically, environmentally and culturally.

22. The complex projects that hold significant value will favour the local supply chain through non-price evaluation criteria.

23. The Council will still require suppliers to provide goods and services at an appropriate level of quality and experience. This requirement will not be compromised by the Local Supply Chain Discount.

24. Using local evaluation criteria is out of scope for roading projects due to the need to comply with the New Zealand Transport Authority’s Procurement Policy.

Amendments to the financial delegations register

25. Council officers recommend that a temporary amendment be made to the Council’s Delegation Register once the Proposed recovery plan has been adopted. This will empower Council Management to make higher level financial decisions and will remove time constraints for decision making and result in greater speed, simplicity and flexibility in procurement processes. It is estimated the efficiency in processes proposed could be in excess of a 20 working days.

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26. It is recommended that a temporary amendment be made to the hierarchy in 4 the delegations register to empower Council officers to make financial decisions at a higher level. This is particularly relevant to the current sole sourcing approval requirements. Noting that this risk is mitigated by a procurement monthly report showing what has been approved under these new delegations to the Executive Leadership Team.

27. Strategic high value or high importance projects will still require Elected Members approval before activation.

28. The proposed delegation changes are listed below:

Current Proposed Delegation Over $500,000 Over $500,000 CEO & Group Manager (Procurement policy (Procurement policy (GM) approval exemption * under exemption * over $250,000 CEO approval, $500,000 elected Council exemption over $250,000 committee approval) elected Council committee approval)

$100,000 to $500,000 $300,000 to $500,000 Any 2 GM approval $75,000 to $100,000 $200,000 to $300,000 GM approval $50,000 to $75,000 $50,000 to $200,000 Functional Manager (FM) approval $25,000 to $50,000 $25,000 to $50,000 Operational Manager (OM) approval $10,000 to $25,000 Lead approval

* Procurement Policy exemption is defined as such actions as sole sourcing.

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Amendments to the financial delegated procurement approach 4

29. The Procurement Recovery Plan (Covid-19) proposes a change to the delegated procurement approach. This combined delegation change will gain speed, simplicity, and flexibility to be able to engage the market most efficiently.

Current Proposed Approach Critical/urgent essential Sole Sourcing, where contracts * feasible Over $500,000 Open or closed Request for Proposal process $100,000 to $500,000 Open or closed Request for Quotes (Dependent on the complexity of the project) $100,000 plus Open market request for tenders or proposals $25,000 to Three written quotes are $100,000 required $0 to $25,000 $0 to $100,000 Direct purchase

* Critical/urgent contracts are defined as projects that hold significant value for the community and the economic recovery of the District)

30. Where an Expression of Interest or Request for Information approach has been applied, a Sole Sourcing approach can be executed. Officers will prepare further guidance on identifying and managing risks in all these areas.

Sole sourcing

31. Council has many existing successful agreements and strong relationships with small to medium-sized enterprises and large local suppliers. For critical and urgent goods, works or services, a direct appointment provides the most efficient process to quickly engage with the market and improve local cash flow. Critical or urgent contracts are defined as projects that hold significant value for the community and the economic recovery of the district. Sole sourcing can also have recognised benefits of saving time, as well as saving on internal and external resource costs. This is essential to boosting and stimulating the region's economy, as this process is not burdened by a drawn-out procurement process or pro-longed lead times. Sole sourcing in this manner is restricted by the current procurement policy.

32. Directly appointing suppliers to category panels will be essential for any Central Government stimulus funding (within any rules for that funding). This will ensure the speedy mobilisation of suppliers and employment, for the potential high volume renewals work. This allows officers flexibility in their response to projects that directly impact on the regions recovery.

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4 Extending existing contracts

33. Council officers recommend that critical contracts which are due to expire within the next 12 months are able to be extended outside of the term agreements. The Procurement Team will highlight contracts the Covid-19 pandemic has impacted and/or will further impact on procurement planning and seek for an extension from the Executive Leadership Team.

34. Applying short term agreements outside of current contract clauses will enable time to adequately consider the post Covid-19 pandemic situation before entering into new contracts. Contracts that are extended must be within the financial agreements based on unit prices of existing contracts. These short term extensions are limited to a maximum of 12 months.

35. Utilising contract scope variations will enable flexibility and the ability to mobilise suppliers efficiently. Using existing contracts reduces risks, as the approved suppliers have already successfully passed through the procurement evaluation process and Council has agreed preferred rates. This is particularly advantageous for the Crown Infrastructure works being identified for Central Government funding. Forecasted contract value will be amended and reapproved by the appropriate delegated authority in accordance with the added contract term.

Project Fluctuations

36. To protect against project price fluctuations, fixed-price contracts or target pricing approaches are used. In addition, a competitive procurement approach is used to achieve market rates where appropriate.

37. The use of retentions in contracts also ensures defects are remediated.

Advertising

38. Council officers recommend that the Council give advance notice of future projects to suppliers. This will enable suppliers have more visibility for planning, forecasting and have confidence in maintaining the appropriate levels of resources to target future opportunities.

39. The Proposed Procurement Recovery Plan (Covid-19) also includes a reduction in advertising periods for live tenders. Currently the Ministry of Business, Innovation and Employment recommend an advertising period of 25 working days, this will be reduced to 15 working days with prior advanced notice to the market having been implemented.

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Tendering 4

40. The Proposed Procurement Recovery Plan (Covid-19) is designed to increase the efficiency of tender processes through:

a) Using simple documentation i.e. existing light procurement plan

b) Using closed tender processes

c) Reusing historic project scopes

41. Other opportunities to quickly engage the market for goods, works and services include:

a) Raising staff purchasing (P-card) limits (currently $1,000 per monthly)

b) Pre-approving contracts (contract approved before procurement appointment)

c) Accelerating lean procurement process review

Reusing historic evaluation information

42. For identified projects, where similar work scopes were used in past evaluations, these will be reused to determine suitable suppliers. It is fair to assume the Covid-19 pandemic will not have impacted supplier methodologies and experience. Evaluations from the last 24 months are deemed as suitable to award contracts. In particular, this is a suitable approach for high volume renewals projects where the expertise needed is limited and work scopes are generic. However, it is recommended that the suppliers’ financial position and available resource be considered.

NEXT STEPS

43. This report recommends community engagement prior to final adoption of the Proposed Procurement Recovery Plan (Covid-19). Consideration of community feedback would be undertaken prior to adoption of a final plan at the end of June (when the Proposed Annual Plan 2020/21 is adopted). The changes will take immediate effect on adoption of the Procurement Recovery Plan (Covid- 19) by the Council. Council officers will continue to track the effect of the plan by monitoring efficiency of the processes and the wider Covid-19 Recovery Plan. This report proposes the term of the Procurement Recovery Plan (Covid- 19) being 12 months from adoption. Council Officer’s will report back if it is deemed practicable to revoke the Procurement Recovery Plan (Covid-19) or extend its duration of operation.

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SIGNIFICANCE AND ENGAGEMENT 4

44. In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as being of some importance because of the impact on commercial ratepayers and the financial difficulties being experienced by businesses and individuals across the district. The community have previously expressed views on the Council’s procurement practices and Council officers advise that community engagement on the Proposed Plan is possible.

OPTIONS

45. The three reasonably practicable options are:

a) Undertake community engagement on the Proposed Procurement Recovery Plan (Covid-19).

b) Adopt (or amend) the Proposed Procurement Recovery Plan (Covid-19) and amend the delegations register without engagement.

c) Not adopt the Proposed Procurement Recovery Plan (Covid-19) or amend the delegations register

The options are assessed together below.

Financial and Resourcing Implications

46. Implementing the Proposed Procurement Recovery Plan (Covid-19) will need the appropriate support to maintain fair and transparent behaviours. Robust procurement processes with executive oversight and approval will continue as per the financial delegations. This will also ensure appropriate measures are in place to prevent against such actions as fraud.

47. Increased support will be needed to deliver contract payment claims promptly and manage retentions on contracts. It is proposed that the employment of a Procurement Business Partner which is underway continues and internal resources are redeployed to provide support if required.

224 Council - Extraordinary (5 May 2020) - Procurement Recovery Plan (Covid-19)

Risk Analysis 4

48. The Ministry of Business, Innovations, and Employment have advised that accelerated procurement in the national alert level 3 and 4 is desirable. This is not compliant with the Government Rules of Sourcing. In the absence of guidance around procurement in the national alert levels 1 and 2, it is possible that the Proposed Procurement Recovery Plan (Covid-19) will be inconsistent with the Government Rules of Sourcing. However, given the anticipated expectation of a long term recovery period for the community, it is recommended that the Council acknowledge the inconsistency and adopt the Proposed Procurement Recovery Plan Covid-19 for 12 months to allow efficiency and provide the local economy the best chance of recovery in the short-medium term.

49. Undertaking community engagement will delay implementation of the plan for approximately six weeks and may therefore have impacts on procurement processes during that time.

Promotion or Achievement of Community Outcomes

50. Adoption of the Proposed Procurement Recovery Plan (Covid-19) supports all of the Community Outcomes by supporting the Council’s suppliers and ensuring that the Council retains access to goods and services to provide its activities.

Statutory Responsibilities

51. The Council’s purchasing activities must be in accordance with its legal responsibilities. Fundamentally the Council’s public law obligation is always to act fairy and reasonably, and in keeping with the law. This imposes a higher standard of conduct than that which may apply in the private sector.

52. The proposed recovery plan meets the statutory obligations.

Consistency with Policies and Plans

53. Adoption of the Proposed Procurement Recovery Plan (Covid-19) in response to the Covid-19 pandemic is consistent with the Council’s Procurement Policy.

Participation by Māori

54. The Procurement Policy includes a section on Iwi Māori participation in procurement processes. This recognises a unique local iwi Māori contribution and value-add to the community. The Proposed Procurement Recovery Plan (Covid-19) does not alter this part of the policy

225 Council - Extraordinary (5 May 2020) - Procurement Recovery Plan (Covid-19)

Community Views and Preferences 4

55. Procurement processes are likely to be of interest to many in the community, particularly those that supply goods and services to the Council.

56. The Covid-19 pandemic has created unprecedented economic and social circumstances. While the effects of the pandemic are not yet well understood, the economic recovery may take several years. The financial difficulties being experienced by businesses and individuals have been expressed in the media and directly to the Council.

Recommended Option This report recommends Option 1 – Undertake community engagement on the Proposed Procurement Recovery Plan (Covid-19).

APPENDICES

Appendix 1 Proposed Procurement Recovery Plan (Covid-19) (ECM 8278259)

Appendix 2 Procurement Recovery Plan Supplier Analysis

Report Details Prepared By: Richard Gater (Procurement Lead) Team: Procurement Approved By: Joy Buckingham (Chief Financial Officer) Ward/Community: District Wide Date: 30 April 2020 File Reference: ECM8276503

------End of Report ------

226 Council - Extraordinary (5 May 2020) - Procurement Recovery Plan (Covid-19)

PROCUREMENT RECOVERY PLAN (COVID-19) 4

Purpose

1. The purpose of this document is to outline the New Plymouth District Council’s procurement activity in response to the Covid-19 Pandemic

2. This document has been prepared in line with the Emergency Procurement section of the Council’s Procurement Policy (P19-001).

3. The purpose of the Proposed Procurement Recovery Plan (Covid-19) is to aid the effectiveness of Taranaki’s economic recovery from the Covid-19 pandemic. The plan is intended to facilitate the planning and execution of procurement actions needed during the recovery phase of the pandemic.

4. To aid the effectiveness of Taranaki’s economic recovery the plan aims to remove time constraints for decision making and result in greater speed, simplicity and flexibility in procurement processes. In addition, a ten per cent evaluation discount on price would favour a supplier who can demonstrate their impact on the local supply chain and employment of local resources.

5. To expedite Taranaki’s and New Plymouth District’s economic recovery, Council officers recommend that the existing two-stage tendering process be suspended. In addition, other methods of accelerating procurement (such as sole sourcing) should be considered.

Proposed Procurement Recovery Plan (Covid-19) methods

Suspension of two-stage tendering process

6. To expedite Taranaki’s and New Plymouth District’s economic recovery, the existing two-stage tendering process be suspended.

Multi-sourcing procurement strategies

7. To expedite the procurement process and reduce tender application costs for suppliers, Supplier Category Panels will be established. Category panels will be comprised of pre-approved suppliers of goods and/or services. Once established the Council can source goods and services directly from the panel without openly advertising.

8. Before inviting a supplier to be included in a panel, Council officers will

i) Consider the supplier’s

 Current financial status,

227 Council - Extraordinary (5 May 2020) - Procurement Recovery Plan (Covid-19)

4  Available resources and

 Ability to complete work

ii) Review previous project evaluations that have taken place over the past 24 months and review existing contracts with the Council.

Apply Local Supply Chain Evaluation Discount

9. Where feasible, Council officers will seek quotes for goods, works or services from local suppliers. Local is defined as suppliers that use Taranaki’s supply chain and employ regional resources which impact on the New Plymouth District and Taranaki’s Regional economy.

10. Supplier evaluation criteria for projects will have a focus on the number of employees, coupled with how the supplier’s proposal identifies further employment opportunities. The opportunities include such initiatives as retraining resources from other sectors, utilising apprenticeships and/or employing staff with less experience, different ethnicities or lower socio- economic background.

11. A ten per cent evaluation discount on price will be given to a supplier who can demonstrate their impact on the local supply chain and employment of local resources.

12. To ensure that the Council is placing value on the benefits that a local supplier creates socially, economically, environmentally and culturally, the discount is applied for evaluations purposes only.

13. The complex projects that hold significant value will favour the local supply chain through non-price evaluation criteria.

14. Suppliers are still required to provide goods and services at an appropriate level of quality and experience. This requirement will not be compromised by the Local Supply Chain Discount.

Note: Using local evaluation criteria is out of scope for roading projects due to the need to comply with the New Zealand Transport Authority’s Procurement Policy.

Sole sourcing

15. To assist with boosting and stimulating the region's economy efficiently, Council will utilise sole sourcing for critical and urgent goods, works or services.

228 Council - Extraordinary (5 May 2020) - Procurement Recovery Plan (Covid-19)

Extending existing contracts 4

16. Critical contracts which are due to expire within the next 12 months may be extended outside of the term agreements. Short term extensions require approval of the Council’s Executive Leadership Team.

17. Short term extensions are limited to a maximum of 12 months.

Project Fluctuations

18. To protect against project price fluctuations the use of fixed-price contracts or target pricing approaches will be used along with retentions if appropriate.

Advertising

19. The Council will provide suppliers with advance notice of future projects to enable more visibility for planning and forecasting to enable maintenance of appropriate levels of resources to target future opportunities.

20. Advertising periods for live tenders will be reduced to 15 working days with prior advanced notice to the market having been implemented.

Tendering

21. Through the duration of the plan, there will be increased efficiency of tender processes through:

a) Using simple documentation i.e. existing light procurement plan

b) Using closed tender processes

c) Raising staff purchasing (P-card) limits

d) Pre-approving contracts (contract approved before procurement appointment)

e) Accelerating lean procurement process review

Reusing historic evaluation information

22. For identified projects, and where similar to those used in past evaluations, the Council will reuse work scopes to determine suitable suppliers. Evaluations from the last 24 months are deemed as suitable to award contracts. This approach will be most suitable for high volume renewals projects where the expertise needed is limited and work scopes are generic. A suppliers’ financial position and available resource will be considered.

229 Council - Extraordinary (5 May 2020) - Procurement Recovery Plan (Covid-19)

Amendments to the financial delegated procurement approach 4

23. For the duration of the Procurement Recovery Plan (Covid-19) the following approach will be taken to procurement.

Current Proposed Approach Critical/urgent essential Sole Sourcing, where contracts * feasible Over $500,000 Open or closed Request for Proposal process $100,000 to $500,000 Open or closed Request for Quotes (Dependent on the complexity of the project) $100,000 plus Open market request for tenders or proposals $25,000 to Three written quotes are $100,000 required $0 to $25,000 $0 to $100,000 Direct purchase

* Critical/urgent contracts are defined as projects that hold significant value for the community and the economic recovery of the District)

24. Where an Expression of Interest or Request for Information approach has been applied, a Sole Sourcing approach can be executed.

Financial delegations

25. To remove time constraints for decision making and result in greater speed, simplicity and flexibility in procurement processes, temporary amendments will be made to the Council’s Delegations Register to empower Council Management to make higher level financial decisions. These amendments will be by separate Council resolution.

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Timeframes 4

26. The active timeframe of the Proposed Procurement Recovery Plan (Covid-19) is estimated to be up to 12 months, dependant on the recovery model applied to Taranaki.

Level 4 Lockdown Level 1 Advance preparedness for Continue with accelerated procurement activities. Adoption of procurement policy, while reverting policy changes. Identification of to normal processes for non-essential critical/essential projects. projects.

Level 3 and 2 Post Covid-19 Levels

Procurement prepared for Phase-out accelerated

immediate response. Identify procurement, revert to best projects for special practice, taking into consideration

procurement procedures to be lessons learned. shovel ready.

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Procurement Recovery Plan Process Plan & Implement Embed Review 4

Month May 20 June20 July 20 Feb 21 March 21 Apr 21

Stakeholder and Local Business Engagement Support Business Change & Risk Management Market Feedback

Adoption of recovery plan Work with Stakeholders to ensure compliance with procurement recovery plan Measure impact of Process recovery plan Identify Key Stakeholders Work with Stakeholders to implement the Social, Economic and Environmental Values

Business communications Deliver supporting documents for Council officer guidance Review of DA levels and Review overall Delegations effectiveness efficiency and Development of supporting documents Analysis of present and emerging risks recommendations

Identify projects for Support reduction in open tender advertisement period through Release of supplier Review long term Advertising advertisement to open market supplier communications, tender evaluation and contract survey on Council advertisement (first 12 months) negotiations procurement process opportunities

Local business engagement Ensure compliance of local supplier focus Support officers with supplier Review recovery Local on boarding and background plan impact and Define evaluation method Support officers with local evaluation methodologies checks plan for BAU

Develop category panels Panel contract development Review panel effectiveness and

Panels further opportunities Identify potential suppliers Complete panel agreements and define work distribution methods

Identify critical Support Council officers with historical evaluations review Support Council officers through Contracts contract management and future open contracts for extension Support Council officers with short term contract extensions and variations tenders of short term extensions

Review of tender template Delivery and support of lite procurement documents Plan for BAU Tendering A dopt local focus into criteria Ensure all documentation is complete to ensure fairness and transparency

Identify potential redeployment candidates Support business through procurement planning, sourcing and management cycle. Plan

Resource Maintain auditable records with administration of procurement document approvals, for Continue to implement Business Partnership tenders, contract compiling, contract payments and contract retentions BAU

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Procurement Recovery Plan Supplier Analysis Local Suppliers 4 Local is defined as suppliers that use Taranaki’s supply chain and employ regional resources which impact on the New Plymouth District and Taranaki’s regional economy. This includes purchasing goods, works or services from a business or business branch in the Taranaki area that is operated by a member of the community who has decision making control over local operations.

These businesses are managed by people who live and work in our communities; raising their families and investing in our communities’ futures. They support our people, schools, organisations, and increase our quality of life; thus improving the health of our communities overall.

Applying 10 per cent on price evaluation

Applying 10 per cent discount onto the evaluated pricing to benefit the local conforming suppliers will focus on the areas where quotes are requested i.e. projects in-between $100,000.00 and $500,000.00 as per the recommendation in the procurement recovery plan. An example would be as follows –

Example Project – Pukekura Car Park Supplier Local Price Project 10% local evaluation Difference Conforming reduction against lowest price Joe Blogs Ltd N $151,000.00 Y N/A NP Industries Y $159,000.00 Y $143,000.00 Stratford Civil Y $156,000.00 N N/A Awarded NP industries Price $159,000.00 +5%

From our definition of local, an analysis of recent projects and tender evaluations has shown there is no potential financial impact from implementing a 10 per cent evaluation reduction on projects valued in-between $100,000.00 to $200,000.00.

No. of projects analysed Locally awarded Tender Local non-local tendered submissions submissions average price difference 18 96% 57 45 + 12%

Although there is a significant local advantage for these projects, there is an estimated increase in competition from outside of the Taranaki region, as New Zealand businesses look to get back on their feet. By allowing a 10 per cent local reduction for evaluation purposes only, the evidence suggests there is no potential budget impacts on the 38 capex projects that could be procured through a request for quotes, but adds further security to the use of the Taranaki local supplier market.

Consequently, projects analysed in the $200,000.00 to $500,000.00 bracket identified an increase in proposals from outside of the Taranaki Region.

No. of projects analysed Locally awarded Tender Local non-local tendered submissions submissions average price difference 15 67% 49 30 + 15%

If the 10 per cent evaluation price reduction was applied to these project, then this would have increased the local awarded contracts to 80 per cent, with an average cost increase of 7 per cent. However, the overall analysis shows an average project cost increase of 15 per cent if contracts are awarded to suppliers outside of Taranaki. Again, the evidence suggest no significant budget impacts to applying a 10 per cent evaluation reduction to local suppliers.

233 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

RENT RELIEF FOR COUNCIL’S COMMERCIAL AND COMMUNITY GROUP TENANTS (COVID-19 PANDEMIC) 5

MATTER

1. The matter for consideration by the Council is to consider an offer of rent relief to Commercial Tenants and Community Groups who occupy Council owned property; the requirement due to the Tenant1 (or Group) being unable to fully conduct the Tenants business from their leased premises as a result of the Covid-19 pandemic.

RECOMMENDATION FOR CONSIDERATION

That having considered all matters raised in the report the Council:

a) Approves the offer of a percentage rent reduction (net leases at 60%; gross leases at 50%) to Commercial Tenants for the period that they are unable to fully conduct their business from their leased premises due to the Covid-19 pandemic except for essential businesses (5 tenants), leases where the rent is based solely on a percentage of turnover (3 tenants), and tenancies that are effectively ground leases (2 tenants).

b) Approves the offer of a full refund (where paid) or offset of rental (if about to become due) of rental to all Community Group tenants for a three month period commencing 26 March 2020.

c) Authorises the Property Manager to negotiate terms of rent relief with commercial lessees and community groups and where necessary prepare and sign variations to Lease Agreements.

1 The terms “tenant” and “lessee” are used interchangeably in this report.

234 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

COMPLIANCE Significance This matter is assessed as being significant 5 This report identifies and assesses the following options for addressing the matter:

For Commercial Tenants;

1. Offer a percentage rent reduction (net leases at 60%; gross leases at 50%) to Commercial Tenants for the period that they are unable to fully conduct their business from their leased premises due to the Covid-19 pandemic except for essential businesses (5), leases where the rent is based solely on a percentage of turnover (3), and tenancies that are effectively ground leases (2).

2. Vary all commercial leases to include clause 27.5 of Options the 2012 ADLS lease and negotiate with each tenant when they make application to the Council requesting rent relief.

3. Do Nothing.

for Community Group Tenants;

A. Offer a full refund of rental (where paid) or offset of rental (if about to become due) to all Community Group tenants for a three month period commencing 26 March 2020.

B. Do Nothing.

The persons who are affected by or interested in this matter Affected persons are ratepayers of the New Plymouth District, particularly those impacted by the Covid-19 pandemic. This report recommends option 1 and option A for Recommendation addressing the matter. Long-Term Plan / Annual Plan Yes Implications Significant Policy and Plan No Inconsistencies

235 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

EXECUTIVE SUMMARY

2. This report proposes that the Council considers providing rent relief to 5 Commercial Tenants (18) and Community Groups (67). The recommendations are aimed at offering a reduced level of rent for commercial tenancies (up to 60% for those tenants on a net rent; or negotiate the level of relief if this is the option adopted by the lessee) for the period that they are unable to fully conduct their business from their leased premises (currently estimated at 7 weeks). For Community Groups the recommendation is a full reduction (100%) for a period of three months, commencing the start of level 4. This will result in a reduction of rental cash flow to the Council of around $83,000 in respect of the commercial leases and $5,800 for community leases. If required, any replacement of this income will need to come from the Economic Development and COVID19 Reserve.

BACKGROUND

3. The Covid-19 pandemic has created unprecedented economic circumstances, particularly during the lockdown period. The Government has mandated that businesses and community groups not deemed essential must close during Covid-19 alert levels 4 and 3, effective from 11.59pm on 25 March 2020. It is noted that essential businesses still have access to their premises. Some businesses/organisations that lease Council owned premises have asked for rent relief during this period.

4. The commercial tenancies are covered by various lease arrangements, some specialised in nature, but the majority following different versions of the Auckland District Law Society (ADLS) lease. Community Groups occupy mostly reserve areas and their tenancies are usually covered by a Council designed community lease, although there are also a number of licences. It is proposed that Commercial Leases and Community Group Leases are considered separately.

5. Following the Christchurch earthquakes the ADLS lease introduced a ‘No Access in Emergency’ clause (clause 27.5). The purpose of clause 27.5 was “…to cater for the ‘red zone’ situation where tenants were unable to physically gain access to their undamaged buildings, because they were cordoned off for safety reasons2.” Clause 27.5 states that where “…the Tenant is unable to gain access to the premises to fully conduct the Tenants business from the premises … then a fair proportion of the rent and outgoings shall cease to be payable…”.

2 ADLS explanation of clause 27.5

236 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

5

6. Not all of Council’s commercial leases use the updated ADLS lease; however, as that lease contains the ‘No Access in Emergency’ clause ADLS form, then it is recommend that all of Council’s commercial leases be read, for the period of the Covid-19 event, as containing clause 27.5 to ensure that all tenants are treated on an equal footing. While this is not required if it was the sole purpose to simply offer to grant a rental percentage reduction to all tenants. Notwithstanding that, it is the aim to provide a level playing field and ensure that all commercial tenants are able to exercise clause 27.5. For some leases this will require a variation of lease with the agreement of the Lessee. If existing leases are to be varied for that purpose, the Council will need to authorise a Council officer to do so. The terms of the variation would be for the period commencing on the date when the Tenant became unable to gain access to their premises to fully conduct Tenant’s business from the premises until the inability ceases.

7. Clause 27.5 hinges on two factors ‘fair portion’ and ‘fully conduct the Tenant’s business’. Since the commencement of the lockdown there has been considerable discussion as to what “a fair proportion” means; there is no case law to provide guidance on this issue. It is, however, the consensus of Property Law specialists that ’fair proportion’ is something to be negotiated between the landlord and tenant and could fall anywhere between 0% and 100%. A number of relevant factors have been identified and include goodwill (location of the premises), what relief the Tenant has accessed through the Government business grants, the type of use of the premises (e.g. storage), and the term of the lease.

8. While there is limited case law on pre-clause 27.5 which is useful in respect of factors that the Court considered relevant; determining what ‘fair proportion of rent’ actually is will depend on a number of factors (listed in Option 2) and will require negotiation with each Tenant that makes application to the Council. Commentary from the property profession, suggest that it is purely open to negotiation and range from nil through to 100%. Discussions with local Valuers, Agents and Property Owners, indicate most are settling between 50-70%.

237 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

9. News articles suggest that two South Island based Councils have adopted 100% rental relief for three months for commercial tenancies that are operating in the tourism or hospitality fields and are negotiating on a case by 5 case basis with other tenants. This approach would appear to have an element of economic subsidy attached to it.

10. Some Lessees have raised the issue of continued difficult business conditions once the country moves out of Level 4 and 3 into something approaching normality. They have requested extended periods of rent relief at gradually reducing levels. It is considered that such considerations are separate to the issue of addressing ‘fair proportion’ when the tenant does not have access to their premises. Council legal advice notes that clause 27.5 sets out the period for determining ‘fair proportion’; the purpose of the clause is not to provide a rent subsidy beyond the defined period.

11. Government is taking a lead on the Covid-19 response from an economic perspective and continues to introduce new business packages. Within Taranaki, Venture Taranaki and the Taranaki Chamber of Commerce are looking at what assistance can be offered to local businesses. The Council by including some form of rent subsidy potentially could give Council tenants an advantage over some businesses that are subject to private commercial leases. If the Council decides to offer further economic assistance, it is suggested this be by way of an alternative arrangement, so that all businesses/organisations may participate.

12. A further factor to consider is prudent property management. The Covid-19 pandemic is anticipated to produce a significant and serious economic shock which is likely to have an ongoing impact on the businesses that were possibly uneconomic prior to Covid-19. Should these businesses fail and the lessees vacate their premises, then there is no guarantee of immediately finding a new tenant or maintaining the same level of rent. Providing a reasonable level of rent relief in a timely manner may help avoid business/organisations failure and vacant premises.

13. The Options considered within this report for the Commercial Tenants are:

a) Offer a percentage rent reduction (net leases at 60%; gross leases at 50%) to Commercial Tenants for the period that they are unable to fully conduct their business from their leased premises due to the Covid-19 pandemic except for essential businesses (5), leases where the rent is based solely on a percentage of turnover (3), and tenancies that are effectively ground leases (2).

238 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

b) Vary all commercial leases to include clause 27.5 of the 2012 ADLS lease and negotiate with each tenant when they make application to the Council requesting rent relief. 5

c) Do Nothing.

There are also two options put forward for Community Groups:

d) Offer a full refund of rental (where paid) or offset of rental (if about to become due) to all Community Group tenants for a three month period.

e) Do Nothing.

NEXT STEPS

14. If approved, officers will communicate with lessees and apply the new rent relief measures as and when lessees apply for them.

SIGNIFICANCE AND ENGAGEMENT

15. In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as being significant because of the impact on ratepayers and the potential impact on the Council finances. It also impacts on the lessees and community groups involved.

16. Given the extraordinary circumstances and the requirements for rent relief policies to be in place as soon as possible, no consultation is proposed.

OPTIONS – COMMERCIAL TENANTS

Option 1: Offer a percentage rent reduction (net leases at 60%; gross leases at 50%) to Commercial Tenants for the period that they are unable to fully conduct their business from their leased premises due to the Covid-19 pandemic except for essential businesses (5), leases where the rent is based solely on a percentage of turnover (3), and tenancies that are effectively ground leases (2).

17. This option looks at offering all of Council’s Commercial tenants who operate non-essential businesses a standard percentage rental reduction for the period that they are unable to fully conduct their business from their leased premises due to the Covid-19 pandemic.

18. The percentage adopted would vary between those on net leases at 60% and those on gross leases at 50%. This is because a tenant on a net lease will be expected to continue to pay outgoings in addition to the rental whereas those on a gross lease pay rental inclusive of outgoings. These percentages fall within the range of those currently being negotiated in the market place.

239 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

19. However, as some existing leases contain clause 27.5; they have the right to negotiate a ‘fair proportion’ if they do not wish to accept the offer of the rent 5 percentage reduction. To maintain a level playing field, Council proposes to offer to amend those leases without clause 27.5 (by agreement with the lessee); so that that their leases read as though the clause is included.

20. If adopted, commercial lessees will be contacted and offered the following:

 All lessees will have the option of assuming that for this exercise their lease contains clause 27.5 of the ADLS lease (as per paragraph 5).

 All Lessees are then given the choice of waiving clause 27.5 and accepting a set percentage (as set out in the paragraph above); or,

 Tenants who are not happy with this offer of a set percentage can still elect to exercise clause 27.5 and provide the necessary documented evidence to support their claim. (See details in option 2).

21. The exception would be essential businesses (5), those tenants where the rentals are based solely on a percentage of turnover (3); or tenancies that are effectively ground leases (2) and the Lessee owns the improvements on the land. No adjustment is proposed for these tenants.

Financial and Resourcing Implications

22. The financial implications of this proposal are estimated at $12,000 per week for the period that lessees are unable to fully conduct their business from their leased premises due to the Covid-19 pandemic.

23. The above table indicates the reduction in rental income at different levels of relief. The row highlighted in yellow, is the estimate based on the level of relief covered in this option (60% for net leases and 50% for gross). Based on the businesses restrictions outlined in Levels 4 and 3 to date, the period of limited or no access is likely to be around 7 weeks or $83,000.

240 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

24. If as a result of Lessee preference a mix of options is adopted (some lessees opting for the rent percentage and the balance to negotiate under Clause 27.5); the financial implications may be higher. 5

25. As this represents a reduction in income rather than additional expenditure, any sum of rent relief given to the Lessees will need to come from the Economic Development and Covid-19 Reserve.

Risk Analysis

26. While this approach reduces any potential claim of unequal treatment, there is a possible risk of external claims that Council has used ratepayer funds to subsidise their tenants which has disadvantaged commercial tenants in the private sector.

27. There is also the potential that if required to negotiate a claim under clause 27.5, not all lessees may be able to justify the percentage of rent recommended within this approach. The mitigating factor is that some might be able to justify more; but choose not to negotiate under clause 27.5 because of convenience.

28. By including a level playing field and offering to include cause 27.5 in all of the commercial leases, increases the potential or risk of incidents of dispute; from those lessees that currently do not have the right to negotiate a ‘fair proportion’ of rent relief.

Promotion or Achievement of Community Outcomes

29. This option helps achieve the People and Prosperity community outcomes.

Lease Responsibility

30. The Council (as lessor) is required to negotiate with Tenants who are on the 2012 ADLS lease (which contains clause 27.5) and who make an application for rent relief due to the Tenant unable to gain access to the premises to fully conduct the Tenants business from the premises.

Consistency with Policies and Plans

31. This option creates a reduction in anticipated income from rents then the figures set out in the Long Term Plan 2018-28.

Participation by Māori

32. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

241 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

Community Views and Preferences

33. The Lessees are part of our Community. There has already been enquiries 5 about the availability of rent relief from eight lessees.

Advantages and Disadvantages

34. This option enables the Council to assist Lessees who have had restrictions placed on access to their leased premises which in turn is impacting on their ability to run their businesses. It is clear and easy to administer, while at the same time giving the lessee the option of a percentage reduction while requiring little in the way of effort or resource on behalf of the lessee. If the lessee believes the offer to be unfair, there is still the option of the lessee producing the appropriate facts and figures and negotiating a different outcome. It does have some resourcing and financial implications for the Council which will need to be funded, but with limited lease numbers involved (17), costs are relatively modest. This proposal aims to provide a balance between being helpful to the individual lessee while not creating a significant cost to the Council (and therefore all ratepayers).

Option 2: Vary all commercial leases to include clause 27.5 of the 2012 ADLS form of lease and negotiate with each tenant individually as and when they approach the Council seeking rent relief.

35. This option is more structured and would require each lessee to negotiate separately with the Council and provide more information and documents to support their claim. It would involve a greater input (work) from both Council staff and the Lessee.

36. It still assumes that all leases have a clause 27.5 in their Lease (as per paragraph 5) but requires a structured and detailed approach when dealing with each negotiation.

37. This option provides the following factors that may be considered (in consultation with Legal Services), when negotiating rent relief:

Fair Proportion: Examples of factors to consider -

a) To what extent is the business still operating and using the premises?

b) What are the specific terms of the lease?

242 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

c) What is the permitted use of the lease?

d) What is the duration of the lease? (including rights of renewal). 5

e) To what extent has the tenant been able to mitigate its losses through other means, such as trading online?

f) Does the tenant have insurance cover? It is suggested that the Council receive a written warranty from applicable tenants that the tenant has not, and will not, receive insurance cover business interruption loss during the period that it is not fully able to conduct its business from the leased premises due to Covid-19.

g) What government/bank business subsidies was available to the Tenant? (Note the issue is not what the Tenant accessed, it is what was available to the Tenant).

h) What is the period that the Tenant is unable to gain access?

i) What was the ‘extent of use’ of the premises during the period they were unable to gain access? e.g. storage, business assets providing the tenant with benefits?

j) What is the period that the Tenant cannot ‘fully conduct’ the Tenant’s business?

k) What are the Council’s financial obligations? E.g. payment of Council’s Property staff, finance repayment obligations.

l) Under the Lease what outgoings etc. are paid by Council?

m) Long term v short term considerations. Was this Tenant solvent pre- Covid-19? (This consideration would need the Council to ask for the tenant’s financials, which the tenant may refuse to provide).

Financial and Resourcing Implications

38. Similar cost to Option 1.

39. It is anticipated that there would be additional Council officer involvement; in the initial preparation of documents and discussions with the lessees and then a follow up review of the information provided and negotiations with lessees.

243 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

Risk Analysis

40. As negotiations will occur on an individual basis there is a slight reduction in 5 risk from Option 1, but through assuming all leases will now include clause 27.5, there is a possible risk of external claims that Council has used ratepayer funds to subsidise those tenants who previously didn’t have this option, which has disadvantaged commercial tenants in the private sector.

41. There is potential for reputational damage arising from a claim from Lessees that the process required to be followed to establish any rent relief, places additional stress on the Lessee during a period when they are already under pressure. Council can mitigate this by claiming it is only following due process.

Promotion or Achievement of Community Outcomes

42. This option helps achieve the People and Prosperity community outcomes.

Consistency with Policies and Plans

43. As per Option 1.

Participation by Māori

44. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

45. As per Option 1.

Advantages and Disadvantages

46. This option provides a more structured approach to the negotiation process and should achieve a more accurate assessment of fair rent relief on an individual basis.

47. It is likely to take longer to work through and potentially put the Lessee under more stress throughout the process.

244 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

Option 3 Do Nothing

48. The ‘Do Nothing’ option is to consider each application for rent relief against 5 the terms of the lease. In respect of the ADLS leases with clause 27.5 “… then a fair proportion of the rent and outgoings shall cease to be payable… for the period commencing on the date when the Tenant became unable to gain access to the premises to fully conduct the Tenant’s business from the premises until the inability ceases”. The Council is, therefore, required to negotiate with Lessees under that lease provision.

49. For Tenants on earlier versions of the ADLS lease, or other lease formats that don’t include clause 27.5, the Council would need to consider applications against the terms of the lease.

Financial and Resourcing Implications

50. In terms of rental value, approximately one half of the leases are either in older or specialty formats and do not contain a clause that is the same or similar to that of Clause 27.5. The level of likely rent relief (reduction) is therefore estimated to be only one half (or 50%) of that for Options 1 or 2 (see table above).

Risk Analysis

51. This option has a low legal risk as each application is dealt with on the terms of the each individual lease.

52. However there is the possibility of reputational risk. There is potential for a claim from Lessees of unfair treatment and uneven playing fields as well as the possibility that any business failure (if this should occur), would be attributed to the approach taken by the Council. There may also be claims that the stance taken by the Council has placed additional stress on the Lessees during a period when they are already under pressure.

Promotion or Achievement of Community Outcomes

53. This option helps in part to achieve the People and Prosperity community outcomes.

Consistency with Policies and Plans

54. As per Option 1.

Participation by Māori

55. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

245 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

Community Views and Preferences

56. The Lessees are part of our Community. There has already been enquiry over 5 the availability of rent relief from some Lessees whose lease does not contain the Clause 27.5. This approach will not suit their preference.

Advantages and Disadvantages

57. This option is likely to have the least effect on rental income but in turn does not provide a level playing field and could cause reputational risk/damage through negative comment by disgruntled Lessees. From a property management prospective, it does not lend itself to good future Lessor/Lessee relationships.

OPTIONS – COMMUNITY TENANTS

Additional Background

58. The Council has a number of Community based leases that are with the likes of Sports Clubs, Community Organisations and Charity Groups. In the main, these are located on Reserves and comprise land used for grazing, site leases, sports grounds, and some Council owned buildings.

59. Under Covid-19 many of the activities undertaken by these groups are considered non-essential and as a result the Lessee has been unable to occupy or use their lease area. A number of the Community Groups have asked for rent relief

60. Almost all leases have concessional rents which for some are as low as $1 per annum but for those that have been reviewed in recent years are based on a formula. These nominal leases will be excluded from the offer as are grazing leases. In total there are some 120 leases and of these there are currently 70 that pay rental based on the formula (not a nominal $1 – most generally sitting in the range of $25-$500pa).

61. Under the terms of the Lease there is no requirement to negotiate a change to the rental. The Council could consider a similar approach to that recommended for commercial leases and assume that a clause similar to 27.5 of the current ADLS lease applies.

62. Only nominal sums are involved. If the Council decides to offer rent relief, it is recommended that a period of three months be applied.

63. Noting that as rents are usually charged on a six monthly or yearly basis, rather than a refund of rent, a credit be applied to the next payment. From an administration perspective, this would be easy to manage.

246 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

Option A Offer a full refund (where paid) or offset of rental (if about to become due) of rental to all Community Group tenants for a three month period commencing 26 March 2020 5

Financial and Resourcing Implications

64. The financial implications of the proposed relief is estimated at $5,800 for the three month period.

65. As this represents a reduction in income rather than additional expenditure, any sum of rent relief given to the Lessees will need to come from the Economic Development and Covid-19 Reserve.

Risk Analysis

66. While this approach reduces any potential claim from the Lessee of not having rights to a fair process, there is a possible risk of external claims that Council has used ratepayer funds to subsidise their tenants which has disadvantaged other Council tenants as well as those in the private sector.

Promotion or Achievement of Community Outcomes

67. This option helps achieve the People and Prosperity community outcomes.

Statutory Responsibilities

68. There are no known statutory responsibilities.

Consistency with Policies and Plans

69. This option creates a reduction in anticipated income from rents than the figures set out in the Long-Term Plan 2018-28.

Participation by Māori

70. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

71. The Lessees are part of our Community. There has already been an enquiry over the availability of rent relief.

247 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

Advantages and Disadvantages

72. This option enables the Council to proactively help Lessees who have had 5 restrictions placed on access to their leased premises which in turn is impacting on their ability to function. It is clear and easy to administer, while at the same time requiring little in the way of effort or resource on behalf of the Lessee. It does have some resourcing and financial implications for the Council which will need to be rate funded, but costs are relatively modest. The proposed relief aims to provide a balance between being helpful to individual Lessee whilst not creating a significant cost to the Council (and therefore all ratepayers).

Option B Do Nothing

73. There is no requirement to provide rent relief within these leases and doing nothing is an option.

Financial and Resourcing Implications

74. There are no financial or resourcing implications.

Risk Analysis

75. There is the potential risk of negative publicity from a disgruntled Lessee who might feel that some form of rental relief is warranted. This may be mitigated by the low value of the rental to begin with and the fact that these are based on concessional rental calculations.

Promotion or Achievement of Community Outcomes

76. This option does nothing to achieve the People and Prosperity community outcomes as might be viewed by the Lessee.

Statutory Responsibilities

77. There are no known statutory responsibilities.

Participation by Māori

78. Council officers have briefed the five Iwi Chief Executives on two occasions on the detail of the rate options and the Get Us Back On Our Feet Plan and invited further discussions during community engagement.

Community Views and Preferences

79. The Lessees are part of our Community. There has already been an enquiry over the availability of rent relief and this option would not achieve their preferred outcome.

248 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

Advantages and Disadvantages 5 80. This option is likely to have the least effect on rental income but could cause reputational risk/damage through negative comment by disgruntled Lessees.

Recommended Options

This report recommends for the Commercial Tenancies - option 1 - Offer a percentage rent reduction (net leases at 60%; gross leases at 50%) to all Commercial Tenants (whose businesses are classed as ‘non-essential’) for the period that they are unable to fully conduct their business from their leased premises due to the Covid-19 pandemic except for essential businesses (5), leases where the rent is based solely on a percentage of turnover (3), and tenancies that are effectively ground leases (2); and,

For the Community Tenancies - option A - Offer a full refund (where paid) or offset of rental (if about to become due) of rental to all Community Group tenants for a three month period commencing 26 March 2020.

APPENDICES

Appendix 1 – List of Commercial and Community Group Tenants

Report Details Prepared By: Ian Baker (Property Manager) Team: Property Team Approved By: Joy Buckingham (Chief Financial Officer) Ward/Community: District Wide Date: 29 April 2020 File Reference: ECM 8276273

------End of Report ------

249 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

NPDC COMMERCIAL TENANTS* Tenant Name Tenant Type Property 5 ARBORIO N.P. LIMITED Café Puki Ariki EJO LTD Café Teahouse MONICA'S EATERY Café GBAG A & J RAWLINSON Camping ground Oakura Bay Holiday Park HAYSTON HOLIDAYS LTD Camping ground Onaero Bay Holiday Park HAYSTON HOLIDAYS LTD Camping ground Urenui Beach Motor Camp TOURISM BIZ LTD Camping ground Belt Road Holiday Park TOURISM BIZ LTD Camping ground Fitzroy Beach Holiday Park WESTBEACH MOTOR CAMP WAITARA LTD Camping ground 9 Browne Street Extension, WAITARA 4320 CALIBRE CONSULTING LTD Civic Centre 84 Liardet Street, NEW PLYMOUTH 4310 NZTA Civic Centre 84 Liardet Street, NEW PLYMOUTH 4310 COASTLINE LTD Metro Plaza 33 Devon Street West, NEW PLYMOUTH 4310 GOV AND CROOKS Metro Plaza 33 Devon Street West, NEW PLYMOUTH 4310 LOST ART GALLERY Metro Plaza 33 Devon Street West, NEW PLYMOUTH 4310 SHAMPOO PLUS Metro Plaza 33 Devon Street West, NEW PLYMOUTH 4310 SUBWAY METRO Metro Plaza 33 Devon Street West, NEW PLYMOUTH 4310 THE MUSHROOM CLOUD LTD Metro Plaza 33 Devon Street West, NEW PLYMOUTH 4310 Varnell CLAY Metro Plaza 33 Devon Street West, NEW PLYMOUTH 4310 * Some tenants have been excluded = please refer to coveringreport

250 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

NPDC COMMUNITY TENANTS 5 WAITARA PONY CLUB Grazing Lease Ranfurly Park Waitara TARANAKI COMMUNITY STADIUM TRUST Land Lease Jubilee Park TRIMBLE - JUBILEE PARK KARTSPORT TARANAKI INC Land Lease MANUKORIHI PARK WEST END BOWLING CLUB (INC) Land Lease WESTERN PARK TASMAN CLUB INCORPORATED Land Lease OCTAVIUS PLACE

NP BOWLING CLUB Land Lease DEAN PARK PUKEKURA PARK TENNIS CLUB Land Site Lease BROOKLANDS - WELBOURN PARKS CENTRAL DIVISION INDOOR BOWLS LTD Land Site Lease Belt Road NP SURFRIDERS CLUB Land Site Lease Clubrooms - Fitzroy Beach HUATOKI TENNIS CLUB Land Site Lease HUATOKI DOMAIN ROTOKARE LAWN TENNIS CLUB Land Lease ROTOKARE PARK BOWLS WAITARA INCORPORATED Land Lease PUKEKOHE DOMAIN WAITARA LAWN TENNIS CLUB (INC) Land Lease PUKEKOHE DOMAIN

Paid by Direct Debit NEW PLYMOUTH ROLLER SPORTS CLUB INC Land Site Lease EAST END RESERVE KAITAKE RUGBY FOOTBALL CLUB Land Lease Clubrooms Site CORBETT PARK DOMAIN OAKURA TARANAKI FREE KINDERGARTEN Land Lease - Fillis Street ASSOCIATION INCORPORATED PUKEKURA KINDERGARTEN TARANAKI FREE KINDERGARTEN Land Brooklands Kindergarten ASSOCIATION INCORPORATED DEAN PARK TARANAKI FREE KINDERGARTEN Land Site Lease ASSOCIATION INCORPORATED 39 MURRAY STREET NP OLD BOYS SWIMMIMG & SURF CLUB Land Clubrooms & Storage Shed OAKURA BEACH TARANAKI RADIO CONTROL CAR CLUB Land Lease Part Peringa Park NP OLD BOYS SPORTS CLUB Land Lease Clubrooms Site VOGELTOWN PARK NP POTTERS CLUB Land Rent Vicarage 290 COURTENAY STREET, KAWAROA PARK SQUASH CLUB Land Site Lease KAWAROA PARK FITZROY SURF CLUB INC Land Site Lease - Club Rooms FITZROY BEACH NP RANGERS AFC Land MERRILANDS DOMAIN Lease Clubrooms Site TUKAPA RUGBY & SPORTS CLUB Land Lease Clubrooms Site SANDERS PARK

251 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

NPDC COMMUNITY TENANTS WESTERN SUBURBS COMMUNITY SPORTS Land Clubrooms Site Rental CLUB INCORPORATED NGAMOTU DOMAIN 5 EAST END SURF LIFESAVING CLUB Land Site Lease Clubrooms EAST END RESERVE BELL BLOCK MARIST RUGBY LEAGUE Land Site Lease Clubrooms HICKFORD PARK BELL BLOCK RUGBY FOOTBALL CLUB Land Lease Clubrooms Site HICKFORD PARK INGLEWOOD SMALLBORE RIFLE CLUB Land Site Lease Clubrooms TRIMBLE - JUBILEE PARK NEW ZEALAND PLAYCENTRE FEDERATION Land Lease Section 243 Brown Street INGLEWOOD NETBALL TARANAKI Land Site Lease Clubrooms TRIMBLE - JUBILEE PARK MOTUROA AFC & SPORTS CLUB Land Lease Clubrooms Site ONUKU TAIPARI DOMAIN WESTERN SUBURBS COMMUNITY SPORTS Land Lease - Shower Block CLUB INCORPORATED NGAMOTU DOMAIN NETBALL TARANAKI Land Site Lease WAIWAKAIHO PARK NPHS OLD BOYS CRICKET CLUB INC Land Lease Clubrooms Site WESTERN PARK MANUKORIHI PARK SPORTS CLUB Land Site Lease Clubrooms MANUKORIHI PARK WOODLEIGH SPORTS CLUB Land Site Lease Clubrooms SUTHERLAND PARK OAKURA BOARD RIDERS CLUB Land INCORPORATED Lease Clubrooms Site Oakura Beach BELL BLOCK COMMUNITY POOL SOCIETY INC Land Lease 10 MURRAY STREET BELL BLOCK COMMUNITY POOL TARURUTANGI TENNIS CLUB Land Lease 69 UPLAND ROAD, TARURUTANGI INGLEWOOD COMBINED SPORTS CLUB Land Site Lease Clubrooms KARO PARK PERINGA PARK SPORTS CLUB Land Site Lease Clubrooms INCORPORATED PERINGA PARK NEW PLYMOUTH MOUNTAIN BIKERS Land Lease Storage Shed - Lake Mangamahoe NP HORTICULTURAL SOCIETY Land Site Lease - Storage Buiding MANGAMAHOE WAITARA COMMUNITY ARTS & CRAFT Land Lease MEMORIAL PLACE

PAID BY DIRECT DEBIT WESTOWN SCOUT GROUP Land Site Lease WAIMEA RESERVE WAITARA GYMNASTIC CLUB Land Lease PUKEKOHE DOMAIN PUKEKURA SCOUT GROUP Land Site Lease BROOKLANDS - WELBOURN PARKS FITZROY SCOUT GROUP Land Site Lease Clubrooms PERINGA PARK TARANAKI VINTAGE CAR CLUB (INC) Land Lease WAIONGONA HALL OKATO PONY CLUB BRANCH OF NTPC INC Land Okato Domain Ground Lease

252 Council - Extraordinary (5 May 2020) - Rent relief for Council's Commercial and Community Group Tenants

NPDC COMMUNITY TENANTS INGLEWOOD CROQUET CLUB Land Site Lease Clubrooms TRIMBLE - JUBILEE PARK 5 NEW ZEALAND PLAYCENTRE FEDERATION Land Lease - Lot 2 DP 2515 URENUI COMMUNITY CENTRE UPPER MANGOREI HALL SPORT COMPLEX Land Lease UPPER MANGOREI DOMAIN NP MODEL ENGINEERING & NP CHESS CLUB Land Cnr Gilbert Liardet Streets GILBERT STREET RESERVE MS TARANAKI Land Lease ONUKU TAIPARI DOMAIN NEW PLYMOUTH BOYS HIGH SCHOOL Land Lease part Hobson Street Depot Land ROYAL NZ PLUNKET TRUST Land and building Lease 43 Queen Street Waitara Plunket Rooms FORD 8 & 10 CLUB Land Lease Storage Shed MANGAMAHOE BELL BLOCK SCHOOL Land and building Use of Bell Block Hall WEST END CROQUET CLUB Land and building Lease - Western Park INGLEWOOD SCOUT & GUIDE Land and building Site Lease Carnival Park TRIMBLE - JUBILEE PARK TARANAKI OUTDOOR PURSUITS Land and building Camp Huinga MANGAMAHOE MENDL SOC OF CREATIVE DANCE Land and building Site Lease Storage Facilities MERRILANDS DOMAIN

* Some tenants have been excluded from this list - please refer to covering report

253