Napier City Council Annual Report 2010/2011 Summary

NAPIERTheArtDecoCity

NAPIER CITY COUNCIL ANNUAL REPORT

SUMMARY for the year ended 30 June 2011

ISSN 1177-9888

Napier City Council 231 Hastings Street, Private Bag 3010, Napier 4142 Phone: 06 835 7579 Fax: 06 835 7574 Email: info@napier.govt.nz www.napier.govt.nz Front Page: The Norfolk Pines on Marine Parade

Contents Mayor and Chief Executive Report

4

Mayor and Councillors as at 30 June 2011

6

Financial Performance Measures

7

How Rates Were Spent

7

Financial Summary

8

Summary Financial Statements

8

Explanation of Variances Against Budget

9

Financial Overview

13

Council Income 2010/11

14

Average Residential Rates

15

Council Operating Expenditure 2010/11

16

Borrowing

17

Cash Flows

19

Activity Summaries

20

Democracy and Governance

20

Recreation

20

Social and Cultural

22

City Promotion

23

Planning and Regulatory

24

Roading

25

Water and Wastes

26

Property Assets

28

Customer Satisfaction Survey Results

29

NRB Customer Satisfaction Survey

29

Audit Report

30

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

3

Mayor and Chief Executive Report Our aim for residents of our clean green city, is to ensure a great place to work and play while keeping it affordable for you.

A report on our last year would not be complete without a mention of Christchurch’s devastating earthquakes. These have impacted on all property owners in New Zealand in terms of insurance, and on most businesses with building strengthening requirements. People here were especially anxious to help with the recovery.

Napier and Hastings District hosted 1,000 Christchurch people for much needed respite, paying for airfares, in addition to the $250,000 the region sent for relief. What a wonderful community response. Thank you.

The big project of the year was the completion of the $3.6 million upgrade of Taradale. The user-friendly clean lines of the retail centre met with a positive response from both the public and businesses.

At the other end of the heritage scale, the King George Hall turned 100 and the Bay View community celebrated with style. Significant improvement to the Bay View stormwater management has been completed by upgrading drains that link to the detention area on the Landcorp farm.

The Council made land provision at Onekawa Park for the ‘one-stop’ Plunket facility. Construction is now underway.

Napier people continue to increase the amount of rubbish they recycle, reducing tonnage to the landfill by more than 3,000 tonnes in this year, and effectively tending to the environment.

You are achieving great results with more than 30% diverted from the landfill in the last 5 years.

The ‘Greening of Napier’ continues, with trees planted appropriately on reserves and by walkways. Pathways also continue to be built, providing a wonderful network that stretches across our city and beyond. We are delighted the Government has jumped on board.

Napier is a tourist town and marketing, through campaigns aligned to the Napier Life magazine, keep visitors coming. This year the focus was on Australia, as well as the domestic market.

Tourism facilities continually add product to the industry and in spite of the closure of the Hawke’s Bay Museum and Art Gallery (for the $18 million redevelopment), visitor interest is strong.

Roading projects include improvement and reconstruction of Hill Road, Golding Road, Normans Lane and Stafford Street. The Council remains concerned that the New Zealand Transport Agency have not yet approved subsidy for the Prebensen Drive Four Laning project, which has a high priority in the Regional Transportation study.

The Overland drain is now an important operative part of the City’s stormwater disposal. It performed extremely well during the heavy rain event in April.

Our wastewater focus was to obtain consent for the $30 million upgrade. One of the milliscreens was replaced at the Awatoto Wastewater Treatment Plant, and major renewal of the Taradale Road sewer main was completed.

Major improvements were made to the Redclyffe Transfer Station layout and weighbridge.

The first stage of the Awatoto Trunk Main project has been completed. This facility allows us the ability to source water from that area and adds flexibility to the City’s reticulation system.

Ongoing demand for sections in the Parklands subdivision has remained above expectation in the current economic climate. Revenue from Parklands has allowed Council to put funding provision into planning for upgrades to areas of Marine Parade.

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Mayor and Chief Executive Review continued The actual redevelopment of the Marineland site has stalled because of legal review undertaken by the Friends of Marineland. Napier City Council offered mediation and a meeting, but this was declined.

Activity in our streets and neighbourhoods is what affects us most and consultation during this year on the Te Awa Structure Plan and the Napier Hill and Jervoistown Plan changes, saw many residents involved. Hearings will be held and the proper process followed, but the Council was left in no doubt as to how the majority of Jervoistown and Hill residents saw their community’s future.

Five hundred Council workers take pride in our city and work to make a difference, from the cleanliness of our streets, to the eye-catching floral displays, the flow of clean water and safe streets and neighbourhoods. A huge provision of services to the 60,000 residents of our city and our important visitors.

This is all good news for Napier and our robust financial position has once again improved in this financial year. An external debt level of $4 million means a very sustainable Council, while still constructing major infrastructure and amenity projects for our city.

Thanks to the whole team, the community and the Council who do make ‘this city’ the best place to live.

Barbara Arnott

Neil Taylor

MAYOR

CHIEF EXECUTIVE

4 November 2011

4 November 2011

Art Deco event at the Soundshell

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

5

Mayor and Councillors as at 30 June 2011

Back Row (L-R): , Cr Keith Price (Onekawa–Tamatea Ward), Cr Bill Dalton, Cr Tony Jeffery.

Middle Row (L-R): Cr Rob Lutter (Taradale Ward), Cr Maxine Boag (Nelson Park Ward), Cr Michelle Pyke, Cr Faye White, Cr Mark Herbert (Ahuriri Ward), Cr John Cocking.

Front Row (L-R): Mayor Barbara Arnott, Cr Tania Wright (Taradale Ward), Cr Kathie Furlong, Cr Dave Pipe (Nelson Park Ward).

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Financial Performance Measures The financial performance measures reflect the Napier City Council’s financial position at 30 June 2011. Public debt and working capital show favourable variances due to timing variations of capital projects and a net surplus above budget.

Actual 2010/11 $000

Budget 2010/11 $000

Actual 2009/10 $000

Rates Revenue

43,799

43,393

42,898

Net Surplus

13,905

23,271

16,507

Working Capital

58,070

11,205

47,205

4,036

7,914

6,046

1,345,845

1,400,397

1,304,779

51.17%

42.51%

48.08%

Public Debt as a percentage of Total Assets

0.30%

0.57%

0.46%

Proportion of Rates Revenue applied to service Debt (%)

4.83%

12.60%

5.54%

Public Debt Total Assets Proportion of Rates Revenue to Total Revenue (%)

How Rates Were Spent

The new look Napier Library entrance.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Financial Summary Summary Financial Statements Actual 2011 $000

Budget 2011 $000

Actual 2010 $000

Summary Statement of Comprehensive Income for the Year Ended 30 June 2011 Total Income 85,602 102,075 Less Operating Expenditure 71,570 78,490 Less Finance Costs 394 529 Share of Associate Surplus/(Deficit) 267 215 Income Tax Expense -

89,220 72,358 424 69 -

Surplus/(Deficit) after tax

13,905

23,271

16,507

Valuation Gains/(Losses) on Revaluation Valuation Gains/(Losses) on Fair Value through Comprehensive Income on Investments

31,578

70,465

460

(218)

-

10

Total Comprehensive Income

45,265

93,736

16,977

Statement of Changes in Equity for the Year Ended 30 June 2011 Balance at 1 July 1,280,767 Surplus/(Deficit) after tax 13,905 Valuation Gains/(Losses) on Revaluation 31,360

1,279,904 23,271 70,465

1,263,790 16,507 470

Total Equity

1,326,032

1,373,640

1,280,767

Statement of Financial Position as at 30 June 2011 Total Current Assets Total Non Current Assets

68,729 1,277,116

25,809 1,374,588

61,001 1,243,778

Total Assets

1,345,845

1,400,397

1,304,779

Total Current Liabilities Total Non Current Liabilities

10,660 9,153

14,604 12,153

13,796 10,216

Total Liabilities

19,813

26,757

24,012

1,326,032

1,373,640

1,280,767

31,899 (28,190) (2,010)

36,927 (35,357) 1,864

40,936 (40,200) (1,023)

Net (Decrease)/Increase in Cash, Cash Equivalents & Bank Overdrafts

1,699

3,434

(287)

Cash, Cash Equivalents & Bank Overdrafts at beginning of period

5,518

6,098

5,805

Cash, Cash Equivalents & Bank Overdrafts at close of period

7,217

9,532

5,518

Total Public Equity Statement of Cash Flows for the Year Ended 30 June 2011 Net Cash from Operating Activities Net Cash from Investing Activities Net Cash from Financing Activities

1. Part 6 Section 98 (4) (b) of the Local Government Act 2002 requires Council to make publicly available a summary of information contained in its Annual Report.

2. The specific disclosures included in the summary financial report have been extracted from the full financial report and were authorised for issue by the Mayor and Chief Executive on 4 November 2011.

This summary has been prepared in accordance with FRS-43: Summary Financial Statements.

3. The summary financial report cannot be expected to provide as complete an understanding as provided by the full financial report. The full financial report, dated 19 October 2011, has received an

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Financial Summary continued unqualified auditor’s report. A copy of the financial report may be obtained from Council’s offices and from Council’s website www.napier.govt.nz keyword: annual report 4. This summary financial report has been examined by the auditor for consistency with the full financial report. An unqualified auditor’s report is included with this summary.

5. The Summary Financial Statements are for Napier City Council as an individual entity and are presented in New Zealand dollars rounded to $000’s.

6. The primary objective of Napier City Council is to provide goods and services for the community or social benefit rather than making a financial return. Accordingly, Napier City Council has designated itself as a public benefit entity for the purposes of New Zealand equivalents to NZ IFRS. 7. The full financial report was prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP) and comply with New Zealand equivalents to International Financial Reporting Standards (IFRS) as appropriate for public benefit entities.

8. There have been no significant events since balance date.

9. Changes in Accounting Policies - There have been no changes in accounting policy during the financial year except as follows: The following amendments to standards have been early adopted: NZ IFRS-7 Financial Instruments: Disclosures - The effect of early adopting these amendments is the following information is no longer disclosed: -- the carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated; and -- the maximum exposure to credit risk by class of financial instrument if the maximum credit risk exposure is best represented by their carrying amount.

Explanation of Variances Against Budget Major Variances Income is $16.5m below 2010/11 budget and $3.6m below 2009/10 year. Key variances to budget were lower grants received for the Hawke’s Bay Museum and Art Gallery building project and below budget sales of Parklands residential sections. These are both timing variances.

Confirmation of the timing of grant payments for the Museum was received after adoption of the 2010/11 Annual Plan. While some grants and donations for this project were received in 2010/11, the balance of the amount included in the 2010/11 Annual Plan will be received between 2011 and 2014. Budgeted grants were $10.4m and actual amount received was $2.3m, a variance of $8.1m.

Wet weather over the autumn period delayed completion of 28 sections in the Parklands subdivision. The majority of these sections were under contract for sale. Consequently, when the sections were completed in mid-July, these contracts for sale were recognised as revenue in 2011/12. This resulted in 2010/11 sales at $3.4m below budget.

Total expenditure is $7.1m below budget and $0.8m below 2009/10 actual outcome. Variances to budget arose from Parklands residential section development delays, reprioritising of roading projects resulting from reductions in NZ Transport Agency subsidies and lower landfill costs. In addition, the 2010/11 budget included provision of $1m for regional sports facilities.

Application of these funds remains undecided.

Significant variances in equity are retained earnings $7.6m below budget, resulting from a $9.4m lower than forecast surplus and partly offset by a higher opening retained earnings balance than budgeted $1.4m. Other reserves variance at $40m below budget arises from revaluation gains taken to equity of $31.4m against a forecast of $70.5m.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Financial Summary continued Other Variances Explanations for other variances from Council’s 2010/11 Annual Plan are as follows:

1.

Statement of Financial Performance

1.1. Income a.

Other Gains/(Losses) were $2.6m below budget. Other gains/(losses) are detailed in Note 5 of the Notes to the Financial Statements of the Annual Report. This variance between actual and budget comprises two main items. These are loss on disposal of assets and the loss arising from revaluation of investment property.

b.

Disposal of assets resulted in a variance to budget of $1.3m. The most significant items giving rise to loss on disposal of assets were sewer, stormwater and water pipe asset disposals. The largest value of loss, $0.7m, was the removal and replacement of sewer pipes. Significant replacements occurred when Taradale Road sewer pipes were found to have deteriorated faster than anticipated. These pipes were retired 20 – 30 years ahead of schedule. Consequently a project is now in progress to test check and evaluate the condition of other sewer pipes around the city.

In addition stormwater and water pipe assets have been replaced, ahead of the scheduled end of their economic life, as part of other infrastructure improvement projects. When assets are retired early, a loss on disposal is incurred.

c.

In addition to asset disposal variances, based on valuations at 30 June 2011, Council’s investment property portfolio was assessed to have fallen $0.3m during the last financial year. It had been projected, for budget purposes, that these assets would gain in value $1.0m.

1.2. Expenditure a.

Employee benefit expenses were $0.3m or 1% above budget and $0.7m or 3% above 2009/10 year.

Budget actual variance was in part due to increased staff costs, overtime and allowances, arising from significant rain/storm events in 2010/11 and in part due to staff redundancies due to the closure of the Hawke’s Bay Museum & Art Gallery for building redevelopment.

10

b.

Employee costs increased $0.7m between 2009/10 and 2010/11. This comprised $0.5m (2.4%) increase in cost of hours worked, including significant overtime worked during the rain/storm events, redundancy payments due to the closure of Hawke’s Bay Museum & Art Gallery $0.1m and $0.1m for additional leave accruals. FTE (Full Time Equivalents) for the year were 418 compared to 432 for the 2009/10 year.

c.

Depreciation charges were $1.1m below budget for the year. This variance to budget arises from timing differences of capital additions between budget 2010/11 and actual 2010/11.

d.

Other expenses are $6.0m below 2010/11 budget and $2.7m below 2009/10. Lower expenditure comprised:

Cost of development for residential sections which were $2.3m below 2010/11 budget and $2.7m below 2009/10. See Major Variances above for discussion regarding this variance.

The 2010/11 budget included provision of $1m for regional sports facilities.

Application of these funds remains undecided.

The operating cost of roading activities was $1.5m below 2010/11 budget and $0.1m above 2009/10. The lower operating costs incurred were due to reprioritisation of maintenance activities and refocused asset management strategies resulting from NZ Transport Agency reductions in subsidy levels.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Financial Summary continued

2.

Costs of solid waste disposal were $1.0m below the 2010/11 budget and $0.6m below 2009/10. This was due to reduced landfill costs due to lower refuse volumes, lower litter collection costs and write back of provision for landfill aftercare costs.

Statement of Financial Position

2.1. Current Assets Significant variances in Current Assets are: a.

Cash and cash equivalents were $2.3m below budget. This variance is due to amounts of cash placed on deposit, being above that anticipated in the budget.

b.

Debtors and other receivables were below budget $1.9m. This was due to lower revenue overall for the 2010/11 year but was particularly due to recognition of Parklands sales delayed until July 2011/12.

c.

The current asset portion of inventories are $1.4m above budget and $2.5m above 2009/10. This arose from delays in completion of developed Parklands residential sections (see Major Variances above for discussion regarding this variance).

d.

The current portion of other financial assets consisted of cash on deposit where the deposit is held for more than 3 months and investments in local authority stock. At 30 June 2011 funds held in this classification were $45.4m above budget and $5.3m above 2009/10. The budget variance is due to the actual balance at 30 June 2010 being $31.7m above the forecast opening position and capital purchases 2010/11 being $21.1m below budget. For discussion regarding below budget fixed asset purchases see Note 2.2. a. below. These variances were offset by an additional $5.8m above budget held in non current other financial assets at year end.

2.2. Non Current Assets Significant variances in Non Current Assets are: a.

Property, plant and equipment was $100.5m below budget at year end.

Capital additions planned for 2010/11 but not completed were $21.1m below budget.

This variance was made up of a combination of vested assets below budget and incomplete projects. 2010/11 capital additions budget included $5.7m of vested assets. Actual assets vested to Council for the year were $1.5m or $4.2m below budget. Items budgeted but not completed in 2010/11 included, Hawke’s Bay Museum & Art Gallery building redevelopment $12.0m (commenced late June 2011), Roading projects carried forward to 2011/12 $3.3m and Westshore Beach reprofiling $1.1m (held over until Whakariri Groyne completed).

Additionally, the Prebensen Drive Four Laning project budgeted in earlier years $7.9m is also yet to be completed.

Revaluation gains were also $38.9m below budget for the year. This variance arises from changes in value of land assets which have decreased in value since the last revaluation of Council assets. The budget, based on similar assumptions to the 2009/10 - 2018/19 Ten Year Plan for land assets, was based on land assets remaining at 2008 revaluation values.

b.

Investment properties were lower than budget by $4.2m. This was due to a $2.7m lower than forecast opening balance and $1.5m variance due to the revaluation loss of $0.3m instead of the budgeted revaluation gain of $1.0m.

c.

Other financial assets comprise corporate bonds, local authority stock, term deposits and unlisted shares. The increase of $5.8m between budget for 2010/11 and actual 2009/10 arose from above budget deposits with terms greater than 12 Months.

2.3. Current Liabilities Significant variances in Current Liabilities are: a.

Creditors and other payables are 31% ($3.7m) lower than anticipated in the 2010/11 NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

11

Financial Summary continued budget and 10% below 2009/10 actual. This is a result of both lower capital and operating expenditure than planned in the budget and the timing of expenditure during the year.

2.4. Non Current Liabilities Significant variances in Non Current Liabilities are: a.

Revenue received in advance relates to McLean Park corporate boxes and naming rights where licences and naming rights are granted for 10 years. Under NZ IAS revenue received for these licences, although the cash has been received, is required to be allocated over the 10 years of the box holder licence or naming rights agreement. The amount included in this classification is for the 7 years from 2012/13 to 2018/19 and was not budgeted in the 2010/11 budget.

b.

Borrowings are $3.8m lower than budget for the period. This arises from loan funds budgeted but not yet drawn for projects planned to be in progress or completed either in 2010/11 or earlier. Funding of projects by internal loan, when cash flow requirements permit, have also reduced actual external borrowings required compared to requirements forecast when the budget was prepared.

3.

Statement of Movements in Equity

Other variations in the statement of movements in equity are the below budget after tax surplus of $9.3m and the below budget gain on revaluation. The net surplus variance is the result of lower than budget income $16.5m offset by lower than budget expenditure $7m. Variances for these items are outlined above in Notes 1.1. and 1.2. The gain on revaluation variance is over viewed in Note 2.2. a. above.

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Financial Overview The Annual Report Summary provides an overview of the Council’s financial results for the year ended 30 June 2011. For detailed information please refer to Section 2 - Financial Statements and Section 3 - Activity Statements of the Annual Report. The financial statements are presented in New Zealand dollars and values are rounded to the nearest thousand dollars ($000).

Actual 2011 $000

Budget 2011 $000

Actual 2010 $000

Income Rates Revenue Finance Income Other Revenue Other Gains/(Losses)

43,799 3,036 40,337 (1,570)

43,393 1,526 56,150 1,006

42,898 2,498 46,815 (2,991)

Total Income

85,602

102,075

89,220

Expenditure Employee Benefit Expenses Depreciation and Amortisation Other Expenses Finance Costs

24,443 19,655 27,472 394

24,192 20,826 33,472 529

23,789 18,444 30,125 424

Total Operating Expenditure

71,964

79,019

72,782

Operating Surplus/(Deficit) before tax Share of Associate Surplus/(Deficit)

13,638 267

23,056 215

16,438 69

Surplus/(Deficit) before tax

13,905

23,271

16,507

-

-

-

Surplus/(Deficit) after tax

13,905

23,271

16,507

Movements in Equity Adjustments for Revaluation Gains taken into Equity

31,360

70,465

470

Total Recognised Income and Expenses

45,265

93,736

16,977

Income Tax Expense

Other Movements in Equity

-

-

-

45,265

93,736

16,977

Equity at beginning of period

1,280,767

1,279,904

1,263,790

Equity at close of period

1,326,032

1,373,640

1,280,767

Total Movements in Equity

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Financial Overview continued Council Income 2010/11 The main sources of Council’s $85.6m income are rates with non-targeted rates being (37%) and targeted rates being (14%) and user charges and service delivery (28%).

As noted above, a significant source of funding for Council is the rates levied on commercial and residential properties within the Napier City boundaries. A table of the last 5 years of rates increases, compared to Consumers Price Index (CPI) is shown below, along with a graph of the net rates received and cumulative CPI to cumulative rates increases over the same 5 year period.

The key trend displayed is the very close alignment between rates increases and changes in CPI. CPI is a measure of the changes in the price level of consumer goods and services purchased by households. However, cost changes which significantly impact Council, particularly in the area of capital expenditure are reflected in other indices such as the Capital Goods Price Index (CGPI), the Producers Price Index (PPI) and Labour Cost Index (LCI). CGPI and PPI indices move differently to CPI. This is due to the components within the indices. Items such as electricity, gas, oil and oil products, concrete and iron/steel are significant components within CGPI and PPI whereas food and housing costs are significant components within CPI. Due to the different components of these measures significant variances arise between CPI and PPI and CGPI. PPI and CGPI have, on average, been well above CPI over recent years. This has meant that pressures on Council expenditure from price increases has been above that measured by CPI. Council is very aware of this issue and has addressed cost increases with a multipronged approach to ensure rates increases are kept close to CPI to maintain community affordability. Council’s approach has focussed on tight control of all costs, competitive purchasing processes, a focus on core infrastructure within the capital plan and adding new services only when costs for these can be met from existing budgets.

Net Increase of Rating Revenue - 5 Year Trend

14

2006/07 $000

2007/08 $000

2008/09 $000

2009/10 $000

2010/11 $000

Rating Revenue Penalties & Remissions

38,333 (175)

39,708 (100)

41,724 (17)

42,898 69

43,799 74

Net Rates Revenue

38,158

39,608

41,707

42,967

43,873

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Financial Overview continued

Rates per Rateable Property (Average) Rates % increase per annum per Rateable Property CPI at 30 June * Net Increase (Under)/Over CPI per Rateable Property *

2006/07 $

2007/08 $

2008/09 $

2009/10 $

2010/11 $

1,651

1,676

1,733

1,773

1,795

3.6%

1.5%

3.4%

2.3%

1.2%

2.0%

4.0%

1.9%

1.7%

3.3%

1.6%

-2.5%

1.5%

0.6%

-2.1%

* Note: CPI quoted is the value at the end of the year reported (i.e. for 2010/11 year is as at 30 June 2011) and excludes the impact of the change of GST rate from 12.5% to 15%. CPI used for Annual Plan purposes is the reported value as at 30 June for the year prior to the Annual Plan (i.e. for 2010/11 year the base rate of CPI for Plan purposes was the rate at 30 June 2009).

5 Year Trend of Cumulative Rate Increases $ and Cumulative Rate Change % to Cumulative CPI % Change

Average Residential Rates

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Financial Overview continued Council Operating Expenditure 2010/11 Activity Operating Expenditure 2010/11

The following graphs show the trend of revenue, expenditure and net surplus over the last five years. The 2008/09 result reflects year 1 of the international financial crisis and its impact on the revaluation of investment property and Parklands residential land sales. Income and operating surplus were well below the previous 2 years due to the loss on revaluation of investment properties of $7.5m, income for Parklands residential section sales $5.2m below the 2007/08 year and Financial and Development Contribution income $1.8m below 2007/08.

Income

Expenditure

Operating Surplus

Operating surpluses shown are a combination of rated funds for capital expenditure, loan repayments and surpluses from non rating activities.

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Financial Overview continued Borrowing The Council manages its finances prudently and in a way that supports both the current and the future generations within the community. Council prepares and consults on a Ten Year Plan every three years. The most recent of these plans was for the 2009/10 - 2018/19 years.

Since completion of this Ten Year Plan, Council has also prepared revised Annual Plans for the 2010/11 and 2011/12 years. These provided an update to the 2009/10 - 2018/19 Ten Year Plan and reflect, amongst other revisions, changes to inflation assumptions and other unusual items such as changes to roading subsidy levels.

The development and renewal of assets is funded by a number of sources including government grants and subsidies, contributions from developers for their share of infrastructure costs, through development and/or financial contributions, targeted rates, fees and charges and borrowing. A new Ten Year Plan is currently being prepared. Capital expenditure and the funding sources for this expenditure, including borrowing levels, will be reviewed during preparation of this plan.

The table below shows the Council’s level of secured loans (i.e. loans where an entity external to Council have lent money to Council). Projects where the timing of the project expenditure differs to the 2010/11 Annual Plan resulted in borrowings not increasing to the level projected.

Actual 2011 $000

Budget 2011 $000

Actual 2010 $000

Current Secured Loans Non Current Secured Loans

4,036

8 7,906

2,010 4,036

Total Secured Loans

4,036

7,914

6,046

In recent years Council has also funded some capital projects from cash, held by Council, that is excess to Council’s short-term requirements. Funding of capital projects by this method is termed ‘internal loan funding’. Internal loans are used, where possible, for loan funded projects as the net cost of internal loans results in a lower cost arrangement to the benefit of Council.

Internal loans are funded from cash sourced from a mixture of equity and special funds and enable effective use of funds held while also ensuring activities with loan funding are not cross subsidised by other activities. This method of loan cost allocation between activities also supports the integrity of Council’s funding policies. The table below displays the gross debt of Council over the last 5 years. However, it is important to note that if Council had funded all loan funded projects through external debt, Council would also have shown an equivalent increase in the level of cash or cash and investments in Council’s statement of financial position.

Debt Levels Internal and External 2006/07 $000

2007/08 $000

2008/09 $000

2009/10 $000

2010/11 $000

External Debt (excluding Finance Leases) Internal Debt

18,570 22,210

11,562 27,057

7,055 31,754

6,044 34,233

4,036 34,489

Total Debt

40,780

38,619

38,809

40,277

38,525

In addition to existing loans, Council has approved loan funded capital projects in current and prior years capital plans of $30m. These projects are either in progress at present or will be commenced and completed in future years. Significant projects which are partly funded by loans, and included in the $30m are the Advanced Wastewater Treatment Plant project $10m, Hawke’s Bay Museum and Art Gallery building redevelopment $5m, other sewerage projects $4m, Whakariri Groyne and Westshore Beach Reprofiling $3m and Prebensen Drive projects NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

17

Financial Overview continued $3m. Loans for the projects above, with the exception of the Advanced Wastewater project and other sewerage projects were included in Council’s 2009/10 - 2018/19 Ten Year Plan, and were forecast to have been drawn at the end of 2010/11. The Ten Year Plan forecast external debt to be $9.4m at 30 June 2011. The 2010/11 Annual Plan forecast debt levels were $7.9m. New debt for 2010/11 of $2m has been funded by internal loans. The Annual Plan anticipated that new loans for 2010/11 would be funded by external loans rather than internal loans.

Under Council’s Liability Management Policy, Council is able to borrow to fund projects which will benefit several generations of residents or when a project is a ‘one-off’ or to fund Council’s balance sheet. However, the risk to both current and future generations of uncontrolled borrowing is significant, so Council, within its policy, manages these risks within specific borrowing limits. Performance against these limits is measured annually as a part of year end reporting. The performance against these limits at the end of 2010/11 and over the 4 preceding years is shown in the tables below.

Debt Servicing Proportion of Rates Revenue applied to Service Debt (External and Internal Debt)

Debt Servicing Proportion - Actual Policy Limit

2006/07 %

2007/08 %

2008/09 %

2009/10 %

2010/11 %

8.5% 16%

8.7% 16%

7.4% 16%

5.5% 16%

4.8% 16%

Rate Funded Debt per Capita Net Rate Funded Debt per Capita (External and Internal Debt)

Rate Funded Debt per Capita - Actual Policy Limit

2006/07 $000

2007/08 $000

2008/09 $000

2009/10 $000

2010/11 $000

$551 $1,000

$535 $1,000

$536 $1,000

$530 $1,000

$485 $1,000

Debt / Income Net Debt as a % of Total Income (External and Internal Debt)

Net Debt % of Total Income - Actual Policy Limit

2006/07 %

2007/08 %

2008/09 %

2009/10 %

2010/11 %

43% 100%

40% 100%

50% 100%

44% 100%

44% 100%

2006/07 %

2007/08 %

2008/09 %

2009/10 %

2010/11 %

232% 110%

266% 110%

206% 110%

328% 110%

385% 110%

Liquidity Liquidity to peak 12 month Net Debt

Liquidity % - Actual Policy Minimum

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Financial Overview continued Cash Flows The table below summarises the movement of cash for the last 5 years. The net cash inflow/ (outflow) for the year shows the net change in cash and bank balances from operating, investing and financing activities.

Net Cash Flows from or used in Operating Activities Net Cash Flows from or used in Investing Activities Net Cash Flows from or used in Financing Activities Net Cash Inflow/(Outflow) for the period

2006/07 $000

2007/08 $000

2008/09 $000

2009/10 $000

2010/11 $000

35,793

32,852

30,196

40,936

31,899

(37,170)

(31,501)

(23,300)

(40,200)

(28,190)

(4,569)

(7,188)

(4,559)

(1,023)

(2,010)

(5,946)

(5,837)

2,337

(287)

1,699

Net cash from or used in operating activities is the net of receipts from rates, interest and other revenue received, payments to suppliers and employees and interest paid.

Net cash from or used in investing activities includes purchase and sale of property, plant and equipment and intangibles and acquisition and withdrawal of investments.

Net cash from or used in financing activities is the net change in external loan and lease liabilities for the year.

Net cash inflow/(outflow) for the period is the net change in cash and cash equivalents for the year.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Activity Summaries Democracy and Governance Through Democracy and Governance Council provides a democratic and consultative system for decision making.

Performance Measures 78% residents satisfied with Sufficiency of Public Information Supplied in the NRB Customer Satisfaction Survey (target 75%).

Key Issues Council election was held in October 2010. The Council structure remained the same as the previous Council with the Mayor elected at large and twelve Councillors elected as follows:

One Councillor elected by the Ahuriri Ward.

One Councillor elected by the Onekawa-Tamatea Ward.

Two Councillors elected by the Nelson Park Ward.

Two Councillors elected by the Taradale Ward.

Six Councillors elected by the city as a whole.

Recreation Recreation activities include Sportsgrounds, the Napier Aquatic Centre, Marine Parade Pools (managed by external contract), Reserves and the Inner Harbour.

Performance Measures Sportsgrounds 91% residents satisfied with Parks and Sportsfields in the NRB Customer Satisfaction Survey (target 92%).

Napier Aquatic Centre 100% water quality adherence rate (target 95%).

Reserves 196,700 annuals propagated and planted throughout the City (target 180,000).

Key Issues Sportsgrounds Key works in 2010/11:

Sportsgrounds Infrastructure Asset Renewal – Work is being undertaken on condition assessments over the next 24 months.

Park Island – Bond Field Extension project is on hold until the Park Island Master Plan is completed. The plan will prioritise point future development works at Park Island.

Install Auto Irrigation System – Nelson Park Irrigation deferred due to further work to be done on the design of the project.

Guppy Road Sports Village Stage 1 – Planning work currently underway to be completed before any development is started.

Reserves Key works in 2010/11:

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A new reserve was vested in the Te Awa Estate subdivision.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Activity Summaries continued

Investigation continues for the Resurface Soundshell area project.

Botanical Gardens Restoration work focused on the installation of a new water reticulation system. The project was funded in previous years and work is ongoing.

A new walkway and cycleway link was constructed in the Oaklands area.

Whakarire Ave Breakwater and Westshore Beach Reprofiling During the year the Council put its resource consent application for the construction of the Whakarire Avenue Breakwater on hold to allow time to review a number of legal and planning matters that arose when the application was lodged. It is anticipated, subject to the additional legal and planning advice, that Council will proceed with the project in the 2011/12 financial year.

Napier Aquatic Centre The Olympic Pool has been removed and Napier Aquatic Centre Infrastructure Asset Renewal funding is being incorporated to the wider master plan development of the site, which includes the restoration of the Olympic Pool site.

Inner Harbour Funding Policy The 2010/11 Annual Plan included an amended policy for funding the Inner Harbour. This policy allocates cost based on the assessed benefit arising from each type of cost. The amended policy provides for about 70% to be recovered from user pays and 30% from the wider community compared to the previous 60/40 split.

As a result of both cost increases and the new policy, increases in user charges of 73% would have been required in 2009/10. As this increase would not be affordable for boat owners in one year the increase is being applied over a five year period, with 10% pa increase applying in each of 2009/10 and 2010/11, and 18% pa for the following three years.

Greening of Napier Over the last two years there has been significant tree planting in Prebensen Drive, Gloucester Street, Church Road, Kennedy Road and Tamatea Drive. Next year it is intended to plant trees in or near the CBD and in clusters at some of the gateway entrances to Napier.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Activity Summaries continued Social and Cultural Social and Cultural activities include the Libraries, War Memorial Centre, Municipal Theatre, Hawke’s Bay Museum and Art Gallery, Community Advice, Safer Community, Halls, Retirement and Rental Housing, Cemeteries, Public Toilets and Emergency Management.

Performance Measures Libraries 899,895 items issued (target 790,000).

Napier War Memorial Conference Centre 339 national and international hires (target 293), 4½ Star Qualmark Venue rating was achieved (target 4 Star).

Hawke’s Bay Museum and Art Gallery 11 workshops and educational programmes (target 10).

Community Advice 22 Youth Forums (target 18) and 8 Youth alcohol and drug free events and activities (target 8).

Safer Community 14 community based crime reduction strategies supported (target 4).

Retirement and Rental Housing Average of 98.6% occupancy rate (target 97%).

Key Issues Hawke’s Bay Museum and Art Gallery Redevelopment The Hawke’s Bay Museum and Art Gallery closed to the public on 25 July 2010. This was followed by an intense period of packing and moving the Hawke’s Bay Museums Trust collection and staff functions of Hawke’s Bay Museum and Art Gallery to an off site location.

Relocated staff are now working on the development of the opening programme of the new re-built facility and on collection management tasks previously delayed.

The tender process for the building project was concluded on 9 June 2011 with the announcement of Gemco Construction Ltd., as the successful applicant. The project commenced on 22 June 2011 with the demolition of the Lilliput building.

Crime Prevention Through Environmental Design Crime Prevention Through Environmental Design (CPTED) treatments were applied to the library forecourt to reduce vandalism and anti-social behaviour around the Civic Buildings and lighting upgrades were applied to problematic alleyways in Maraenui.

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Activity Summaries continued Emergency Management Significant Events Napier Civil Defence has responded to a number of small events during the year, opening a welfare centre for the slips on Napier Hill and responding to Tsunami warnings. The Civil Defence team were also deployed to Christchurch and the National Crisis Management Centre in Wellington in response to both the September and February earthquakes to support staff with Welfare and Public Information.

Review of Performance After each response to any event the associated Operating Procedures are reviewed as part of the debriefing sessions. There are a number of key learnings which the Civil Defence Team have bought back with them from Christchurch and the Welfare Planning and Public Information and Media management areas are under review.

All operating procedures and plans are developed and peer reviewed with the Emergency Management Officers from Hawke’s Bay at regular meetings, these plans are shared and again ensure a consistent approach to emergency management across Hawke’s Bay.

City Promotion City Promotion activities include City and Business Promotion, City Promotion Grants, Marineland of NZ, National Aquarium of New Zealand, Napier i-SITE Visitor Centre, Par 2 MiniGolf and Kennedy Park Top 10 Resort.

Performance Measures The National Aquarium of New Zealand maintained its ARAZPA and Qualmark visitor activity endorsements, the Napier i-SITE Visitor Centre is a member of i-SITE and Kennedy Park Top 10 Resort maintained “Top 10”, Qualmark 5 Star Holiday Park and 4+ Star self contained and serviced ratings.

City and Business Promotion 104 Be Your Own Boss clients serviced (target 108).

National Aquarium of New Zealand 91,830 visitors (target 96,000).

Napier i-SITE Visitor Centre 286,932 visitors (target 275,000).

Kennedy Park Top 10 Resort 25,295 room nights booked (target 33,000).

Key Issues Marineland of New Zealand Council are currently reviewing options for the future of Marineland and the site. The review has been the subject of public consultation and further consultation is planned.

Kennedy Park Top 10 Resort Timing of the Cabin Replacement Project was brought forward to ensure they were in place for the summer of 2009/10. The budget was provided in the 2009/10 - 2018/19 Ten Year Plan with $500,000 in 2009/10 and $611,000 in 2010/11.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Activity Summaries continued Planning and Regulatory Activities required by legislation are Planning Policy, Regulatory Consents, Building Consents, Environmental Health and Animal Control. Parking Services is also included in this group.

Performance Measures Building Consents 99.9% (1,010 of 1,011) processed within 20 working days (target 100%).

Building Consent Accreditation (BCA) and International Organisation for Standardisation (ISO) accreditation maintained.

Environment Health 91% of food and non food premises were inspected (target 100%) due to staff changes. A catch up is now in progress.

Animal Control 99% complaints investigated within 5 working days (target 100%).

Parking Services Percentage of residents satisfied with parking in the NRB Customer Satisfaction Survey:

CBD 71% (target 60%)

Suburbs 69% (target 80%)

Key Issues Parking Services Key works in 2010/11:

Parking meters were introduced in Taradale as part of the Taradale Town Centre Upgrade.

Alternative Parking – Initial design of a motorcycle and cycle covered facility in Inner City which is planned to be built in 2011/12.

Parking Security Upgrade – Scoping report has been completed.

Parking Equipment Replacement – Upgrade of handheld devices occurred early in 2011/12.

Access way Vautier/Raffles Streets will be developed in conjunction with the carpark on Raffles Street.

Animal Control Upgrade work was carried out to the pound, working towards full compliance with animal welfare standards.

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Activity Summaries continued Roading The City’s road network provides accessibility to Napier residents and visitors within a safe, clean and aesthetic environment.

Performance Measures 88% residents satisfied with Footpaths in the NRB Customer Satisfaction Survey (target 82%) and 92% residents satisfied with Roads (target 87%).

Key Issues Roading Projects Key works for 2010/11:

Roading I.A.R. – ongoing works with unspent budget carried forward.

Taradale Town Centre Upgrade project was completed this year. The upgrade included street furniture, footpaths, planters and parking precinct upgrades.

Roading Capital Projects (Bulk Funded) – ongoing projects throughout the City. Work this year included Park Road reconstruction, Hill Road, Golding Road, Normans Lane, and Stafford Street.

Transportation Proposals – long term budget provision to cater for growth of the City.

Prebensen Drive Four Laning – Council’s share of the funding for this has been carried forward from past plans. NZTA has not as yet approved the subsidy for this project.

Cycleway Projects – Water Trail Pathway joining Ahuriri and Bay View.

Reduced NZTA Funding As a result of the Government’s revised targets for the Land Transport Programme, subsidy levels for maintenance and renewal works for the three years from 2009/10 to 2011/12 was reduced by approximately 10%. The Council decided to “fund” the shortfall in the 2009/10 year from outturn surplus from the 2008/09 year so there was no impact on the level of service in that year. For 2010/11 and 2011/12 careful reprioritisation of works, particularly between renewal and maintenance, has been required to minimise any adverse affect of this shortfall in funding.

Increase in Mass and Dimensions for Trucks Council has been working with NZTA and their consultants to accurately determine the likely effects of the increased mass and dimension of trucks on parts of the network. Initial indications are that the effect on straight sections of road are likely to be minimal (less than 5% increase in maintenance and renewal) largely because the increased tonnage per vehicle is expected to result in less vehicles on the road. The effects on high stress areas however, (intersections and tight bends) could be more pronounced because of the additional shear forces generated by the additional axle loadings.

To date only Prebensen Drive is being used as an HPMV route and the effects of these larger vehicles is being closely monitored.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Activity Summaries continued Water and Wastes Solid Waste, Stormwater, Wastewater and Water Supply provide the service and infrastructure for a healthy environment.

Performance Measures Solid Waste 18,707 tonnes of waste to landfill, or 320 kg per capita, is an improvement on the target of 25,000 tonnes or 431 kg per capita.

92% of residents are satisfied with refuse collection in the NRB Customer Satisfaction Survey (target 92%).

Stormwater Pumping capacity was available 98% of the year (target 97%).

88% of residents are satisfied with stormwater in the NRB Customer Satisfaction Survey (target 85%).

Wastewater Urban main residential and rural settlement population served by reticulated system as a proportion of total city population 93% (target 93%).

92% of residents are satisfied with wastewater in the NRB Customer Satisfaction Survey (target 85%).

Water Supply 100% compliance with drinking water standards (target 100%).

95% of residents are satisfied with water supply in the NRB Customer Satisfaction Survey (target 90%).

100% compliance with resource consent parameters for solid waste, water supply, stormwater, and wastewater (target 100%).

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Activity Summaries continued Key Issues Stormwater Key works in 2010/11:

Stage 1 of the Bay View Stormwater Upgrade project, involving the upgrade of the stormwater drains linking to the stormwater detention area on the Land Corp farm, completed.

Cross Country Drain Outfall completed.

Severn Street stormwater main upgrade completed.

Thames Street stormwater main upgrade completed.

Overland Drain The Overland Drain is now an operative part of the City stormwater disposal system. No issues were experienced with the operation of the overland drain during the heavy rain event in April 2011. The pumps ran effectively for an extended period of time and the drain provided additional drainage capacity as planned.

Wastewater Key works in 2010/11:

Wastewater Treatment Plant Upgrade – planning for this project is ongoing. The Resource Consent application to discharge treated wastewater into Hawke Bay, following treatment of all domestic and non-separated industrial effluent, has been lodged with the Hawke’s Bay Regional Council and a hearing was held in September 2011.

Taradale Pump Station design and tender complete, construction to take place in 2011/12.

Taradale Road sewer main renewal completed.

Milliscreen Renewal – one milliscreen replaced and another to be replaced in 2011/12.

Water Supply A number of water reticulation mains were replaced during the year, including the water main in the Taradale Town Centre as part of the recent upgrade. The first stage of the Awatoto Water Trunk Main project was completed, which will allow for additional source pump stations to be built in the Awatoto area, further increasing the ability of the water supply system to cater for increased demand. Replacement of obsolete flow meters at several pump stations, to ensure continued reliability of flow data from those stations, was completed. The replacement of the Water Supply Control System has been deferred again due to delays in completing the design of the system and is expected to be in service by the end of 2011/12 year.

Solid Waste Redclyffe Transfer Station The layout at the Redclyffe Refuse Transfer Station was significantly changed in November 2010. The changes included the relocation of the existing weighbridge and kiosk closer to Springfield Road.

A second new weighbridge was also installed to allow all customers to be weighed in and out.

The weighbridge project has been a success and the Transfer Station is on target to operate in accordance with the funding policy, that is with no rating contribution to the activity. The general downturn in tonnages is a reflection of the economy. The Regional Landfill has experienced similar levels of downturn in tonnages for Napier and Hastings.

Omarunui Regional Landfill Site Development Development of Valley D, Stage 3B is behind schedule mainly due to delays caused by weather.

Other development has been reprogrammed due to reduced refuse quantities. Funds will be carried forward as the work will be required to be carried out in the future.

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Activity Summaries continued Property Assets Council’s property assets include the Lagoon Farm, Parklands Residential Development and Property Holdings.

Performance Measures 36 lots were created in the Parklands Residential Development (target 70). Wet weather over the autumn period delayed completion of 28 sections in the Parklands subdivision.

Key Issues Business Park Proposal The rezoning for the proposed business park off Prebensen Drive has been completed. In the near future, the Council will be making decisions about the timing, staging, design and tenure of this project, then start development.

Property Holdings Marine Parade/CBD Upgrade Project is a long term project and dependant upon other Marine Parade Projects.

Council Chambers and Weatherproofing is on hold pending further studies.

Parklands Residential Development

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Customer Satisfaction Survey Results NRB Customer Satisfaction Survey The results of the NRB Customer Satisfaction Survey are one measure of public satisfaction levels of services provided by Council.

The Council commissions this customer satisfaction survey where 450 residents throughout the city are interviewed by phone. The results provide useful information on how well services are provided as well as what should be changed for the future.

2011 Satisfaction %

2010 Satisfaction %

Target %

Public Gardens and Street Beds

96

96

97

Water Supply

95

95

90

Parks & Sportsgrounds

91

91

92

Wastewater

92

91

85

Roads

92

91

87

Stormwater

88

86

85

Footpaths

88

87

82

Parking in the Suburbs

69

72

80

Animal Control

77

75

75

Noise Control

84

84

77

Public Toilets

76

76

80

Parking in the City Centre

71

64

60

Refuse Collection

92

91

92

Pools

55

60

81

Council’s Policies to Promote Job Opportunities

34*

72*

80*

Service

* Excludes “Don’t know” answers.

Napier from Sugar Loaf

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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Audit Report

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NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

Audit Report continued

NAPIER CITY COUNCIL – Annual Report Summary 2010/2011

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