agenda - goredc.govt.nz · would likely resume in level 3 and some of the backlog would be able to...

Notice is hereby given that an ordinary meeting of the Gore District Council will be held virtually, by Zoom technology, on Tuesday 12 May 2020, at 4.30pm

Stephen Parry

Chief Executive

7 May 2020

Agenda

1. Apologies 2. Declaration of Councillor conflict of interests 3. Confirmation of minutes and reports

Confirmation of the minutes of the ordinary meeting of the Gore District Council, held

on Wednesday 15 April 2020. Pages 1-6

Confirmation of the minutes of the extraordinary meeting of the Gore District Council,

held on 22 April 2020. Pages 7-8

Confirmation of the minutes of the extraordinary meeting of the Gore District Council,

held on 28 April 2020. Pages 9-10

4. Urgent late business – as tabled at the meeting, pursuant to section 46 (a)(7) of the

Official Information and Meetings Act 1987. 5. Financial report for February 2020

Pages 11-23 6. Dog Control Policy and Practices

Pages 24-28

7. Green waste disposal

Pages 29-30

8. Bancorp treasury report Pages 31-41

9. Revenue forecasting for the year ending 30 June 2020

Pages 42-44 10. Health and safety report

Page 45 11. Civic Financial Services annual report

Pages 46-83

12. Business to be considered pursuant to the Local Government Official Information and Meetings Act 1987:

(i) Confirmation of minutes • Confirmation of the minutes of the extraordinary meeting of the Gore

District Council, held in committee, on Monday 13 April 2020. • Confirmation of the minutes of the ordinary meeting of the Gore District

Council, held in committee, on Wednesday 15 April 2020. • Confirmation of the minutes of the ordinary meeting of the Gore District

Council, held in committee, on Wednesday 22 April 2020.

(ii) Other business • Update on land negotiations – water treatment plant upgrade • WorkSafe vs Gore District Council • Howe Road bridge report

1 Cncl\Mins\15.04.20

Minutes of an ordinary meeting of the Gore District Council, held virtually, via Zoom, on Wednesday 15 April 2020, at 4.38pm

Present His Worship the Mayor, Mr Tracy Hicks JP, Crs Bolger, Davis, Dickson, Gardyne, D Grant JP, N Grant, Highsted, MacDonell, McPhail, Phillips and Reid.

In attendance The Chief Executive (Mr Stephen Parry), General Manager Infrastructure (Mr Ramesh Sharma), HR/Administration Manager (Susan Jones), Communications-Marketing Manager (Sonia Gerken), Parks and Recreation Manager (Mr Ian Soper), 3 Waters Asset Manager (Mr Matt Bayliss), Project Manager Infrastructure (Mr Hashem Ramezan-zadeh), Roading Asset Manager (Mr Peter Standring) and Accountant (Mrs Donna McKewen).

His Worship acknowledged the Council’s first meeting being conducted by Zoom technology. He also acknowledged and paid tribute to those people who were essential workers and putting their lives on the line in order to protect the community from Covid-19. In a very short space of time, the world had changed. He offered condolences to those who had lost family members to the virus. He thanked and acknowledged local health workers, civil defence, ambulance, police and social organisations who were going above and beyond to protect and support the community.

1. CONFIRMATION OF MINUTES

RESOLVED on the motion of Cr McPhail, seconded by Cr Highsted, THAT the minutes of the ordinary meeting of the Gore District Council, held on Tuesday 10 March 2020, as presented, be confirmed and signed by the Mayor as a true and complete record.

RESOLVED on the motion of Cr MacDonell, seconded by Cr Phillips, THAT the minutes of the extraordinary meeting of the Gore District Council, held on Monday 23 March 2020, as presented, be confirmed and signed by the Mayor as a true and complete record.

Cr Highsted asked with the legislative changes that had been made subsequent to the Council’s establishment of an Emergency Committee that allowed electronic meetings, whether it was still appropriate to have a quorum of two. The Chief

1


Executive advised the quorum of two was something that became automated under the Local Government Official Information and Meetings Act as soon as a Committee of Council was established. The Emergency Committee had been established due to the move into the Level 4 lockdown. All Councillors were entitled to attend an Emergency Committee meeting.

2. FINANCIAL REPORT FOR FEBRUARY 2020 A financial report for February 2020 from the Accountant had been circulated and was

perused by the Council. The Accountant noted two corrections in the report. On page 1, total revenue was higher than budget by $85k. Since the date of the report, the world had changed and there would be changes to the Council’s finances in the coming months.

Cr MacDonell referred to replacement parts for the Mataura Valley Milk (MVM) industrial hub. The Accountant advised the items needed for the plant were required to be held in stock as they came from overseas. In response to His Worship, the Chief Executive advised MVM did not own the plant. It was paid for by the company and MVM paid for and owned the pipeline leading to the hub, but the hub itself was owned and operated by the Council. The operational costs were funded by MVM through a wastewater agreement. MVM also had exclusive rights for the facility under the agreement, although it could be available to another user in consultation with the company. Cr Highsted asked if the unfavourable variance in the regulatory area would be picked up in the annual plan for the forthcoming financial year. The Accountant confirmed most of it had been. It included the recruitment of a Planning Manager and other staff adjustments. Cr Highsted disliked suspense accounts and suggested those items being held should be allocated to the areas they had been incurred in. He asked if the suspense account would be addressed quickly or would the clearing of it take some time. The Accountant expected most of what was held would be addressed quite quickly but there were some unknowns as to where the costs may be allocated to. The balance sheet reflected the suspense account figures. Cr Dickson asked if the lockdown would have a negative or positive effect on the Council’s finances, especially in the parks and roading activities with potential impact on subsidies. The Accountant was unsure whether there had been any emergency or roading safety works undertaken. There may be a downturn in the revenue collection through the pool and regulatory functions. The Chief Executive agreed possible revenue drops would incur pressure on the Council’s finances. He could see regulatory functions being impacted with pre-Covid-19 developmental conditions in terms of building and resource consents. The pool relied upon a decent amount of revenue to off-set the ratepayer input. There was no guarantee as to when the pool could reopen to the public again. Parks and reserves did not have revenue hits as a result of the

2


service not being delivered. It was expected the parks staff could return to work once the Level 4 lockdown had been lifted. There would be pockets of discomfort financially, and it was a watching brief in terms of rating income and what the Council may need to do to assist ratepayers. The impacts would flow into a future report to the Council. The Roading Asset Manager advised roading activities were continuing as far as funding was concerned. There was catch-up work that would need to be undertaken post Level 4. The Parks and Recreation Manager said the parks and reserves activity would likely resume in Level 3 and some of the backlog would be able to be cleared without breaching social distancing requirements. Cr Gardyne asked if the Council was reimbursed by MVM for items purchased for the industrial hub. The Accountant understood it was covered by an agreement with 3 Waters and included in an overall wash-up at the end of the financial year. The 3 Waters Manager would confirm that the Council was in fact claiming the inventory carrying costs. He confirmed the trade waste agreement allowed for full cost recovery. In response to Cr Reid who asked if there had been any analysis done about the loss of income from the pool having been closed for a month, the Accountant advised she had not looked at that but could include it in a future report. RESOLVED on the motion of Cr Highsted, seconded by Cr Gardyne, THAT the financial report for February 2020 be received.

2020/30 3. FUTURE USE OF COUNCIL OWNED LAND – 67 WIGAN STREET, GORE (21.2/SC2255) A memo had been received from the Parks and Recreation Manager seeking guidance

from the Council on the future use of the land it owned at 67 Wigan Street, formerly the Seddon Memorial hospital site. The Council had purchased the site in November 2017 for $150,000. At the time of purchase, there were no specific uses, however it was viewed as a strategic acquisition given its proximity to the Gore A&P Showgrounds to the north and Council owned recreation reserve land to the west.

In 2018 the Council developed and completed an application to the Government’s

Provincial Growth Fund for the Manaaki Eco Village. In December 2019, the Council was notified the application had been declined. A copy of the letter from the Provincial Development Unit of the Ministry of Business, Innovation and Employment had been circulated with the agenda.

The Chief Executive did not think the Council needed to be pressured into coming up

with a decision as to what to do with the land. His Worship added the land had initially been purchased without any specific use in mind.

3


Cr Highsted said the world had fundamentally changed recently, there was uncertainty in the community, tourism was an unknown and he felt the Council should sit tight and show the community it recognised where it was at right now. It could be raised at some time in the future. He was reluctant to go out with aspirational ideas that may cost the ratepayers money.

Cr D Grant concurred with Cr Highsted. The aspirations of some in the community may have been towards the equestrian hub but he believed it needed to be focused on something for the whole community. Whatever the Council did, it had to be a stand-alone project with all costs covered. It could not be funded by ratepayers. Cr Davis agreed and did not think it was appropriate to canvass the community at this time.

Cr Gardyne asked what the limitations of the Reserves Act meant. He asked if there had been any more thought about subdivision against the two road boundaries for housing. It was a contaminated site, but there was work that could be done. He estimated there could be 13-15 sections for subdivision. His Worship said he was not aware of there having been any work done. He was aware of previous owners having considered subdivision and there were areas that could be used for residential purposes. The Chief Executive said a Reserves Act classification did incur some limitations. When the land was purchased the Council suspected it may be used for a future recreational pursuit rather than intensive development for residential purposes. The property did have limitations in regard to contaminated land and areas that could not be built on.

RESOLVED on the motion of Cr D Grant, seconded by Cr Highsted, THAT the information be received,

THAT the Council note that the future use of the former Seddon Memorial Hospital site will be determined in the future on a case by case basis – with all probability that the future use will be one that fits within the boundaries and limitations of the Reserves Act 1977.

2020/31

4. MATAURA COMMUNITY BOARD REPORT (SC2696)

A copy of the report of the meeting of the Mataura Community Board held on 16March 2020 had been circulated with the agenda and was perused by the Council.

In response to Cr D Grant, the Parks and Recreation Manager advised the Council usedto receive a lot of assistance from periodic detention personnel, but in recent times,it had been more difficult to secure.

Cr Davis asked what impact Covid-19 would have on the Board’s proposal for the oldrailway station building. His Worship said it had not been contained within the reportand he felt it was too early to make any comment on it. Cr Phillips said he had made

4


comments about the public release of information relating to the railway station project. Given the current situation, the Board was in no hurry and would wait to see how tha project and others the Board had in mind would pan out.

RESOLVED on the motion of Cr Phillips, seconded by Cr Highsted, THAT the report be

received, AND THAT the recommendations contained in the report be ratified.

2020/32 5. GREAT SOUTH – SIX MONTHLY UPDATE (SC2586) A memo had been received from the Chief Executive together with a six monthly

update report from Great South to 31 December 2019. The report detailed the work involved in getting the Great South brand and the organisation’s operations established, together with a number of initiatives that had been instigated for the region.

His Worship said since the report had been produced, the world had changed and the

focus of Great South had changed totally. The Chief Executive said there would be a revised Statement of Intent from Great South that the Council would need to approve by the end of the month.

RESOLVED on the motion of Cr Bolger, seconded by Cr Dickson, THAT the report be

received. 2020/33

6. GRANTS SUB-COMMITTEE MEETING (SC2609) A copy of the report of the meeting of the Grants Sub-Committee held on Thursday

19 March 2020 had been circulated with the agenda. Cr D Grant moved THAT the report of the meeting of the Grants Sub-Committee held

on 19 March 2020, be received,

AND THAT the recommendations contained in the report be ratified. The motion was seconded by Cr Highsted. Cr Highsted referred to clause 4 of the report about the presentation from Gore Corps and the suggestion that perhaps the Youth Council having some input into funding. He thought it was a good point and the Gore Corps was a very good example where the Council could empower the Youth Council to have some input. Cr D Grant said he had had comments from two former Youth Councillors who would have liked to work to a budget. Cr Reid said about two years ago the Youth Council had worked with James Ward in hosting an event which had been very successful. She said perhaps

5


during a future Youth Week it was something that could continue to be offered to young people in the District. Cr Dickson thought the project was very worthwhile and was aware that Hokonui Huanui was working with James Ward. She felt that connection would work out well. Cr Highsted asked for a report from the Chief Executive in the future about the prospect of having a budget established for the Youth Council and how that could operate. The motion was put and it was carried.

2020/34

The meeting concluded at 5.30pm

6

1 ExtordCncl\Mins\22.04.20

Minutes of an extraordinary meeting of the Gore District Council, held virtually by Zoom, on Wednesday 22 April 2020, at 4.43pm Present His Worship the Mayor, Mr Tracy Hicks JP, Crs Bolger, Davis,

Dickson, Gardyne, D Grant JP, N Grant, Highsted, MacDonell (from 4.44pm), McPhail, Phillips and Reid.

In attendance The Chief Executive (Mr Stephen Parry), General Manager

Infrastructure, Roading Asset Manager (Mr Peter Standring), HR/Administration Manager (Susan Jones) and Communications-Marketing Manager (Sonia Gerken).

1. PROPOSED COVID-19 SHORT TERM RATES DEFERRAL POLICY (SC0110) A report had been received from the Chief Executive following the imposition of an

alert Level 4 lockdown in New Zealand in response to the Covid-19 pandemic having created economic uncertainty and hardship due to many sectors of the economy being effectively side-lined and unable to operate. A copy of a proposed Covid-19 Short Term Rates Deferral Policy had also been circulated with the agenda.

Cr Dickson asked if rates deferred would be in full. The policy indicated the deferral

did not include water rates and those businesses that could not open. His Worship said the new policy related to a deferral of rates, not remission of rates. The Chief Executive confirmed it was deferral. A ratepayer could opt to defer the entire instalment for the fourth quarter of this financial year and the first quarter for the next financial year. The policy only applied to the ratepayer.

Cr Highsted said the country was in extraordinary times and some people who may benefit would not be used to asking for assistance. He would prefer to see the policy amended to having a declaration of hardship or loss of employment. The Chief Executive said there was no legal impediment to that suggestion. It had been considered by the Council staff and on balance some evidence of hardship without being onerous would be preferable. Cr Reid agreed with Cr Highsted. She thought it could be a big issue for some people to admit they were struggling financially. The Government had not asked for much evidence in return for the payments it had made to date. She also supported having the penalties being waived.

7

2 ExtordCncl\Mins\22.04.20

Cr Bolger said those who did not take advantage of the policy would be carrying others which was fine. However, he supported having evidence of hardship being provided. Cr McPhail thought the policy was a good one. The reference to whether evidence of hardship was required he thought would be a form of gatekeeping. Cr Davis agreed with Cr Highsted. If people were going to apply they would already be at a disadvantage. She did not think they should go through too many hoops to take advantage of the policy. Cr Dickson said because it was a deferral and not a remission the Council did not need to be too onerous. She asked if the Council had to be accountable for the deferral. Was there a criteria to meet for people’s finances so that the rates were being deferred for the right reasons? His Worship thought it was laid out in the policy. Cr Phillips asked whether the Council was in a financial position to be able to defer the rates. The Chief Executive said it was a step into the unknown and the amount of uplift was unknown. He had suggested it may be necessary to borrow short-term to cover the amount of rates that may be deferred. Cr Gardyne thought it was a good policy and the key would be discretion and management by the staff. Cr Reid asked if the staff who would be dealing with ratepayers about the policy could mention the rates rebate scheme. Some may not be aware of their entitlement to it. There was general consensus to have “evidence” replaced by “declaration” in the policy. RESOLVED on the motion of Cr Davis, seconded by Cr MacDonell, THAT the Council consider and approve the Covid-19 Short Term Rates Deferral Policy, THAT the Council note that this policy will come into effect on 24 April 2020, THAT the Council note that the Covid-19 Short Term Rates Deferral Policy is a further annunciation of the broader Remission of Rates Policy within the Council’s 2018-2028 Long Term Plan, THAT the Council note that this policy will remain in place until 31 August 2020, AND THAT the Council note that a review of the adequacy and effectiveness of the new policy will be undertaken prior to its intended expiry date.

2020/38 The meeting concluded at 5.05pm

8

Minutes of an extraordinary meeting of the Gore District Council, held virtually by Zoom, on Tuesday 28 April 2020, at 4.34pm Present His Worship the Mayor, Mr Tracy Hicks JP, Crs Bolger, Dickson,

N Grant, Highsted, MacDonell, McPhail and Reid. In attendance The Chief Executive (Mr Stephen Parry) and

HR/Administration Manager (Susan Jones). Apologies Crs D Grant and Phillips apologised for absence. 1. NEW ZEALAND LOCAL GOVERNMENT FUNDING AGENCY (LGFA) - AMENDMENTS TO

BORROWING DOCUMENTS (SC2459)

A memo had been received from the Chief Executive advising that the Local Government Funding Agency (LGFA) had proposed amending its borrowing programme by making amendments to certain LGFA documents. The Council was a member of LGFA borrowing programme as both a borrower and a guarantor.

Amendments to the LGFA Shareholders’ Agreement had previously been approved and the LGFA would enter into a deed to record those changes. The purpose of the proposed amendments was to: (a) enable approved council-controlled organisations to borrow directly through the

LGFA borrowing programme (on the basis of guarantees from and/or sufficient uncalled capital issued to their parent local authorities);

(b) allow local authorities to apply to the LGFA to be tested at the group level rather

than at the parent level (for compliance with LGFA covenants);

(c) increase the amount of borrower notes required to be subscribed for when borrowing from the LGFA; and

(d) make certain other technical improvements to the borrowing programme.

(e) In order to amend the LGFA documentation, each local authority member of LGFA was required to enter into certain deeds of amendment and restatement. The

9

Council therefore needed to pass a formal resolution to execute the following legal documents:

a. Amendment and Restatement Deed (Multi-issuer Deed); b. Amendment and Restatement Deed (Notes Subscription Agreement); and c. Amendment and Restatement Deed (Guarantee and Indemnity).

The Council would also need to formally authorise the Chief Executive to sign a section 118 Chief Executive Certificate (in relation to the documents noted at 4.1 – 4.3). (f) The documents at 4.1, 4.2 and 4.3 had been prepared by LGFA’s solicitors, Russell

McVeagh. Simpson Grierson reviewed and approved the documents on behalf, and from the perspective, of the Shareholders' Council of LGFA (which included the Crown and nine Councils). The Chief Executive Certificate had been prepared by Simpson Grierson.

(g) Authority for signing the abovementioned documents would need to be delegated to two elected members of the Council.

RESOLVED on the motion of Cr Highsted, seconded by Cr McPhail, THAT the report “New Zealand Government Funding Agency (LGFA): Amendments to Borrowing Documents, be received and noted, THAT the Council’s entry into the documentation noted in this report be authorised, THAT any two of the Council’s elected members be authorised to execute the following deeds for the purposes of the recommendation above: 1.1 Amendment and Restatement Deed (Multi-issuer Deed); 1.2 Amendment and Restatement Deed (Notes Subscription Agreement); and 1.3 Amendment and Restatement Deed (Guarantee and Indemnity) AND THAT the Council authorise the Chief Executive to execute the Chief Executive Certificate and such other documents and take such other steps on behalf of the Council as the Chief Executive considers necessary or desirable to execute or take to give effect to the preceding recommendations above.

2020/40

The meeting concluded at 4.38pm

10

COUNCIL MEETING AGENDA TUESDAY 12 MAY 2020 5. FINANCIAL REPORT FOR MARCH 2020

(Memo from Accountant – 30.4.20)

Summary Key points:

• Total revenue is lower than budget by 23k • Total expenses are higher than budget by 1,331k • Total variance is unfavourable to budget by 1,355k

Revenue is mainly in line with the budget, NZTA recoveries continue to be lower than expected due to Pyramid Bridge contract value and 3 Waters revenue is offset by expenditure. Expenditure is currently higher than budget. There are three factors creating this including depreciation, insurance premiums and flooding maintenance and response expenses. The asset revaluation performed in June 2019 has resulted in an increase in the value of assets, which has in turn increased depreciation and insurance premiums. The majority of the capital projects are on schedule with some exceptions in the 3 Waters area. The progress of significant capital projects is reported to the Capital Works Committee. The higher general debtors balance is due to the value and timing of the NZTA subsidy. All other balance trends are on par with previous years three year average. A total of $711k of expenses from the flooding event in February have been allocated to departments and are a mixture of response, operational and capital expenses. Discussions are still to be had with NEMA (National Emergency Management Agency) in regard to the quantum of the claim submitted. These are currently on hold due to Covid-19. We are also awaiting funding approvals from NZTA and insurance agencies. Once funding approvals have been determined these will be allocated to the appropriate departments.

11

Total expenses at a glance…

Capital expenditure at a glance…

12

Revenue and Expenses by Department

Department Actuals Current Budget Variance

Favourable / Unfavourable

Annual Current Budget

% of Annual Budget Actuals

Current Budget Variance



% of Annual Budget Actuals

Current Budget Variance



3 Waters & Solid Waste 6,596 6,249 (347) F 8,496 78% 7,413 6,453 (959) U 8,546 87% (817) (205) (613) U (50)Aquatic Services & Stadiums 1,531 1,534 3 U 2,046 75% 1,451 1,440 (11) U 1,889 77% 80 94 (14) U 157Cemeteries 255 253 (3) F 337 76% 252 227 (25) U 300 84% 3 25 (22) U 37Central Administration 2,578 2,570 (8) F 3,416 75% 2,601 2,619 18 F 3,375 77% (23) (49) 26 F 41Civil Defence 156 90 (66) F 121 130% 160 94 (66) U 125 128% (3) (3) 0 F (4)Community Grants 456 444 (12) F 592 77% 483 565 82 F 652 74% (27) (121) 94 F (60)Elected Members 960 899 (61) F 1,200 80% 1,008 910 (99) U 1,196 84% (48) (10) (38) U 3Heritage Precinct 1,887 1,767 (119) F 2,357 80% 1,797 1,810 12 F 2,387 75% 89 (42) 132 F (29)Parks and Reserves 2,939 2,845 (95) F 3,794 77% 2,872 2,792 (81) U 3,696 78% 67 53 14 F 99Property 674 677 3 U 903 75% 847 839 (8) U 1,096 77% (173) (162) (12) U (193)Public Conveniences 83 83 (0) F 111 75% 124 113 (11) U 151 83% (41) (30) (11) U (40)Regulatory 1,811 1,806 (4) F 2,369 76% 2,072 1,959 (114) U 2,719 76% (262) (152) (110) U (350)Roading 5,632 6,363 731 U 8,488 66% 4,172 4,101 (70) U 5,464 76% 1,460 2,262 (802) U 3,024Income Total 25,557 25,581 23 U 34,230 75% 25,252 23,921 (1,331) U 31,596 80% 305 1,660 (1,355) U 2,634

for the 9 months ended 31 March 2020ExpenseRevenue Totals

15

Commentary on underlying revenue and expense variances Overall income is unfavourable by $23k. A total of 75% of the annual budgeted revenue has been received. Overall expenditure is unfavourable by $1,331k. A total of 80% of the annual budget has been spent. The 3 Waters and solid waste area has an overall unfavourable variance of $613k. Revenues are up by $347k. This continues to be driven by trade waste fees. Expenses are up by $959k, flooding response and maintenance expenditure have now been allocated causing a large increase of $407k, made up of pumping, sandbagging, old landfill works, waste removal and general maintenance expenses. Other contributors to this variance include increased depreciation expenses and increased insurance premium costs. Offsetting these higher costs are decreased interest costs from capital projects yet to be completed and higher than forecasted industrial hub operating fees collected. Aquatic services and stadiums have an overall unfavourable variance of $14k. Revenue is on track and expenditure is up by $11k. The increase in expenditure is due to increased depreciation and insurance costs. The cemetery activity has an overall unfavourable variance of $22k. This is mainly due to the timing of cemetery maintenance. This needs to be monitored. Central administration has an overall favourable variance of $26k. Revenue is on track. IT expenditure continues to create an unfavourable variance. This is mainly due to upgrading ageing IT infrastructure to improve resilience of the Council’s systems. This variance will be offset by the capital expenditure. Civil defence has an overall net variance. The revenue and expenditure variances are due to welfare expenses from the floods, which full compensation is expected. Community grants have an overall favourable variance of $94k. This is due to the timing of grants being issued. The elected member's section has an overall unfavourable variance of $38k. This continues to be driven by the increased payment to the Southland Regional Development Agency payment (SRDA), along with slightly higher election expenses. The heritage precinct activities have an overall favourable variance of $132k. Each department in this activity is managing revenue and expenditure variances. It is likely that remaining events budgets will not be utilised this year. NB the sale of Civic Assurance building dividend has been used to pay down part of the Smith City building loan. The parks and reserves department has an overall favourable variance of $14k. The favourable revenue variance continues to be driven from favourable plant disposals.

17

Expenditure continues to be higher than budget. This is driven by the timing of general maintenance and flooding maintenance expenses. Property has an unfavourable variance of $12k. The unfavourable expense variance continues to be driven by the timing of maintenance and increased insurance premiums. While council departments are located in the James Cumming Wing revenue from bookings have ceased. Public conveniences has an unfavourable variance of $11k. This is due to the timing of maintenance expenses and increased depreciation expenses resulting from the revaluation. Regulatory has an overall unfavourable variance of $110k. Main factors driving this variance are a decrease in parking revenue, and building consent revenues being down. Planning consultant costs are also higher than planned due to transitioning to an in house Planning Manager. Lower than expected property file digitisation expenses are offsetting a higher unfavourable variance in the wider regulatory activity. The property digitisation project, which is loan funded, is currently under budget by $134k. The NZTA subsidy is $731k behind budget. This is due to the timing of the roading revenue budgets and the roading programme being rolled out. This variance is likely to stay as the Pyramid Bridge contract is lower than expected and therefore the subsidies received will be less than budgeted. In summary, the nine months to March has concluded with an overall unfavourable variance of $1,355k. The majority relates to the timing of the roading NZTA subsidies, of which will remain this way due to lower than expected contract cost of Pyramid Bridge. The overall unfavourable variance excluding the roading variance is $553k. The revaluation of infrastructure assets has resulted in higher asset values, which affected both depreciation and insurance premiums. The unfavourable variance in the regulatory area continues to be actively managed. Flood response expenditure is creating larger variances in 3 Waters and solid waste. Other departments are able to accommodate these expenses within budgets for the time. Funding options, which involve discussions with NEMA are still being explored, although are on hold due to Covid-19.

18

Commentary on capital expenditure More detailed information on capital projects is included in reports to the Capital Works Committee. A total of 45% of the annual capital expenditure budget has been spent. All variances at this point are due to the timing of the various projects. 3 Waters and solid waste are progressing slowly, with 41% of the capital budget spent. The roading programme is progressing, with 65% of the annual budget spent. Pyramid Bridge construction is now almost complete. Aquatic services and event centre have a favourable variance of $242k and 19% of the annual budget has been spent. Adjustments required from the earthquake-prone building structure assessment have now been completed. Central administration is under budget by $436k. This is due to the timing of vehicle renewals and replacement of IT equipment. The heritage precinct is under budget by $2,438k and 7% of the annual budget being spent. The library re-roof is on hold and the Eastern Southland Gallery seismic strengthening design work is underway, with the precinct upgrade works continuing.

19

Parks and reserves capital expenditure is on track. The dog parks project which were budgeted for in previous year are now complete and have been funded by loan. Plant and vehicle replacement are on track. Property has a favourable variance of $2,500k. The civic administration building demolition is continuing. The renewal of a depot building is completed, this projected is funded via loan and was budgeted for in 2018/19.

Department Actuals Current Budget Variance


% of Annual Budget Spent

3 Waters & Solid Waste 2,577 4,770 2,193 6,363 41%Aquatic Services & Stadiums 47 182 134 242 19%Cemeteries - 43 43 57 0%Central Administration 104 327 223 436 24%Elected Members - - - - 0%Heritage Precinct 167 1,828 1,661 2,438 7%Parks and Reserves 401 404 3 538 74%Property 1,160 1,874 715 2,500 46%Regulatory 71 321 250 428 17%Roading 4,181 4,809 628 6,415 65%Total 8,707 14,557 5,850 19,417 45%

for the 9 months ended 31 March 2020Capital expenditure by department

20

Statement of Financial Position as at 31 March 2020

Actuals

2020 Actuals 2019

Assets Current Assets Cash And Cash Equivalents 3,341 3,212 Inventories 255 227 Other Financial Assets 1,716 1,700 Other Current Assets 151 92 Trade & Other Receivables 2,976 1,700 Current Assets Total 8,438 6,931 Non Current Assets Infrastructure Property Plant Equipment 449,478 397,300 Other Financial Assets 432 309 Non Current Assets Total 449,910 397,609 Assets Total 458,349 404,541 Liabilities Current Liabilities

Other Financial Liabilities - - Employee Entitlements 572 551 Short Term Borrowings 6,000 6,000 Short Term Provisions 55 55 Trade & Other Payables 2,385 2,535

Current Liabilities Total 9,011 9,141 Non Current Liabilities Long Term Borrowings 16,500 11,000 Long Term Provisions 84 88 Other Financial Liabilities 2,002 1,022 Non Current Liabilities Total 18,586 12,110 Liabilities Total 27,597 21,250 Net Assets 430,751 383,290 Equity Asset Revaluation Reserve 289,355 241,533 Other Reserves 7,693 7,954 Accumulated Surplus 133,703 133,804 Equity Total 430,751 383,290

21

Commentary on the Statement of Financial Position The major changes in the balance sheet from the same month in the prior year:

Assets • Cash and cash equivalents are on par with the same month last year. • Inventories have increased. The March 2020 quarter stock take was not

completed due to the Covid-19 lock down. The next stock take is due in June. • Other current financial assets are similar to the same period last year. • Other current assets increased on the same month last year due to invoices being

paid in advance of the full period being invoiced. • Trade and other receivables have increased from the same month last year, this is

due to a large NZTA subsidy claim. • Infrastructure, property, plant and equipment are up on the same period last year

due to continuing capital works. • Other non-current financial assets have increased on the same month last year.

Driving this increase is the slight rise in clean air loans and also additional LGFA borrower notes.

Liabilities • Short term provisions remain unchanged due to the provision set aside for the

Ouvea pre-mix removal. This will start to decrease as the project makes headway. • Creditors are similar on the same month last year. • Total debt has increased to $22.5 million. This is split between short term and long

term borrowing and up by $5.5 million on last year. • Other non-current financial liabilities have increased on the same period last year.

This is due to a decrease in the interest swaps valuation at 30 June 2019.

RECOMMENDATION THAT the financial report for March 2020 be received.

22

DRAFT - Gore District Council - Civil Defence Claim 17/03/2020

1 2 3 4 5 6

No.: Site: Infrastructure Asset Damage: Scope of Remediation Works Reqd.: Claim Eligibility Initial High Level Estimated Cost Range (NZD):

Is it a critical asset?

The damage impacts on the ability of the network/asset to perform and function as intended

If the damage has not yet resulted in performance issues, failure of the asset is likely to be imminent.

Is it a critical asset i.e. main pipeline, lifeline or life safety asset?

Is the asset in a critical location, or does it service critical community infrastructure (e.g. a hospital or school)?

Has the damage resulted in unacceptably high operating expenditure for the local authority?

Are there critical interdepen-dencies?

Is there a betterment component?

Temporary repairs are interim repair work necessary to keep essential infrastructure networks operational, and provide an acceptable level of service until a permanent solution can be put in place. This type of work can also result in a permanent repair.

1 Gore and Mataura Stormwater Flood Risk Initial Response

Gore District Council was directed by the Civil Defence Controller (Under the powers of the CDEM Act) to undertake works associated with disaster management and mitigation activities leading up to and during the flooding event (These works included signage, flood patrol, assisting the evacuation, pumpimg of contaminanted flood water, contaminated rubbish collection, and contract management by council staff.

This work was required to a) Protect the public health of residents as the flood waters were contaminated with raw wastewaterb) Allow residents to return to their homes from the welfare centers

Other response costs $400,000 - $520,000

Not an asset, works undertaken as preventive actions to reduce immediate danger to human life and response to community needs.

No

2 Hamilton Park Stormwater Stormwater MainMains blocked with debris, required hydrovac and inspection to remove debris and assess extent of damage.

Recovery cost $10,000 - $13,000

Yes - Blocked stormwater pipes reduce the ability of the network to absorb and transmit runoff resulting in localised flooding which poses damage risk to other assets (roads etc.) and their operationality

No

3 Coutts Road StormwaterDamage to SW inlet structure

Clearing of debris around inlet strucutre and repairs/ modification of grate over inlet structure. Recovery cost $5,000 - $7,000

Yes - stormwater drainage is reliant on the ability of the inlet to absorb incoming runoff. Inlet damage results in localised flooding which poses damage risk to other assets (roads etc.) and their operationality

No

Sub Total Estimated Cost of Repair:

$415,000 - $540,000

4Intersection of Salford Street and Wigan Street

WastewaterWastewater Trunk Main Damage

Pipe failure due to surcharge pressure in network from flood event. Repair solution being engineered. It is anticipated to replace approx. 125 m of 1.8km trunk main.Not in LTP for replacement or renewals programme.

Recovery cost $432,000 - $575,000

Yes - wastewater network and treatment plant dependent on this assets performance. Pipe failure will cause contaminatination and closure of network.

No

5Gore Wastewater Treatment Plant Damage

Wastewater Access Track FailureAccess Track was washed out by floodwater. Reinstatement to ensure access for maintenance and operations staff required to ensure ongoing serviceability.

Recovery cost $10,000 - $15,000

Yes - Failure to access this plant will result in failure to conduct essential operations and maintenance duties which is likely to lead to plant failure. To maintain security of outlet.

No

6Carlye St, McConnell St, Oakland St and Bristol Street Wastewater Main

WastewaterWastewater main damage

The existing trench has slumped above the wastewater mains in these streets. Further investigations are planned to determine any damage to the pipes.

Recovery cost $20,000 - $27,000Yes - Wastewater network is dependent on this asset's performance

No


$462,000 - $617,000

7 Pyramid Pumpstation Water supply Pump failure The submersible pump failed (No diagnostics completed) and was replaced, and the access track sustained damage from overland flow erosion. The extent of repair is to be determined.

Recovery cost $15,000 - $20,000Yes - Water network is dependent on this assets performance

No

8 Coopers Well Water supplyDamage to Electrical Equipment

Water damage to level transmitters causing operational issues to pumps at Coopers Wells. Level Transmitters were required to be replaced to enable services to be reinstated. The transmitters were ?? Year old.

Recovery cost $5,000 - $10,000Yes - Water network is dependent on this assets performance

No


$20,000 - $30,000

9 Gore landfill LandfillWaikaka Stream remediation works

Gore District Council was directed by the Civil Defence Controller (Under the powers of the CDEM Act) to conduct a professional risk assessment (top priority) and develop a remedial plan for the stream bank. Subsequent to this under the RMA Emergency Works Provisions (Section 330). The Council staff worked with the Consultants, planner and ES staff to develop and implement the best practical solution to contain the exposed river bank and provide interim barriers to future flood events as well as contain landfill material. Approximately 400m of embankment containment across two sites is needed. The eventual work included battering of the riverbanks then capping with a clay layer , geotextile/geomat, then placement of rock riprap. It was decided we should engage a consulting engineer and a consulting planner, for the survey, and lab testing of the contaminants all in preparation for the retrospective resource consents. Final extent of the solution will be detrmined after the containment work is completed in both sides of the stream and subsequent leachate analysis and approval by the Regional Council.

Recovery costs - temporary repairs

$700,000 - $950,000

Yes - It is a critical asset. The stream bank failure and exposure of a closed landfill failure has health and life safety implications for down stream users of water (public and private). Works instructed by Civil Defence Controller.

No

10 Mataura Landfill Landfill Waimumu Stream remediation works

Gore District Council was directed by the Civil Defence Controller (Under the powers of the CDEM Act) to conduct a professional risk assessment (top priority) and develop a remedial plan for the stream bank. Subsequent to this under the RMA Emergency Works Provisions (Section 330) a team was mobilised to develop and implement the best practical solution to contain the exposed river bank and provide interim barriers to future flood events as well as contain landfill material and leachate. Approximately 80m of embankment containment across the site is needed. The work will require a similar response to Gore Landfill. This is battering of riverbanks, capping with a clay layer , geotextile/geomat, then placement of rock riprap . The work includes consulting engineering, survey and project management services and consulting planner for preparation of retrospective resource consents. Final extent of solution to be confirmed.

Recovery costs - temporary repairs

$200,000 - $400,000

Yes - It is a critical asset. The stream bank failure and exposure of a closed landfill failure has health and life safety implications for down stream users of water (public and private). Works instructed by Civil Defence Controller.

No


$900,000 - $1,350,000

11 Project, Programme and Consulting Services to assist reinstatement of assets $80,000 - $150,000

Total High Level Estimated Cost of Repair: $1,882,000 - $2,689,000

Criticality

ESSENTIAL INFRASTRUCTURE ELIGIBILITY

At least one of Criteria 1 and 2 must be met

If damage does not meet either criteria 1 and/or 2 then the following criteria will also be considered as part of the risk implication/assessment

Temporary RepairsBetterment23

6. DOG CONTROL POLICY AND PRACTICES

(Memo from Administration Manager – 04.05.20)

Enclosed is the annual report on the Council’s dog control policy and practices for the year ending 30 June 2019.

This is an annual obligation contained in the Dog Control Act 1996. The report had been prepared in September last year by the former General Manager Regulatory and Planning but was inadvertently overlooked for inclusion on a previous agenda. RECOMMENDATION THAT pursuant to Section 10A of the Dog Control Act 1996, the Gore District Council report on Dog Control Policy and Practices for 2018/19 be adopted.

24

Report on the administration of Gore District Council’s Policy and Practices in relation to the control of dogs for the year 1 July 2018 to 30 June 2019. Dog control in the Gore District The total number of registered dogs in the Gore District as at 30 June 2019 was 3446. A third of these dogs are pets domiciled in the urban areas of the Gore District. The Council employs one full time officer and three part time officers. One part time officer covers the night shift and one weekend in three, while the other two part time officers cover one weekend in three. Dog control enforcement practices During the year under review the Council received 22 formal safety related complaints in regard to the behaviour of dogs and/or their owners. Of the complaints received eight concerned dog attacks on people. The Council instigated a prosecution of a dog owner after a dog that had a dangerous classification attacked another dog which subsequently died from its injuries. All the complaints were the subject of an investigation and action to address the concerns of the complainants was implemented.

The Council is still finding that more dogs are not being claimed by their owners, after being impounded. This appears to be due to the cost of registering/microchipping the dogs and the cost of impounding fees which are required to be paid by the Council in full before the dogs can be released. These dogs are rehomed if they are of suitable temperament usually through Furever Homes in Invercargill or the Gore SPCA. Otherwise they are taken to a vet for euthanising. During the year a total of 101 infringement notices were issued. Council representatives contacted dog owners via e-txt or visited dog owners in the area reminding them to register their dogs before the due date but unfortunately dog owners did not always heed the warnings given, forcing the Council to issue infringement notices for non-registration. The Council offers a payment plan to dog owners struggling to find the payment in full and more people seem to be taking advantage of this.

25

Dog registration and other fees A comparison of the dog registration fees for the year ending 30 June 2019 with the previous year is as follows:

2017/18 2018/19 Registration fee – urban dog

a. Less - fenced on a controlled property b. Less – no dog complaints, impoundments

or infringements within a two year period c. Less – neutered or spayed

Registration fee inclusive of a, b and c

Licence fee – three or more dogs Registration fee – rural dog

a. Add – dog complaints, impoundment or infringement within a 2 year period

Late registration fee Urban dog Rural dog

$120.00 -$20.00 -$30.00 -$10.00 $60.00

$150.00

$25.00

$30.00

+40% +40%

$120.00 -$20.00 -$30.00 -$10.00 $60.00

$150.00

$25.00

$30.00

+40% +40%

Poundage First impoundment: dogs with current GDC registration Unregistered Every subsequent impoundment Destruction costs for known owners of dogs Sustenance – per day Additional fee for impounding or releasing dogs at weekends, public holidays or outside Council office hours

$ 50.00 $ 80.00

$ 150.00 Cost

$ 15.00

$ 50.00

$ 50.00 $ 80.00

$ 150.00 Cost

$ 15.00

$ 50.00

The Council takes a vigilant approach in regard to non-registration of dogs. Dogs not registered may be subject to prosecution under the Dog Control Act should owners ignore efforts to achieve registration via e-txt, letter or personal visit and the issue of an infringement notice prior to these proceedings being instituted.

26

Dog education The Council’s Animal Control Officers continue to provide owners with information on how to prevent dogs barking incessantly and also offer advice on how to keep dogs from wandering. The Council’s Animal Control Officer undertakes regular patrols of the parks in Gore and Mataura educating dog owners on their responsibility when exercising their dogs in these areas. The Council’s staff put a concerted effort into clamping down on unregistered dogs in the District. Regular patrols are carried out in Gore and Mataura which appears to have made a positive difference with wandering dogs in the area. Menacing and dangerous dogs In the year under review, two dogs in the Gore district were classified by the Council as dangerous and four were classified as menacing after complaints were received from residents regarding dog attacks and aggressive behaviour. In other cases reported to the Council, warnings were issued to the owners, infringement notices issued or the owners had the dogs euthanized. There are currently 18 dogs in the district classified as menacing under Section 33C (by breed) of the Dog Control Act 1996 and under Section 33A (by behaviour) and eight classified as dangerous under Section 31(1)(b). Statistical information Pursuant to Section 10A(2)(a) of the Dog Control Act 1996, attached is a schedule detailing relevant statistics covering dog control issues in the Gore District for the year ending 30 June 2019. Stephen Parry Chief Executive

27

Statistical information

Category As at 30 June 2019

For period 1 July 2018 to 30 June 2019

1) Total # registered dogs Not required 2) Total # probationary owners 0 0 3) Total # disqualified owners 2 0 4) Total # dangerous dogs 8 2 Dangerous by owner conviction under s33(1)(a) 0 0 Dangerous by sworn evidence under s31(1)(b) 8 2 Dangerous by owner admittance in writing under s31(1)(c)

0 0

5) Total # menacing dogs 18 4 Menacing under s33A(1)(b)(i) – ie by behaviour 12 4 Menacing under s33A(1)(b)(ii) – ie by breed

characteristics 0 0

Menacing under s33C(1) – ie schedule breed 4

6 0

Category Number 6) Total # infringement notices 101 7) Total # complaints received See below 8) Total # prosecutions taken 0 Category of complaint Number of

complaints for year ending June 2019

Public safety related complaints Dog attacks on people – minor 8 Dog attack on people – serious 0 Dog attack on other animals 9 Dog attack on stock (worrying sheep) 5 Dog rushing 17 Aggressive dog behaviour other than rushing N/A Roaming dogs reported by public (including registered dogs that are found)

289

Non-safety concerns People’s dogs that are reported lost/found 163 Barking 138 Fouling/bylaw breach N/A Unregistered dog N/A Welfare concerns N/A Miscellaneous – stock calls Miscellaneous – dog enquiries

112 154

Total complaints all categories 895

28

7. GREEN WASTE DISPOSAL (Report from General Manager Infrastructure and Roading Asset Manager - 01.05.20)

Purpose This report seeks approval from the Council to initiate permanent free green waste disposal effective immediately.

Discussion At the April Council meeting, a report was presented regarding future recycling services in the district. The Council approved the staff recommendation on a preferred concept of future service delivery which included free disposal of green waste at the transfer station effective from 1 July 2020.

At alert level 3, the Gore transfer station is open for general use; there are restrictions and new procedures in place to make sure we can keep everyone safe, both staff and customers.

During this lockdown period, usual tipping charges have applied at the transfer station. To adhere to the safety protocols required by the government, we have accepted Eftpos only. The Council has made a concession of free disposal of green waste during the lockdown restriction mainly for safety reasons.

With recent challenges in the restricted environment and the proposed changes to service delivery intended within the next two months, it makes sense to continue the free green waste disposal services. The following reasons are offered in support of this view:

1) Habit formation is a design process, and the most powerful way to get quick and

lasting change is to change radically. 2) Creation of goodwill among the community; the increase in the level of service will

ease the introduction of the new and limited recycling collection regime, planned for introduction on 1 July.

3) Consistency of messaging - minimise communications - reduce frustration and confusion.

4) Low impact, as we are approaching the winter, where the demand for green waste disposal is less.

Moreover, the proposed immediate free green waste disposal also aligns with a popular method to build and establish new habits. This is called the 21/90 rule. The rule involves a simple commitment to a personal or professional goal for 21 straight days. After three weeks, the pursuit of that goal should become a habit. Once the habit is established, it requires continuance for another 90 days, for it to be cemented as routine.

29

RECOMMENDATION

THAT the report be received, AND THAT the Council agree to free disposal of green waste at the transfer station with immediate effect.

30

8. BANCORP TREASURY REPORT (Memo from Chief Executive – 04.05.20) Attached is the Bancorp treasury report for the three month period ending 31 March

2020.

RECOMMENDATION

THAT the report be received.

31

TREASURY REPORT

FOR

AS AT

31 MARCH 2020

AUCKLAND • WELLINGTON • CHRISTCHURCH

32

http://www.goredc.govt.nz/

Page i

CONTENTS

1. MARKET ENVIRONMENT ................................................................................................. 1

1.1 GLOBAL MARKETS OVERVIEW (AS AT 31 MARCH 2020) ........................................................................ 1 1.2 NEW ZEALAND MARKET OVERVIEW (AS AT 31 MARCH 2020) ................................................................ 2 1.3 LOCAL AUTHORITY SECTOR ............................................................................................................... 3

2. FUNDING ......................................................................................................................... 4

3. HEDGING PROFILE .......................................................................................................... 6

4. POLICY COMPLIANCE (AS AT 31 MARCH 2020) ............................................................ 8

This document has been prepared by Bancorp Treasury Services Limited (“BTSL”). Whilst all reasonable care has been taken to ensure the facts stated are accurate and the opinions given are fair and reasonable, neither BTSL nor any of its directors, officers or employees shall in any way be responsible for the contents. No liability is assumed by BTSL, its directors, officers or employees for action taken or not taken on the basis of this document.

33

1. MARKET ENVIRONMENT

1.1 GLOBAL MARKETS OVERVIEW (AS AT 31 MARCH 2020)

While events in January and February were important in their own right, the real focus for the

quarter was in March when the full impact of the COVID-19 pandemic was felt. During this

month equity and commodity prices plunged, bond rates fell to new all-time lows and currencies

had massive intra-day swings.

In response to the COVID-19 pandemic, the Federal Reserve (“Fed”) cut the cash rates by 1.00%

on 15 March, to a 0.0% to 0.25% range, this after an emergency cut of 50 basis points on 3

March. The Fed also announced unlimited Quantitative Easing (“QE”) and for the first time ever,

the Fed will be able to purchase corporate bonds and make direct loans to companies. The US

government announced multiple stimulus packages. The first announcement was for USD8.3

billion, phase two was for USD104 billion and phase three, was for a massive USD2.2 trillion.

The White House is talking about a further USD2 trillion of infrastructure linked spending.

The global benchmark for long term interest rates, the US 10 year Treasury bond, had an

extremely volatile quarter. At the beginning of January, it was trading at 1.94%, on 9 March it

touched a low of 0.39%, rebounded to 1.27% by 18 March and finished the quarter at 0.69%.

The sharp bounce off the unprecedented lows was a result of various Fed measures to provide

support to the financial system and the announcements of several government support packages.

The European Central Bank (“ECB”) disappointed the market by not cutting its benchmark rate,

but it offered unlimited liquidity at the deposit rate to the banking sector to provide bridge

financing, it lowered the rate on its longer-term refinancing operations to banks by 0.25%, and

the governing council increased bond purchases by EUR120 billion for the current year.

The Bank of England (“BOE”) cut its benchmark interest rate by 50 basis points to 0.25%, and

the British Chancellor unveiled a GBP30 billion spending package. The BOE then cut another

15 basis points on 19 March alongside a QE increase of GBP200 billion. The PBoC, the Chinese

central bank, has also cut interest rates and the Chinese Government announced on 26 March

that it was looking to implement CNY2.4 trillion (USD344 billion) of stimulus and deliver

CNY1 trillion (USD145 billion) in tax cuts.

The global stimulus measures have brought some stability to financial markets, with currency

volatility declining and credit spreads edging back from the blowouts seen in mid-March. Equity

markets have also rebounded. With governments globally providing liquidity at unprecedented

levels, we may be starting to see the first green shots of recovery (or at least stabilisation) but

the COVID-19 crisis still has a long way to go and at some stage, someone will ask, how are we

going to pay for all of this stimulus? That in itself could be sowing the seeds of the next selloff.

34

1.2 NEW ZEALAND MARKET OVERVIEW (AS AT 31 MARCH 2020)

OCR 90 day 2 years 3 years 5 years 7 years 10 years

31 December 2019 1.00% 1.29% 1.28% 1.32% 1.44% 1.59% 1.78%

31 March 2020 0.25% 0.50% 0.53% 0.55% 0.63% 0.75% 0.93%

Change -0.75% -0.79% -0.75% -0.77% -0.81% -0.84% -0.85%

Following the 75 basis point cut to 0.25% on 16 March, the Reserve Bank of New Zealand

(“RBNZ”) also delivered a Large-Scale Asset Purchase (“LSAP”) programme on 23 March,

committing to purchase up to NZD30 billion of New Zealand government bonds across a range

of maturities over the next 12 months.

However, the RBNZ has made it clear that it is prepared to take further action if necessary. Adrian

Orr, stated, “the aim of our QE programme is to keep rates very low,” adding, “we are in a great

position to be doing this.” To support the RBNZ, on 23 March, Finance Minister Grant Robertson

increased the business support package by an additional NZD4.0 billion to the previously

announced NZD12.1 billion for the support package.

The Government also announced that it, and the banking sector, would implement a

NZD6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses by

offering 12 month low interest rate loans to the banks and take 80% of any credit losses that may

eventuate. Another scheme has been added, for a similar amount, with a loan term of 3 years.

The Government has also introduced six-month principal and interest payment holidays for

mortgage holders and SME’s whose incomes have been affected by COVID-19.

Swap rates have again reached fresh lows, following global bond yields. Domestic swap rates are

down dramatically, with the 5 year swap rate currently 0.63%, compared to 1.44% at the end of

December and the 10 year swap is now 0.93%, down from levels above 1.75% at the end of

December. At the short end of the yield curve the 90 day bank bill rate is at 0.50%, with this rate

anchored by the OCR which is at 0.25% and likely to stay there for a very long time. However,

the RBNZ appears to have ruled out negative short term interest rates, which have been a feature

of Japanese and European interest rates for quite some time.

The chart on the following page shows the extent to which New Zealand interest rates have

fallen over the past 12 months, with the dramatic fall from levels that prevailed a year ago

clearly evident.

35

1.3 LOCAL AUTHORITY SECTOR

Listed below are the credit spreads and applicable interest rates as at 31 March for Floating

Rate Notes (“FRN”) and Fixed Rate Bonds (“FRB”), at which Gore District Council (“the

Council”) could source debt from the Local Government Funding Agency (“LGFA”). The

numbers in brackets are those that prevailed at the end of December.

Maturity Credit Spread FRN (or CP) Rate Fixed Rate Bond

3 month CP 0.60% (0.22%) 1.10% (1.32%) N/A

6 month CP 0.60% (0.22%) 1.19% (1.32%) N/A

May 2021 0.84% (0.51%) 1.33% (1.71%) 1.30% (1.68%)

April 2022 0.93% (0.54%) 1.42% (1.74%) 1.42% (1.78%)

April 2023 1.05% (0.64%) 1.54% (1.84%) 1.45% (1.88%)

April 2024 1.14% (0.70%) 1.63% (1.90%) 1.68% (2.02%)

April 2025 1.27% (0.75%) 1.76% (1.95%) 1.83% (2.15%)

April 2027 1.49% (0.89%) 1.98% (2.09%) 2.08% (2.36%)

April 2029 1.58% (0.90%) 2.07% (2.10%) 2.40% (2.60%)

April 2033 2.18% (1.08%) 2.67% (2.28%) 3.16% (2.89%)

As can be seen from the table, credit spreads have increased exponentially during the March

quarter. However, the fall in underlying interest rates has more than compensated for the

increase in the credit spreads, with overall borrowing costs lower (with the exception of the

2033‘s), especially at the short to medium end of the yield curve.

36

2. FUNDING

As at 31 March, the Council had $22.5 million of debt, all sourced from the LGFA. This is

comprised of FRNs and Commercial Paper (“CP”), details of which are contained in the table

below.

Value Date Maturity Instrument Rate Amount Margin

27-May-19 25 May-20 CP 1.425% $6,000,000 23 bp

11-Apr-16 15-Apr-20 FRN 2.12% $3,000,000 84 bp

15-Apr-19 15-Apr-21 FRN 1.79% $3,000,000 51 bp

19-Jun-19 24-Jun-21 FRN 1.02% $2,000,000 49 bp

29-Jun-17 15-Jul-22 FRN 2.015% $3,000,000 73.5 bp

29-Jun-17 15-Jul-23 FRN 2.05% $2,000,000 77 bp

18-Mar-20 15-Jul-23 FRN 1.448% $1,000,000 103 bp

18-Mar-20 15-Jul-24 FRN 1.498% $2,500,000 108 bp

TOTAL $22,500,000

During the March 2020 quarter an additional $3.5 million of debt was raised as follows:

• $1.0 million of 15 July 2023 FRNs at a margin of 103 basis (1.03%) equating to a rate of

1.448%.

• $2.5 million of 15 July 2024 FRNs at a margin of 108 basis points (1.08%) equating to a

rate of 1.498%.

The Council also has a committed bank facility from ANZ Bank (“ANZ”) for $3.0 million that

has a line fee of 0.37% and a margin of 0.73% and expires on 30 June 2020. As at 31 March

there were no drawings under this facility.

The Council’s current debt maturity profile (excluding the ANZ facility) is depicted in the graph

on the following page.

37

The Council’s funding profile, categorised according to the type of funding, is depicted in the

following graph.

38

3. HEDGING PROFILE

As at 31 March, the Council had $22.5 million of debt, with $17.9 million on a fixed rate basis

by way of active interest rate swaps.

The Council manages its debt and associated hedging according to ‘Fixed Rate Hedging

Parameters’ that are contained in the Liability Management Policy (“LMP”). These specify the

minimum and maximum levels of fixed rate cover to which the Council shall adhere when

managing its external debt and were amended by the full council at its December 2019

meeting. The new parameters are as follows:

New Fixed Rate Hedging Percentages

Minimum Fixed Rate Amount Maximum Fixed Rate Amount

0–2 years 35% 100%

2–4 years 20% 80%

4–10 years 0% 60%

The debt and hedging profiles incorporating current and projected debt levels supplied by the

Council are depicted in the following chart. This chart indicates that, as at 31 March, the

Council was policy compliant.

39

The chart on the previous page incorporates the fixed rate payer interest rate swaps that the

Council has transacted. These are detailed in the following table.

Counterparty Start Maturity Rate Amount

ANZ 5-Mar-20 5-Mar-23 3.00% $2,000,000

ANZ 31-Mar-14 5-Sep-23 4.57% $2,350,000

ANZ 12-Aug-14 5-Mar-24 4.43% $1,850,000

ANZ 6-Mar-17 6-Mar-24 3.09% $1,000,000

ANZ 5-Jun-18 5-Sep-24 3.22% $2,000,000

ANZ 13-Aug-14 5-Mar-25 4.79% $2,700,000

ANZ 5-Sep-19 5-Sep-25 2.95% $2,000,000

ANZ 5-Sep-19 5-Sep-25 2.85% $2,000,000

ANZ 15-Dec-18 15-Dec-25 3.34% $2,000,000

TOTAL $17,900,000

The Council’s cost of funds as at 31 March (inclusive of the bank line fee) was 3.75%, down

from 4.29% at the end of the December quarter. The large decline in the cost of funds was

mainly due to the additional $3.5 million of debt being priced at 1.448% for the $1.0 million

of July 2023 FRNs and 1.498% for the $2.5 million of July 2024 FRNs.

The Council’s cost of funds continues to be lower than many of its peers in the local

government sector.

40

4. POLICY COMPLIANCE (AS AT 31 MARCH 2020)

Yes/No

Are all treasury transactions in compliance with policy? Yes

Are the fixed rate hedging percentages within policy control limits? Yes

Is the Council maintaining liquidity within policy control limits? Yes

Are all counterparty exposures within policy control limits? Yes

Are all borrowing covenants/limits being complied with? Yes

This document has been prepared by Bancorp Treasury Services Limited (“BTSL”). Whilst all reasonable care has been taken to ensure the facts stated are accurate and the opinions given are fair and reasonable, neither BTSL nor any of its directors, officers or employees shall in any way be responsible for the contents. No liability is assumed by BTSL, its directors, officers or employees for action taken or not taken on the basis of this document.

41

9. REVENUE FORECAST FOR THE YEAR ENDING 30 JUNE 2020

(Memo from Chief Executive – 03.05.20)

With Council activities under lockdown since 25 March, Management Accountant, Donna McKeown has undertaken an analysis of the impact this extraordinary event is having and is likely to have on Council revenues.

The attached report highlights the Multisports Complex and regulatory services where

revenue levels have been most affected. At the time of writing, we had just learned that Council operations that can prove a 30% loss in revenue over the past few months, may be eligible for receipt of a wage subsidy. This is very welcome news as up until now, advice received that Council activities which were not contained within a separate legal entity (such as a Council Controlled Organisation) were not eligible.

An application for wage subsidies in regard to the Multisports Complex will now be submitted. If received, these subsidies will make a meaningful contribution to off-setting the loss of revenue.

RECOMMENDATION


42

Revenue forecast for remainder of year if Covid-19 restrictions still in place Summary by activity 3 Waters and solid waste will see a slight decrease in revenue. The transfer station has been closed for Level 4 and has not been generating income during this time. In Level 3, green waste is being accepted for no fee, while general waste is being charged as normal. The decreased revenue in Level 4 will be offset by reduced level of waste to be processed. 3 Waters is likely to see a small drop in commercial water and tradewaste fees, while businesses are not operating or operating at a lower level. Would not expect this to be significant. Aquatic services and the event centre will see a large decrease in revenue for each month it is not open at full capacity. On average, the Multisports Complex will be losing $52k in monthly income from the loss in admissions and bookings. Cemeteries should not be affected by these restrictions. Central administration will likely see a drop in penalties as people apply for rates deferrals and sign up for direct debit to smooth pay their rates. This will not be a significant drop or of concern. Civil defence will not be affected by the restrictions. Community grants will not be affected by the restrictions. The elected members/democracy activity will not be affected by the restrictions. The heritage precinct will see a small drop in revenue from the libraries, Visitor Centre and Croydon Aviation Heritage Centre admissions while they are closed. The Visitor Centre and Croydon Aviation Heritage Centre are likely to see ongoing reductions in revenue due to a decrease in visitors to the area. Parks and reserves will not be affected by the restrictions. The decrease in visitor numbers will likely have a small effect on the number of visitors staying at Dolamore Park. Property will not be affected by the restrictions. With the James Cumming Wing already being closed prior to the Level 4 shutdown, room hire revenue will not be affected any more than it currently has been. Public conveniences will not be affected by the restrictions. Regulatory revenues will be adversely affected. Building and resource consent revenues are likely to endure a slump as the local economy re-boots. The team is busy working through current consents to ensure they are available in a timely manner. Parking revenues will also be reduced while in lockdown.

43

Overall, the main area for concern is aquatic services and event centre where services will be restricted for the foreseeable future and may take a while to resume operating at full capacity. Regulatory revenues are also of concern as this area is already struggling with decreased revenues in parking and building control.

Revenue by Department*

Department Actuals VarianceAnnual Current Budget

% of Annual Budget Spent

3 Waters & Solid Waste (1,378) (150) (1,528) 90%Aquatic Services & Stadiums (483) (165) (648) 74%Cemeteries (100) (30) (129) 77%Central Administration (237) (58) (295) 80%Civil Defence (66) 66 - 0%Community Grants (170) (40) (210) 81%Elected Members (61) 61 - 0%Heritage Precinct (382) 32 (349) 109%Parks and Reserves (117) 91 (26) 448%Property (79) (31) (110) 72%Regulatory (829) (231) (1,061) 78%Roading (167) 23 (144) 116%Income Total (4,069) (432) (4,500) 90%

* Revenue totals exclude: rates; internal charges and NZTA subsidies

for the 9 months ended 31 March 2020

44

10. HEALTH AND SAFETY REPORT

(Memo from Human Resources Manager – 04.05.20)

Gore District Council staff training • A first aid was attended in March by 12 staff – 4 undertook refreshers and 8

completed a full course.

Other The relocation of staff from the main office to the James Cumming Wing took place over a three week period from late November to early December. There was assistance from a local building firm to relocate and set-up desks and other furniture. Staff packed up their own possessions. The relocation was a significant undertaking and it was all completed without incident.

A pleasing outcome of having to remove everything from the office was a total clean-out of offices and storage areas. A total of 67 large document destruction bins were filled.

Incident schedule A total of 83 incidents were reported for the period 19 November 2019 to 30 April 2020. A summary of incidents for this period appears below:

Department Staff Public Vehicle Near miss/fatality Aquatic Centre Dry rescue

4 0

47 3

0 1

Event Centre/ISS 0 3 0 0 3 Waters 3 0 0 0 Parks 2 0 19 0 Administration (incl property)

0 0 0 0

Library/Precinct 0 1 0 0 Animal Control 0 0 0 0 Roading 0 0 0 0 Visitor Centre 0 0 0 0 Contractors 0 0 0 0

Fatality at Gore oxidation ponds - update The Council has been notified that WorkSafe will lay charges against it in regard to the January 2019 oxidation pond fatality. The matter is now subject to a judicial process.

RECOMMENDATION


45

11. CIVIC FINANCIAL SERVICES ANNUAL REPORT (Memo from Chief Executive – 04.05.20) Attached is a copy of the annual report from Civic Financial Services for the year

ending 31 December 2019.

The entity recorded a profit of $2,251,309 in the year under review. This profit was approximately double that what was forecast and was boosted by the one-off gain from the sale of its building, Civic Assurance House. The one-off gain was $1,209,909, representing about 53% of the profit result. RECOMMENDATION THAT the annual report be received.

46

ANNUAL REPORT 2019

47

D I R E C TO R S’ R E P O R T 1

D I R E C TO R Y 5

CO N S O L I D AT E D S TAT E M E N T O F CO M P R E H E N S I V E I N CO M E 7

CO N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N 8

CO N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y 9

CO N S O L I D AT E D S TAT E M E N T O F C A S H F LO W S 10

N OT E S TO T H E CO N S O L I D AT E D F I N A N C I A L S TAT E M E N T S 11

I N D E P E N D E N T AU D I TO R ’S R E P O R T 30

S H A R E H O L D E R S’ D E TA I L S B AC K CO V E R

48

Annual Report 2019 1

Civic Financial Services Limited

DIRECTORS’ REPORT

ANNUAL REPORT AND STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2019

Your Directors have pleasure in submitting the 59th Annual Report of the affairs of the Company

(formerly New Zealand Local Government Insurance Corporation Ltd trading as Civic Assurance)

for the year ended 31 December 2019, which is to be presented at the Annual General Meeting

of Members in June 2020.

1. PERFORMANCE

Civic’s before-tax profit in 2019 was $2,251,359 (2018: $1,196,342).

This compares favourably to the forecasted before-tax surplus of $421,299 as set out in the 2019 Statement of Intent.

This is due to receiving higher than anticipated administration fees and the one-off gain on the sale of Civic Assurance House.

2. OPERATIONS

Administration ServicesFees in 2019 from providing services to LAPP, Riskpool and the SuperEasy and SuperEasy KiwiSaver Superannuation Schemes were $2,947,683 (2018: $2,792,697).

Investment RevenueIncome from investments was $329,517 (2018: $262,878). Income from Civic Assurance House was $571,970 (2018: $885,736).

Sale of Civic Assurance HouseAs communicated in the 2019 Statement of Intent, the strengthening work to prepare Civic Assurance House was completed by 31 March 2019; at which time the building was taken to market. A satisfactory price was subsequently received, and the building sold with a settlement date of 15 August 2019.

Payment of Special DividendOn 19 August 2019 Civic paid a Special Dividend to its shareholders, totalling an amount of $9,418,480 plus accompanying imputation credits of $3,662,742.22; representing the sale price of Civic Assurance House of $10,115,000 less selling costs of $696,520.

Loan from ANZ BankCivic entered into a loan arrangement whereby it borrowed an amount of $4 million on 15 November 2018 from the ANZ Bank which was to be repaid on 15 August 2019. Civic lent the same amount of $4 million to Local Government Mutual Funds Trustee Limited (Riskpool) by way of a secured loan facility agreement on commercial terms, which was to be repaid to Civic by the end of July 2019. Local Government Mutual Funds Trustee Limited (Riskpool) repaid the $4 million to Civic with Civic repaying the $4 million to the ANZ Bank on 15 August 2019.

Sponsorship and Support for the SectorThe Company continues as a sponsor of SOLGM (Society of Local Government Managers) events both at a regional and national level.

3. ASSOCIATED ENTITIES

Local Government Superannuation Trustee LimitedLocal Government Superannuation Trustee Limited (LGST) is a 100% subsidiary of Civic and is the trustee to the SuperEasy and SuperEasy KiwiSaver Superannuation Schemes. Both are administered by Civic and from 1 April 2016 both have been registered with the FMA (Financial Markets Authority). Director appointments to LGST are made by LGNZ (two), Civic (one), CTU (one), SOLGM (one) and one, who must be a Licensed Independent Trustee, by the LGST Board.

The SuperEasy schemes feature low member charges and simple administration for councils. Both make use of passive fund managers, which as well as allowing lower member fees removes the possibility of a fund manager making a bad call, which is something that can happen at any time.

The SuperEasy schemes also offer an ‘Automatic Fund’, in which each member’s risk exposure is gradually and automatically switched from growth assets to income assets as the member gets older.

49

2 Annual Report 2019


DIRECTORS’ REPORT

Superannuation funds under management as at December 2019 were $420 million (December 2018 $340 Million) and the combined membership 10,734. SuperEasy’s fund managers are AMP Capital Investors (New Zealand) Ltd and ANZ New Zealand Investments Ltd. Of the councils that have a preferred provider for KiwiSaver, 94% have appointed Civic (69 out of 73 councils).

The SuperEasy website is www.supereasy.co.nz.

LAPP Disaster FundLAPP is a charitable trust that was set up by LGNZ and Civic in 1993. LAPP’s membership is 22. It could be said that LAPP is New Zealand’s original LASS (Local Authority Shared Services).

LAPP was designed to cover back-to-back major disasters and this is what happened of course with the Canterbury earthquakes in 2010 and 2011. LAPP settled the claims from Waimakariri District Council and Christchurch City Council for damage to their underground assets with a total payout of $217 million (excluding GST). LAPP’s highest claim before this was just over $5 million for claims arising from the 2004 Manawatu floods.

LAPP extended its cover arrangement from two events to three events from July 2017.

LAPP settled its Kaikoura-Hurunui earthquake claims with the settlement of the Hurunui District Council’s claim in April 2019 having previously settled with Kaikoura and Marlborough District Councils in 2018, for a combined settlement of $4.66 million.

Civic is the administration and fund manager for LAPP. LAPP’s website is: www.lappfund.co.nz.

Riskpool/Civic Liability Pool (CLP)Riskpool provides public liability and professional indemnity cover for councils and has done so since 1997. It is not a company, but a mutual liability fund governed by a trust deed. CLP is similar to Riskpool, but has no facility for calls. For the fund year ending 30 June 2017 Riskpool/CLP had 31 members.

As support had dropped off in recent years to this low level Riskpool could no longer offer the competitively priced cover and risk management services that it had provided over the previous 20 years.

As a result Riskpool/CLP decided to no longer provide cover after 30 June 2017 and will therefore be in run-off mode for at least the next three to ten years.

Local Government Mutual Funds Trustee Limited (LGMFT) is the trustee of Riskpool and CLP. Civic is the Fund Manager and Scheme Manager for Riskpool and Administration Manager for CLP.

Civic has entered into two arm’s length, secured loan facility agreements on commercial terms with Local Government Mutual Funds Trustee Limited to enable Riskpool to manage its cashflows.

Riskpool members were advised in October 2018 that due to deteriorating claims experience in 2017–18 that Riskpool needed to make one interim call before a final call is made on wind up. The call which has been paid was for an amount of $6 million payable on 1 July 2019, split $3 million each to fund years 7 and 10.

A final call from Riskpool is likely in 2025 or 2026. It is expected that the amount of that call will be less than this previous call.

4. DIRECTORS

As at 31 December 2019 there were five directors: A.T. Gray, M.C. Hannan, A.J. Marryatt, J.B. Melville and B.J. Morrison. M.A. Butcher retired as a director with effect from 31 March 2019. Following a shareholder vote, it was resolved at the AGM on 21 June 2019 that the Company reduce the maximum number of directors from six to five with effect from 1 July 2019 of which two are to be appointed from outside the local authority sector.

Director attendances at Board meetings held in 2019:

Mark Butcher 1 / 1

Tony Gray 6 / 6

Mike Hannan 6 / 6

Tony Marryatt 6 / 6

John Melville 5 / 6

Basil Morrison 6 / 6

The Chairmen of each of the Board and the Risk and Audit Committee are elected at the first meeting held after each year’s AGM.

50



DIRECTORS’ REPORT

Section 139 of the Companies Act 1993All Civic directors are directors of LGMFT except Basil Morrison who resigned from LGMFT in March 2019 to ensure that one Civic director was independent of LGMFT. Subsequently there are two secured loan facility agreements that have been entered into between the Company and LGMFT whereby Civic loans LGMFT up to $2,250,000 under each of two separate loans.

There are no other notices required under section 139 of the Companies Act 1993 except for Directors’ remuneration. Changes to the Directors’ fee pool are approved by shareholders at an AGM. The Board determines the allocation per Director based on the duties of the individual Director. The Director fees for subsidiary companies are set by the Parent Company Board. For the year ended 31 December 2019, Directors’ remuneration was:

Mark Butcher $3,806

Tony Gray $15,339

Mike Hannan $15,339

Tony Marryatt $30,679

John Melville $23,009

Basil Morrison $15,339

$103,511

In addition, the following Directors received director fees in relation to their directorships of Riskpool or LGST:

Tony Gray (Riskpool) $8,310

Mike Hannan (Riskpool) $8,310

Tony Marryatt (Riskpool) $16,620

John Melville (Riskpool) $8,310

Basil Morrison (Riskpool, LGST) $13,299

$54,849

Interests RegisterDirectors’ interests are tabled at the beginning of each Board meeting. Directorship and other disclosures as at 31 December 2019 were:

A.T. Gray Chair of Ngati Pukenga Investments Ltd; Tatau Tatau o Te Wairoa Commercial Limited; Director of Eastland Group Ltd including Gisborne Airport Ltd, Eastland Port; Eastland Network Ltd; Artemis Nominees Ltd; Quality Roading and Services (Wairoa) Limited; Local Government Mutual Funds Trustee Ltd; Executive Project Advisor to Hastings District Council; Trustee of Civic Property Pool; a party to an agreement for finance with the LGMFT.

M.C. Hannan Trustee of Civic Property Pool; Director of Local Government Mutual Funds Trustee Ltd; a party to an agreement for finance with the LGMFT.

A.J. Marryatt Chair of Local Government Mutual Funds Trustee Ltd; AJM Holdings Ltd; Trustee of Civic Property Pool; Member of SuperEasy KiwiSaver Superannuation Scheme; a party to an agreement for finance with the LGMFT.

J.B. Melville Trustee of Civic Property Pool; Director of Local Government Mutual Funds Trustee Ltd; a party to an agreement for finance with the LGMFT.

B.J. Morrison Chairman of Local Government Superannuation Trustee Ltd; Basil J Morrison & Associates Ltd; Member of SuperEasy KiwiSaver Superannuation Scheme; Trustee of Civic Property Pool; Waitangi Tribunal Member; Independent Hearings Commissioner for Auckland Council; Thames-Coromandel District Council Hearings Panel, Waikato Regional Council Hearings Commissioner; Accredited Commissioner – RMA.

The Company provides Directors and officers with, and pays the premiums for, Directors’ and Officers’ liability insurance to the full extent allowed for, and in accordance with the requirements of the Companies Act 1993. The renewal of the Company’s Directors’ and Officers’ liability insurance was entered in the Interests Register pursuant to sections 162 and 163 of the Companies Act 1993. This insurance does not cover liabilities arising from criminal actions or deliberate and reckless acts or omissions by the Directors. The cover includes indemnity of costs and expenses incurred in defending an action that falls within the scope of the indemnity.

51



DIRECTORS’ REPORT

Conduct of the Board and Board CommitteeThe Board has put in place and regularly reviews a number of good governance policies including Charters for the Board and the Risk and Audit Committee, Fit and Proper Policy, Code of Conduct, and a Risk Management Plan.

Use of InformationDirectors, individually or collectively, may obtain independent professional advice relating to any matters concerning the Company’s business or in relation to the discharge of the Director’s responsibilities. Subject to approval of the Chairman the Company will reimburse the Director(s) some or all of the reasonable costs of the advice. During the reporting period, no Director has sought leave to obtain such advice.

Loans to DirectorsNo loans or advances have been made to Directors, their spouses or dependants, or to related parties during the year.

5. EMPLOYEE REMUNERATION

Detailed below is the number of employees who received remuneration in their capacity as employees of $100,000 or more during the year ended 31 December 2019.

Remuneration Number of Employees

$140,000 – $150,000 1

$170,000 – $180,000 1

The above remunerations include Company contributions to employees’ superannuation (KiwiSaver and other), medical insurances and discretionary bonus payments.

6. AUDIT AND RISK MANAGEMENT

Pursuant to Section 15 of the Public Audit Act 2001 the Company’s auditor is the Auditor General who has appointed Silvio Bruinsma using the staff and resources of Deloitte Limited to carry out the audit on his behalf.

The Risk and Audit Committee (RAC) comprises the full Board. John Melville is the Chairman of this committee. RAC met five times in 2019: the Auditor attended two of those meetings and a part of one of those meetings was held without management present.

7. DONATIONS

No donations have been made during the year by any Company in the Group (2018: $0).

8. STAFF

We sincerely thank the staff for their work during the year. They are: Ian Brown, Sylvia Jackson, Chathuri Mendis, Lisa Norris, Ashley Reid, Tim Sole and Glenn Watkin.

Tony Marryatt Chairman March 2020

52



DIRECTORY

DIRECTORS

Anthony (Tony) J. Marryatt (Chairman)Anthony (Tony) T. Gray Michael C. HannanJohn B. MelvilleBasil J. Morrison CNZM JP

EXECUTIVE OFFICERS

Chief Executive : Ian Brown

Chief Financial Officer : Glenn Watkin

AUDITORS

The Auditor General, who has appointed Silvio Bruinsma, Deloitte Limited to carry out the audit on his behalf

BANKERS

ANZ Banking Group (New Zealand) Limited Bank of New Zealand

LEGAL ADVISERS

BrandonsKensington Swan

COMPANY REGISTRATION NO: 13271

REGISTERED OFFICE

Level 7, Civic Assurance House, 116 Lambton Quay, Wellington 6011

POSTAL ADDRESS

Civic Financial Services Ltd, PO Box 5521, Wellington 6140

OTHER CONTACT DETAILS

Telephone (04) 978 1250Facsimile (04) 978 1260Email [email protected] www.civicfs.co.nz

The Company is a participant in the Insurance & Financial Services Ombudsman Scheme (Inc)Participant Number 2000427

53


Statement of Accounts

54



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019

NOTE 2019 $

2018 $

REVENUE

Administration Fees 2,947,683 2,792,697

Interest Income 4 329,517 262,878

Property Income 571,970 885,736

Gain on sale of Building 7 1,209,909 -

Other Income 129 202

Total Revenue 5,059,208 3,941,513

EXPENDITURE

Audit Fee

Statutory Audit of the Financial Statements 116,462 109,779

Other Fees Paid to Auditors Re Assurance Services 30,500 27,500

Other Fees Paid to Auditors Re Tax Compliance 19,077 30,500

Compliance Costs 103,122 110,085

Consultants 44,852 47,936

Depreciation 6 35,053 46,134

Amortisation 6 - 246

Directors' Remuneration 3 103,511 113,344

Interest Expense 130,249 9,429

Legal Fees 38,273 29,547

Property Operating Expenses 396,332 512,887

Other Expenses 1,039,624 989,600

Employee Remuneration 3 729,533 825,430

Superannuation Subsidies 21,261 25,824

Total Expenditure 2,807,849 2,878,241

Surplus Before Revaluation of Investment Property and Taxation 2,251,359 1,063,272

Net Change in Value of Investment Property 7 - 133,070

Surplus Before Taxation 2,251,359 1,196,342

Taxation Expense 10 300,881 298,891

TOTAL COMPREHENSIVE SURPLUS AFTER TAX ATTRIBUTABLE TO OWNERS OF THE COMPANY

15 1,950,478 897,451

This statement is to be read in conjunction with the notes on pages 11 to 29.

55



NOTE 2019 $

2018 $

SHAREHOLDERS’ EQUITYIssued and Paid-Up Ordinary Shares

Ordinary Shares fully paid up 15 10,763,506 10,763,506

Retained Earnings 15 (286,457) 7,181,545

TOTAL EQUITY 10,477,049 17,945,051

Represented By:

CURRENT ASSETS

Cash & Cash Equivalents 274,428 3,414,025

Term Deposits 5,290,045 1,200,000

Sundry Debtors and Prepayments 12 554,609 594,445

Loan Receivable 13 1,996,527 6,280,284

Income Tax Receivable 10 - 3,580

Total Current Assets 8,115,609 11,492,334

NON CURRENT ASSETS

Property, Plant and Equipment 6 34,447 165,120

Intangible Assets (Software) 6 89,000 89,000

Deferred Tax Asset 10 2,486,080 2,786,961

Investment Property 7 - 7,777,583

Total Non Current Assets 2,609,527 10,818,664

TOTAL ASSETS 10,725,136 22,310,998

CURRENT LIABILITIES

Sundry Creditors & Accrued Charges 12 112,990 204,028

Accrued Holiday Pay 37,662 45,228

Borrowings 13 - 4,000,000

CLP/ Riskpool Admin Fee Reserve 52,530 52,530

Total Current Liabilities 203,182 4,301,786

NON-CURRENT LIABILITIES

CLP/ Riskpool Admin Fee Reserve 44,905 64,161

Total Non Current Liabilities 44,905 64,161

TOTAL LIABILITIES 248,087 4,365,947

EXCESS OF ASSETS OVER LIABILITIES 10,477,049 17,945,051

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2019


For and on behalf of the Directors:

TONY MARRYATT Chairman 19 March 2020 JOHN MELVILLE Director 19 March 2020

56




CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2019

NOTE 2019 $

2018 $

OPENING EQUITY 17,945,051 17,047,600

Total Comprehensive Surplus Net of Tax 1,950,478 897,451

Dividend Payment (9,418,480) -

Ordinary Shares issued during the year 15 - -

CLOSING EQUITY 10,477,049 17,945,051

57



CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2019


NOTE 2019 $

2018 $

CASH FLOWS FROM OPERATING ACTIVITIESCash was provided from:

Rent Received 561,561 889,802

Administration Fees Received 2,849,062 2,574,636

Other Income 129 202

Taxation (Paid)/Refunded (5,133) 133

3,405,619 3,464,773

Cash was applied to:

Payments to Suppliers and Employees 2,605,883 2,838,687

2,605,883 2,838,687

Net Cash Flow from Operating Activities 11 799,736 626,086

CASH FLOWS FROM INVESTING ACTIVITIES

Cash was provided from:

Investment Income 115,061 76,150

Term Deposits - 2,300,000

Investment Property 9,116,888 -

Loans Repaid from Related Parties 5,300,000 3,842,591

14,531,949 6,218,741


Term Deposits 4,090,045 -

Purchase of Property, Plant and Equipment 30,721 21,423

Capital Additions to Investment Property - 469,514

Loans Issued to Related Parties 985,550 8,790,242

5,106,316 9,281,179

Net Cash Flow from Investing Activities 9,425,633 (3,062,438)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash was provided from:

Loan Interest Received 183,763 157,409

Borrowings (4,000,000) 4,000,000

(3,816,237) 4,157,409


Interest Paid 130,249 9,429

Dividend Paid 9,418,480 -

9,548,729 9,429

Net Cash Flow from Financing Activities (13,364,966) 4,147,980

Net (Decrease)/Increase in Cash Held (3,139,597) 1,711,628

Opening Cash Balance as at 1 January 3,414,025 1,702,397

Closing Cash Balance as at 31 December 274,428 3,414,025

Being: Cash & Cash Equivalents 274,428 3,414,025

58

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2019



NOTE 1 REPORTING ENTITY

The reporting entity is Civic Financial Services Ltd (the "Company"), formerly known as New Zealand Local Government Insurance Corporation Ltd (trading as Civic Assurance). The Group comprises the Company and its subsidiaries listed in note 2 (b). The Group provides financial services principally for New Zealand local government and also provides property services. The Company provided insurance products to New Zealand local authorities until 31 December 2016 and subsequently opted to cancel its provisional insurance licence with the Reserve Bank of New Zealand. As a result this entity is not an FMC reporting entity from 17 January 2017.

Statement of Compliance

The Group is a Tier 2 Public Sector Public Benefit Entity and the financial statements have been prepared in accordance with and comply with Tier 2 Public Sector Public Benefit Entity (PBE) Standards.

NOTE 2 STATEMENT OF ACCOUNTING POLICIES

General Accounting Policies

The measurement and reporting of profits on a historical cost basis have been followed by the Group, except for specific policies as described below. The reporting currency is New Zealand dollars. The Group is no longer subject to the requirements under the Insurance (Prudential Supervision) Act 2010 as a provisional licence holder.

Critical Judgements and Estimates in Applying the Accounting Policies

In the application of the PBE Standards the Directors are required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. These are based on historical experience and other various factors and are reviewed on an ongoing basis.

The Directors believe that, as at the date of these financial statements, there are no significant sources of estimation uncertainty that have not been disclosed in these notes. The most significant judgements, estimates and assumptions made in the preparation of these financial statements are in respect of the recognition of the deferred tax asset (Note 10).

Particular Accounting Policies

The following particular accounting policies which materially affect the measurement of surplus and financial position have been applied. Further particular accounting policies are contained in the relevant notes to the financial statements.

(a) Consolidation of Subsidiaries

The Group financial statements incorporate the financial statements of the Company and its subsidiaries, which have been consolidated using the acquisition method. The results of any subsidiaries acquired or disposed of during the year are consolidated from the effective dates of acquisition or until the effective dates of disposal. All inter-company transactions, balances and unrealised profits are eliminated on consolidation.

(b) Investment in Subsidiaries

At 31 December 2019 the Company had three wholly owned subsidiaries which are all incorporated in New Zealand. Two of these, Local Government Superannuation Trustee Limited and SuperEasy Limited with balance dates of 31 December and Local Government Mutual Funds Trustee Limited (LGMFTL) with its balance date of 30 June did not have any significant assets, liabilities, revenue or expenses during the years ended 31 December 2018 and 31 December 2019.

LGMFTL is the trustee of New Zealand Mutual Liability Riskpool (“Riskpool”) and Civic Liability Pool (“CLP”). The Company provides administrative services to Riskpool and CLP.

59




NOTE 2 STATEMENT OF ACCOUNTING POLICIES CONTINUED

(c) Administration Fees

Administration fees are recognised at the agreed amounts based on time and expenses incurred. Administration fees collected during the year that will be utilised in future periods are held within the administration fee reserve on the Statement of Financial Position, until the point in time where administration services have been provided.

(d) Property Income

Property rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

(e) Employee Benefits

Provision is made for benefits accruing to employees in respect of wages and salaries and annual leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefits are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

(f ) Basis of Measuring Other Income and Expenses

Income and expenses are accounted for on an accruals basis. All revenue is exchange revenue.

(g) Changes in Accounting Policies

There have been no material changes in the accounting policies during the year. All policies have been applied on bases consistent with those used in the prior year.

NOTE 3 KEY MANAGEMENT PERSONNEL AND RELATED PARTIES

The compensation of the Directors and executives, being the key management personnel of the Group, is set out below.

2019 2018 2019 2018

Number $ $

Short term employee benefits

Executive Management Personnel 3 3 409,204 479,523

Directors 6 6 103,511 113,344

512,715 592,867

As at 31 December 2019 the Company had a loan receivable from New Zealand Mutual Liability Riskpool (“Riskpool”) of $973,927 (2018: $6,086,844) and from Civic Liability Pool (“CLP”) of $1,022,600 (2018: $193,440).

All related party transactions that the Group entered into during the year occurred within a normal client/supplier relationship and under terms equivalent to those that prevail in arm’s length transactions in similar circumstances except for the loan to CLP which has no interest attached to it. Refer to Note 13 for information relating to loans with subsidiaries.

60




NOTE 4 FINANCIAL INSTRUMENTS

Accounting Policies:

i) Classification and Measurement

Financial instruments are transacted on a commercial basis to derive an interest yield / cost with the terms and conditions having due regard to the nature of the transaction and the risks involved. Financial instruments are recognised and accounted for on a settlement date basis.

Loans and Receivables

Other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate.

Bank and Cash Equivalents

Bank and cash equivalents are measured at amortised cost using the effective interest rate.

Financial Liabilities

Financial liabilities include Sundry Creditors, Accrued Charges and Subordinated Debt. Financial liabilities are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, liabilities are measured at amortised cost.

ii) Offsetting Financial Instruments

Financial assets and liabilities are not offset as there is no legally enforceable right to set-off.

iii) Asset Quality

Impairment of Financial Assets

Financial assets measured at amortised cost are reviewed at each balance date to determine whether there is any objective evidence of impairment. If any such condition exists, the asset's recoverable amount is estimated and provision is made for the difference between the carrying amount and the recoverable amount.

As at the date of these Financial Statements, no such evidence of impairment exists.

iv) Fair Value of Financial Instruments

Fair value measurements recognised in the Statement of Financial Position

Financial instruments are categorised into 3 levels:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

v) Derivatives

The Group do not use any derivative financial instruments.

61




NOTE 4 FINANCIAL INSTRUMENTS CONTINUED

Accounting Policies: continued

(1) Income Relating to Financial Assets

2019 $

2018 $

Loans

Interest Received – Loans 214,456 186,729

Cash & Cash Equivalents

Interest Received – Short Term Deposits 115,061 76,149

Total Interest Income 329,517 262,878

(2) Financial Assets and Liabilities

The carrying amounts of all financial assets and liabilities are considered to be equivalent to their market value, which for these assets and liabilities is also considered to be fair value.

The Subordinated Debt is measured at amortised cost which is considered to be fair value.

All fixed interest investments were managed around a 90 day duration and carry a minimum Standard and Poors credit rating of "A" or equivalent. Loans are secured against Riskpool's future contributions and repayable with six months notice (refer to Note 13).

62





(2) Financial Assets and Liabilities continued

Carrying value of Financial Assets and Financial Liabilities

2019 $

2018 $

Financial Asset: Loans and Receivables

Sundry Debtors 501,440 444,308

Loans 1,996,527 6,280,284

Total Loans and Receivables 2,497,967 6,724,592

Financial Asset: Amortised Cost


Financial Liability: Amortised Cost

Sundry Creditors & Accrued Charges 112,990 204,028

Borrowings - 4,000,000

Total Amortised Cost 112,990 4,204,028

(3) Financial Risk – Structure and Management

The Group manages its capital to ensure that the entities in the Group will be able to continue as a going concern. The Group's overall strategy is reviewed annually and remains unchanged.

Financial instruments which potentially subject the Group to a concentration of credit risk consist principally of cash and interest bearing deposits. The Group has no debt liability instruments.

The Group does not require collateral or other security to support financial instruments with credit risk and as such, no collateral exists for any of the investments held by the Group. The maximum credit risk exposure is the carrying amount of the individual debtor and investment balances.

The Group has placed interest bearing deposits and funds to be managed with financial institutions and limits its

amount of credit exposure to any one such institution.

(a) Market Risk

All financial assets and liabilities are New Zealand Dollar based and are recorded at amortised cost, therefore changes in interest rates and foreign currency values do not impact on their carrying value.

(b) Carrying Amount and Fair Value

The carrying amounts of all financial assets and liabilities are considered to be equivalent to their fair value.

63





(3) Financial Risk – Structure and Management continued

(c) Liquidity Risk

Liquidity Risk is the risk that the Group will encounter difficulties in raising funds at short notice to meet commitments associated with financial instruments. Management of liquidity risk is designed to ensure that the Group has the ability to meet financial obligations as they fall due.

The following tables include an analysis of the contractual undiscounted cash flows relating to the Group's financial assets and liabilities categorised by the maturity dates.

Maturity Analysis as at 31 December 2019

Interest Rate Spread

%

Within 6 months

$

6 to 12 months

$

1 to 2years

$

2 to 5years

$

Total

$

Assets

Cash & Cash Equivalents 0 to 0.35% 274,428 - - - 274,428

Term Deposits 1.75% to 2.75% 5,290,045 - - - 5,290,045

Other Receivables n/a 501,440 - - - 501,440

Loans 3.79% to 4.52% 1,996,527 - - - 1,996,527

Total Financial Assets 8,062,440 - - - 8,062,440

Liabilities

Sundry Creditors & Accrued Expenses n/a 112,990 - - - 112,990

Borrowings - - - - - -

Total Financial Liabilities 112,990 112,990

Maturity Analysis as at 31 December 2018

Interest Rate Spread

%

Within 6 months

$

6 to 12 months

$

1 to 2years

$

2 to 5years

$

Total

$

Assets

Cash & Cash Equivalents 0 to 3.45% 3,414,025 - - - 3,414,025

Term Deposits 3.05% 1,200,000 - - - 1,200,000

Other Receivables n/a 637,748 - - - 637,748

Loans 4.71% to 6.28% 6,086,844 - - - 6,086,844

Total Financial Assets 11,338,617 - - - 11,338,617

Liabilities

Sundry Creditors & Accrued Expenses n/a 204,028 - - - 204,028

Borrowings 4.78% - 4,000,000 - - 4,000,000

Total Financial Liabilities 204,028 4,000,000 - - 4,204,028

64





(3) Financial Risk – Structure and Management continued

(d) Credit Risk

All investments are in the form of cash held at registered banks and loans. The registered banks have a credit rating of "A" or better. Loans are with Riskpool (refer to Note 13).

(i) Exposure to Credit Risk

2019 $

2018 $


Term Deposits 5,290,045 1,200,000

Other Receivables 501,440 637,748

Loans 1,996,527 6,086,844

Total 8,062,440 11,338,617

(ii) Concentration of Credit Exposure

94% of the Company's credit exposure is in the form of cash and term deposits held with registered banks and loans to Riskpool.

NOTE 5 OPERATING LEASE COMMITMENTS

2019 $

2018 $

Operating Lease Expense Commitments:

not later than one year 74,208 12,444

later than one year but not later than five years 256,832 29,035

later than five years 37,400 -

368,440 41,479

Operating Lease Income Commitments:

not later than one year - 792,940

later than one year but not later than five years - 2,247,948

later than five years - 96,562

- 3,137,450

Operating lease income relates to a combination of office and retail tenancies to the Investment Property referred to in Note 7. The property was sold in August 2019.

65




NOTE 6 PROPERTY, PLANT & EQUIPMENT AND INTANGIBLE ASSETS

Accounting Policy:

Assets are depreciated on a straight line basis at rates calculated to allocate the assets' cost, in equal instalments over their estimated useful lives which are assessed and regularly reviewed.

Depreciation Rates

Office Furniture and Equipment up to 17 years

Intangibles – Software 5 years

2019 $

2018 $

(a) Property, Plant and Equipment

Office Furniture and Equipment – cost 690,697 669,274

Plus Additions 33,776 21,423

Less Disposals (595,089) -

Closing Value – cost 129,384 690,697

Office Furniture and Equipment – Accumulated Depreciation (525,577) (479,443)

Less Depreciation Charge (35,053) (46,134)

Less Disposals 465,693 -

Closing Accumulated Depreciation (94,937) (525,577)

Net Book Value 34,447 165,120

The Total Comprehensive Surplus After Tax in the Statement of Comprehensive Income includes a $3,055 loss on disposal of fixed assets (2018: nil).

(b) Intangible Assets

Software - cost 519,453 519,453

Plus Additions - -

Less Disposals - -

Closing Value – cost 519,453 519,453

Software – Accumulated Amortisation (430,453) (430,207)

Less Amortisation Charge - (246)

Less Disposals - -

Closing Accumulated Amortisation (430,453) (430,453)

Net Book Value 89,000 89,000

66




NOTE 7 INVESTMENT PROPERTY

Accounting Policy:

Investment property is measured at fair value, by reference to an external market valuation (performed annually), with any resulting unrealised gain or loss recognised in the Statement of Comprehensive Income.

2019 $

2018 $

Civic Assurance House, Lambton Quay, Wellington

(a) Land and Building - 7,150,000

Refurbishment - 469,513

Increase/(Decrease) in value - 133,070

Level 3 Fair Value - 7,752,583

(b) Artwork valuation - 25,000

Fair Value - 25,000

- 7,777,583

The Company had received preliminary advice that investigations and calculations as part of a seismic assessment review highlighted an issue with unreinforced masonry in non-structural parts of the building and, under the Building (Earthquake-prone Buildings) Amendment Act 2016, the building was therefore potentially earthquake prone.

The Company mitigated this risk and completed seismic strengthening work by 31 March 2019. Civic Assurance House achieved a 70% New Building Standard (NBS) rating when the strengthening work was completed. The investment property valuation for 2018 had been obtained as at 30 October 2018 on an ‘as if complete’ basis in regards to the strengthening and asbestos works that were required to be completed. As at 31 December 2018 $352k had been spent on earthquake strengthening and $51k had been spent on asbestos works, with further works to be completed after 31 December 2018. The amount spent as at year end on the works has been added onto the valuers valuation of the property to reach the final fair value of the property.

The investment property valuation as at 30 October 2018 was completed on 7 November 2018 by independent registered valuer Martin Veale (ANZIV, SPINZ) of the firm Telfer Young (Wgtn) Ltd. The property was valued in accordance with International Valuation Standards 2017. The Investment property was Level 3 fair value due to containing unobservable inputs.

The adopted market value had been established by consideration of the Income Capitalisation and Discounted Cashflow approaches. Major inputs and assumptions used in the valuation were rental income, capital expenditure, capitalisation rate and market rent per square metre, discount rate, occupancy and weighted average lease terms.

The Company borrowed $4,000,000 from the ANZ Bank with this loan secured over Civic Assurance House. This loan was repaid in full on 15 August 2019.

The investment property was sold during the reporting period for $10,115,000 following the completion of earthquake strengthening and asbestos works as described below. Settlement for the sale of Civic Assurance House was 15 August 2019. Following settlement, on 19 August 2019 the Company paid a special dividend to shareholders of $9,418,480 plus accompanying imputation credits to offset any tax liability for shareholders.

67




NOTE 8 ANALYSIS OF FINANCIAL ASSETS NOT IMPAIRED

There are no financial assets that are impaired or past due at balance date (2018: $nil).

NOTE 9 CONTINGENT LIABILITIES

There are no contingent liabilities (2018: $nil).

68




NOTE 10 TAXATION

Accounting Policies:

i) Current Tax The current income tax expense charged against the profit for the year is the estimated liability in respect of the taxable profit.

It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for the current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Tax assets are offset only when there is a legally enforceable right to set off the recognised amounts, and an intention to settle on a net basis.

ii) Deferred Tax The liability method of accounting for deferred taxation is applied on a comprehensive balance sheet basis in respect of

temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base of those items.

Deferred tax liabilities are recognised for all temporary differences. Deferred tax assets are reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Statement of Comprehensive Income.

iii) Goods and Services Tax (GST) Revenue, expenses, assets and liabilities are recognised net of the amount of GST except:

• When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority the GST is recognised as part of the cost of the acquisition of the assets or as part of the expense item as applicable.

• Receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

69




NOTE 10 TAXATION CONTINUED

(a) Income tax recognised in the Statement of Comprehensive Income

2019 $

2018 $

Tax expense comprises:

Current tax expense - -

Adjustments recognised in the current year in relation to the current tax of prior years - -

Deferred tax relating to temporary differences 300,881 298,891

Total tax expense 300,881 298,891

Attributable to:

Continuing operations 300,881 298,891

300,881 298,891

The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:

2019 $

2018 $

Surplus before tax 2,251,359 1,196,342

Income tax calculated at 28% 630,382 334,977

Tax effect of permanent differences (337,412) (36,057)

Prior Period Adjustment 7,912 (28)

Income Tax Expense 300,881 298,891

70





(b) Current tax assets and liabilities

2019 $

2018 $

Tax refund receivable - 3,580

- 3,580

(c) Deferred tax balances

2019 $

2018 $

Deferred tax assets comprise:

Temporary differences 2,484,665 3,311,153

2,484,665 3,311,153

Deferred tax liabilities comprise:

Temporary differences 1,416 (524,191)

1,416 (524,191)

Net Deferred Tax balance 2,486,080 2,786,961

71





(c) Deferred tax balances continued

Gross taxable and deductible temporary differences for the Group arise from the following:

Opening Balance

$

Charged to Income

$

Charged to Equity

$

Prior Period Adjustment

$

Closing Balance

$

Investment gains - - - - -

Building, property and equipment (1,872,109) 1,905,422 - (28,256) 5,057

(1,872,109) 1,905,422 - (28,256) 5,057

Employee entitlements 41,132 11,033 - (25,625) 26,540

Losses carried forward 11,784,413 (2,962,774) - 25,625 8,847,264

2019 11,825,545 (2,951,741) - - 8,873,804

Attributable to:

Continuing operations 9,953,436 (1,046,319) - (28,256) 8,878,861

Total 9,953,436 (1,046,319) - (28,256) 8,878,861

Tax effect at 28% 2,786,963 (292,970) - (7,913) 2,486,080

Investment gains - - - - -

Building, property and equipment (1,794,628) (89,567) - 12,086 (1,872,109)

(1,794,628) (89,567) - 12,086 (1,872,109)

Employee entitlements 40,265 867 - - 41,132

Losses carried forward 12,775,265 (978,865) - (11,987) 11,784,413

2018 12,815,530 (977,998) - (11,987) 11,825,545

Attributable to:

Continuing operations 11,020,902 (1,067,565) - 99 9,953,436

Total 11,020,902 (1,067,565) - 99 9,953,436

Tax effect at 28% 3,085,851 (298,916) - 28 2,786,963

No liability has been recognised in respect of the undistributed earnings of subsidiaries because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.

The deferred tax asset relating to tax losses carried forward has been recognised as the financial forecasts anticipate the Group maintaining sufficient profitability in future financial years (refer Note 20).

72




(d) Imputation Credit Account

2019 $

2018 $

Closing Balance 1,593,490 5,259,812

NOTE 11 RECONCILIATION OF COMPREHENSIVE INCOME AFTER TAX WITH CASH FLOW FROM OPERATING ACTIVITIES

Accounting Policy:

The Statement of Cash Flows is prepared exclusive of GST, which is consistent with the method used in the Statement of Comprehensive Income. The GST component of cash flows arising from investing and financing activities, which is recoverable from or payable to, the taxation authority is classified as operating cash flow.

The following are definitions of the terms used in the Statement of Cash Flows:

• Bank comprises cash on hand and demand deposits.

• Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of Cash and which are subject to insignificant risk of changes in value.

• Cash flows are inflows and outflows of cash and cash equivalents.

• Operating activities are the principal revenue producing activities of the entity and other activities that are not investing or financing activities.

• Investing activities are the acquisition and disposal of long-term assets.

• Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.

73




NOTE 11 RECONCILIATION OF COMPREHENSIVE INCOME AFTER TAX WITH CASH FLOW FROM OPERATING ACTIVITIES CONTINUED

2019 $

2018 $

Total Comprehensive Surplus 1,950,478 897,451

Add/(less) non cash items

Loan Interest (30,693) (29,319)

Depreciation 35,053 46,134

Amortisation - 246

Movement in CLP/ Riskpool Admin Fee Reserve (19,256) (225,835)

Movement in Deferred Tax Asset 300,881 298,891

Net change in fair value of investment property - (133,070)

285,985 (42,953)

Add/(less) movements in other working capital items

Sundry Debtors and Prepayments and Reinsurance Recoveries 39,835 (59,784)

Sundry Creditors and Accrued Charges (98,603) 55,502

Tax Refund Due 3,580 -

(55,188) (4,282)

Add/(Less) Items Classified as Investing Activity (1,511,787) (76,150)

Add/(Less) Items Classified as Financing Activity 130,249 (147,980)

Net Cash Flow from Operating Activities 799,736 626,086

74




NOTE 12 SUNDRY DEBTORS AND CREDITORS

(a) Sundry Debtors and Prepayments

2019 $

2018 $

Sundry Debtors 501,440 444,308

Prepayments 43,296 145,453

GST Receivable 9,873 4,684

Sundry Debtors and Prepayments 554,609 594,445

(b) Sundry Creditors and Accrued Charges

2019 $

2018 $

Sundry Creditors and Accrued Charges 112,990 204,028

Sundry Creditors and Accrued Charges 112,990 204,028

NOTE 13 LOANS

Loan ReceivableLocal Government Mutual Funds Trustee Limited is the trustee of New Zealand Mutual Liability Riskpool (“Riskpool”) and Civic Liability Pool (“CLP”). The Company provides administrative services to Riskpool and CLP.

Secured loan agreements between the Company and Local Government Mutual Funds Trustee Limited on behalf of New Zealand Mutual Liability Riskpool (“Riskpool”) were entered into in February 2017, August 2017 and again in November 2018 to assist with Riskpool’s cashflow. The amounts made available under the 2017 agreements were reduced in 2018 to provide facilities of $2,250,000 each (2017: $3,000,000) and under the terms of the loans the interest rate is set as BKBM plus a margin. The November 2018 agreement provides a loan facility of $4,000,000. Under the terms of the loan agreement the interest rate is set at the ANZ Bank lending rate plus a margin. Riskpool may repay the loans and any interest at any time without penalty. The Company may at any time withdraw the facilities by notice in writing to Riskpool to that effect, from which time no further funds will be provided but without giving rise to a requirement for Riskpool to repay the outstanding balance of the loan. The Company may require repayment of the loans (including all interest) in full or in part at any time with six months’ notice. Either party may terminate the agreements on six months’ notice or any other such period that both parties agree to. On termination, the loan outstanding and any interest due to the date of repayment must be paid within the period of notice. The loan outstanding at 31 December 2019 is $973,927 (2018: $6,086,844).

The Company and Local Government Mutual Funds Trustee Limited on behalf of Civic Liability Pool (“CLP”) have an agreement whereby the Company funds any claims payable for CLP under the Trust Deed, without charge to the Trust, which will be reimbursed by CLP in respect of any such claim payments when CLP receives the applicable reinsurance payments on the claims. The loan outstanding at 31 December 2019 is $1,022,600 (2018: $193,440).

BorrowingsThe Company borrowed $4,000,000 from the ANZ Bank in 2018 with this loan secured over Civic Assurance House. The loan was repaid in full on 15 August 2019.

75




NOTE 14 AUDIT FEES

A breakdown of the fees paid to the auditors is below:

2019 $

2018 $

Statutory Audit of the Financial Statements

Civic Financial Services 57,975 52,235

Civic Liability Pool 15,000 13,500

Local Government Superannuation Trustee 43,487 44,044

Total Statutory Audit of the Financial Statements 116,462 109,779

Other Fees Paid to Auditors Re Assurance Services 30,500 27,500

Other Fees Paid to Auditors Re Tax Compliance 19,077 30,500

Total Fees Paid to the Auditors 166,039 167,779

NOTE 15 SHAREHOLDERS’ EQUITY

The Share Capital of the Group comprises solely authorised and issued ordinary shares with each share ranking equally in votes, dividends and surpluses. In 2018, there were no shares were issued. There were no shares issued during 2019.

2019 $

2018 $

Retained Earnings

Opening Balance 7,181,545 6,284,094

Net Surplus After Taxation 1,950,478 897,451

Dividend Payment (9,418,480) -

Closing balance (286,457) 7,181,545

Shareholders Capital

Opening Balance 10,763,506 10,763,506

Ordinary Shares issued during the year - -

Closing balance 10,763,506 10,763,506

Number of Ordinary Shares Fully Paid 11,249,364 11,249,364

Par Value per Share $0.93 $1.60

Dividend Payment per Share $0.84 $0.00

76




NOTE 16 EQUITY RETAINED FOR FINANCIAL SOUNDNESS

All shareholder equity is retained to ensure the financial soundness of the Group with cash being retained for cash flow purposes. A special dividend of $9,418,480 was paid to shareholders on 19 August 2019 following the sale of Civic Assurance House.

NOTE 17 STANDARDS APPROVED BUT NOT YET EFFECTIVE

Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial report, one Standard and Interpretation was in issue that was relevant to the Group, but not yet effective.

Initial application of the following Standard is not expected to affect any of the amounts recognised in the financial report or change the presentation and disclosures presently made in or relation to the Group’s financial report:

Revised NZ IFRS 9 ‘Financial Instruments’ 1 January 2021 31 December 2021

NOTE 18 SUBSEQUENT EVENTS

There have been no material events subsequent to 31 December 2019 that require adjustment to or disclosure in the financial statements.

NOTE 19 CAPITAL COMMITMENTS

The Company has no capital commitments at balance date (2018: $431,527 for contracts relating to the earthquake strengthening and asbestos works).

NOTE 20 GOING CONCERN

The financial statements have been prepared on a going concern basis.

The profitability of financial services supports the going concern assumption for Civic Financial Services Ltd as a whole. The deferred tax asset is reviewed regularly and at balance date against forecast profits and future business opportunities. The Directors believe that it is probable that sufficient taxable profits will be available in the future against which the unused tax losses can be utilised.

Effective for annual reporting periods beginning

on or after

Expected to be initially applied in the financial

year ending

77


The Auditor-General is the auditor of Civic Financial Services Limited and its subsidiaries (the ‘Group’). The Auditor-General has appointed me, Silvio Bruinsma, using the staff and resources of Deloitte Limited, to carry out the audit of the consolidated financial statements of the Group on his behalf.

OPINION

We have audited the consolidated financial statements of the Group on pages 7 to 29, that comprise the consolidated statement of financial position as at 31 December 2019, the consolidated statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date and notes to the consolidated financial statements that include accounting policies and other explanatory information.

In our opinion, the consolidated financial statements of the Group:

• present fairly, in all material respects:

– its financial position as at 31 December 2019; and

– its financial performance and cash flows for the year then ended; and

• comply with generally accepted accounting practice in New Zealand in accordance with Public Sector Public Benefit Entity Standards.

Our audit was completed on 19 March 2020. This is the date at which our opinion is expressed.

The basis for our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and our responsibilities relating to the audit of the consolidated financial statements, we comment on other information and we explain our independence.

BASIS FOR OUR OPINION

We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the Professional and Ethical Standards and the International Standards on Auditing (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the Responsibilities of the auditor section of our report.

We have fulfilled our responsibilities in accordance with the Auditor-General’s Auditing Standards.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS FOR THE FINANCIAL STATEMENTS

The Board of Directors is responsible on behalf of the Group for preparing consolidated financial statements that are fairly presented and that comply with generally accepted accounting practice in New Zealand. The Board of Directors is responsible for such internal control as it determines is necessary to enable it to prepare financial statements that are free from material misstatement, whether due to fraud or error.

TO THE READERS OF CIVIC FINANCIAL SERVICES LIMITED’S FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2019

INDEPENDENT AUDITOR’S REPORT

78


In preparing the consolidated financial statements, the Board of Directors is responsible, on behalf of the Group, for assessing the Group’s ability to continue as a going concern. The Board of Directors is also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless the Board of Directors intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The Board of Directors’ responsibilities arise from the Companies Act 1993.

RESPONSIBILITIES OF THE AUDITOR FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit carried out in accordance with the Auditor-General’s Auditing Standards will always detect a material misstatement when it exists. Misstatements are differences or omissions of amounts or disclosures, and can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of readers taken on the basis of these consolidated financial statements.

We did not evaluate the security and controls over the electronic publication of the consolidated financial statements.

As part of an audit in accordance with the Auditor-General’s Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. Also:

• We identify and assess the risk of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.

• We conclude on the appropriateness of the use of the going concern basis of accounting by the Board of Directors and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements, or if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• We evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Our responsibilities arise from the Public Audit Act 2001.

79


OTHER INFORMATION

The Board of Directors is responsible for the other information. The other information comprises the information included on pages 1 to 5 but does not include the consolidated financial statements, and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information. In doing so, we consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on our work, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

INDEPENDENCE

We are independent of the Group in accordance with the independence requirements of the Auditor-General’s Auditing Standards, which incorporate the independence requirements of Professional and Ethical Standard 1 (Revised): Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board.

In addition to the audit, we have carried out engagements in the areas of tax compliance and controls assurance, which are compatible with those independence requirements. Other than the audit and these engagements, we have no relationship with or interests in the Group.

Silvio Bruinsma Deloitte Limited On behalf of the Auditor-General Wellington, New Zealand

INDEPENDENT AUDITOR’S REPORT CONTINUED

80

CIVIC FINANCIAL SERVICES SHAREHOLDERS AS AT 31 DECEMBER 2019

SHAREHOLDER MEMBER NO. OF SHARES

CITY COUNCILS

Auckland 2,195,042 19.51%

Christchurch 1,417,704 12.60%

Dunedin 470,966 4.19%

Hamilton 202,729 1.80%

Hutt 479,822 4.27%

Invercargill 407,927 3.63%

Napier 283,842 2.52%

Nelson 95,543 0.85%

Palmerston North 411,737 3.66%

Porirua 140,146 1.25%

Tauranga 124,242 1.10%

Upper Hutt 51,209 0.46%

Wellington 526,821 4.68%

DISTRICT COUNCILS

Ashburton 56,016 0.50%

Buller 27,698 0.25%

Carterton 23,642 0.21%

Central Hawke’s Bay 28,580 0.25%

Central Otago 91,238 0.81%

Clutha 33,711 0.30%

Far North 85,440 0.76%

Gisborne 99,404 0.88%

Gore 54,589 0.49%

Grey 33,742 0.30%

Hastings 129,170 1.15%

Hauraki 63,434 0.56%

Horowhenua 110,689 0.98%

Hurunui 14,000 0.12%

Kaikoura 10,000 0.09%

Kaipara 13,629 0.12%

Kapiti Coast 15,060 0.13%

Kawerau 31,161 0.28%

Manawatu 203,964 1.81%

Marlborough 86,022 0.76%

Masterton 127,230 1.13%

Matamata-Piako 122,554 1.09%

New Plymouth 441,456 3.92%

Opotiki 20,000 0.18%

Otorohanga 5,000 0.04%

Queenstown-Lakes 31,149 0.28%

SHAREHOLDER MEMBER NO. OF SHARES

DISTRICT COUNCILS (Cont’d)

Rangitikei 35,338 0.31%

Rotorua 175,906 1.56%

Ruapehu 56,666 0.50%

South Taranaki 135,496 1.20%

South Waikato 42,374 0.38%

South Wairarapa 53,930 0.48%

Southland 13,715 0.12%

Stratford 65,608 0.58%

Tararua 99,972 0.89%

Tasman 65,584 0.58%

Taupo 83,971 0.75%

Thames-Coromandel 27,120 0.24%

Timaru 230,118 2.05%

Waikato 41,070 0.37%

Waimakariri 88,172 0.78%

Waimate 30,458 0.27%

Waipa 149,082 1.33%

Wairoa 22,992 0.20%

Waitaki 120,000 1.07%

Waitomo 16,940 0.15%

Wanganui 289,660 2.57%

Western Bay of Plenty 28,142 0.25%

Westland 28,356 0.25%

Whakatane 38,788 0.34%

Whangarei 63,524 0.56%

REGIONAL COUNCILS

Bay of Plenty 55,000 0.49%

Canterbury 152,696 1.36%

Hawke’s Bay 20,000 0.18%

Horizons 2,000 0.02%

Southland 10,000 0.09%

Taranaki 1,000 0.01%

Waikato 22,000 0.20%

Wellington 80,127 0.71%

OTHER

TrustPower 137,251 1.22%

Total Shares 11,249,364

82

12. PROPOSED EXPANSION OF URBAN RATING BOUNDARIES (Memo from Chief Executive – 05.05.20) A major feature of the 2018-2028 Long Term Plan was an intention of the Council to

expand the urban rating boundaries that applied to both Gore and Mataura. The proposal profiled in the draft Long Term Plan (LTP) at that time followed a comprehensive review by the Council which questioned the adequacy of the existing boundaries which had not been disturbed since the creation of the Gore District Council in 1989.

Following extensive consultation and hearing of submissions, the Council decided to

proceed with implementing changes. However, to give affected ratepayers time to adjust to moving into an urban rating area, the Council decided to defer implementation until the 2020-21 financial year. All affected ratepayers were written to at the time and advised of the Council’s decision. It was the Council staff’s intention to write to those ratepayers in the coming weeks to remind them of the impending introduction of the rating boundary change and its impact on their rates assessments for the forthcoming financial year.

However, in light of the Covid-19 pandemic crisis and the concomitant financial

pressure placed on many households, staff do wonder whether the proposed decision of the Council should be postponed at this point in time. It needs to be emphasised that the rating boundary change was driven by fairness and consistency issues as distinct from any additional income for the Council. Therefore, apart from having these inconsistencies continue for a further period of time, there would be no financial impact on the Council if the implementation of the decision taken in 2018 was deferred for a further two years.

This matter is now referred to the Council for direction and a decision. RECOMMENDATION

THAT the Council agree to deferring the implementation of its urban rating boundary review until the 2022-23 financial year.

83

EXCLUSION OF THE PUBLIC His Worship to move that the public be excluded from the following parts of the proceedings of this meeting, namely the items as listed below. The general subject of each matter to be considered while the public is excluded, the reason for passing the resolution in relation to each matter, and the specific grounds under Section 48(1) of the Local Government Official Information and Meetings Act 1987, for the passing of this resolution are as follows:

General Subject Matter Confirmation of Minutes Confirmation of the minutes of the extraordinary meeting of the Gore District Council, held in committee, on Monday 13 April 2020. Confirmation of the minutes of the ordinary meeting of the Gore District Council, held in committee, on Wednesday 15 April 2020 Confirmation of the minutes of the extraordinary meeting of the Gore District Council, held in committee, on Wednesday 22 April 2020 Other business • Update on land negotiations –

water treatment plants upgrade • WorkSafe vs Gore District Council • Howe Road bridge report

Reason for passing this resolution in relation to each matter Maintain legal professional privilege; protect the privacy of natural persons including that of deceased natural persons; and enable any local authority holding the information to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations.

Grounds under Section 48(1) for the passing of this resolution 7 (2)(a), 7 (2)(g) and 7 (2)(i)

84