Supplementary Agenda of Council Meeting

Item No. 10

Report Under Separate Cover (Open Portion)

Council Meeting

Page 16

25/5/2020

Memorandum: Council

Financial Report and Covid-19 -
City of Hobart Response (2)

Executive Summary

This report:

· Presents the Council’s Financial Report as at 31 March 2020 and seeks approval for a number of budget variations, the last for the 2019/20 financial year;

· Outlines events and actions taken in response to the Covid-19 pandemic in the period since my last report to Council on 27 April 2020 and impact on the Council’s financial position;

· Provides further advice of the likely impact of the Covid-19 pandemic on the Council’s finances for 2020/21 including:

o Significantly reduced revenue in 2020/21, with the freeze on rates compounding lost revenue into the future;

o Removal of all discretionary expenditure which will have an impact on the City’s responsiveness to its community;

o A significantly increased level of borrowing in 2020/21 and consequential ongoing liability;

o The need for a longer term (3-5 year) recovery and resilience plan, including a structural review of the City’s business model in order to recover from these shocks; and

· The report also seeks further guidance from the Council in relation to major events.

Financial Report as at 31 March 2020

· The Council’s Financial Report as at 31 March 2020 is at Attachment A.

· The revised forecast to 30 June 2020 is an underlying result in deficit of $9.53M, $10.08M less than the original budget and $7.64M less than the December forecast.

· The main reasons for this are:

o The impact of the Covid-19 pandemic and associated lockdowns on the City’s revenue streams as follows:

§ Parking fees and charges and fines $6.66M

§ Other fees and charges $2.61M

§ Tas Water dividend $1.086M

§ Rents $122K

o In response operational expenditure has been reduced by $4.34M with any expenditure regarded as discretionary removed or deferred. Specifically this includes unspent salaries, all travel and accommodation, non-mandatory training, special projects which can be deferred.

o In addition to the Covid-19 impacts, there are further increases to expected asset write-offs of $1.62M (as at 31 March 2020) following a concerted and ongoing effort to close out a significant backlog of projects undertaken over a number of years.

· The 2019/20 approved capital works program has been reviewed. Under the delegation in place following the Covid-19 emergency, I have approved the deferral of some projects to manage cash flow, while the opportunity has been taken to bring some others forward while the City is quieter and the works can be undertaken with minimal disruption.
A full listing of projects completed, underway or deferred is at Attachment B to this report.

· This report seeks Council approval for revisions to the 2019/20 Estimates to reflect these revised revenue and expenditure forecasts.

Council Response Covid-19 Pandemic

Actions since my last report to Council on 27 April include:

· Return to business planning

With the Federal and State Governments easing restrictions, a major focus is planning for a return to business operations. Each work area is preparing plans for this to occur in line with required guidelines to ensure the safety of our community and our employees.

· Parks and open space

Wellington Park is now open in accordance with Government direction. The Pinnacle Rd however remains closed at this time.

o Signage has been installed throughout the network reminding users of the need to comply with social distancing and other requirements to ensure the safety of the community.

· Playgrounds

In accordance with the State Government directions, the City’s 50 playgrounds reopened on 18 May 2020. Barbeques and the Legacy Park pizza ovens will reopen on 15 June 2020.

o Each playground and its associated infrastructure (tables, seats, etc) underwent a thorough clean prior to reopening.

o The reopening order restricted usage to a maximum of 10 people.

o Signage has been installed on all entrances reminding users of this restriction. Signage will be updated when the allowable numbers increase.

· Customer Service Centre

The Customer Service Centre and the Town Hall reception are expected to reopen on 27 May, subject to Covid-19 safety planning.

· Planning Applications

Ten planning applications have been approved by the Director City Planning under delegation. A full list of these decisions is at Attachment C.

· Financial Hardship Assistance Policy – Rates Relief

Following approval by Council of the Financial Hardship Assistance Policy on 27 April 2020, some 54 applications (42 for commercial properties and 12 for residential) have been received for rates relief, including in the form of postponements and remissions. These are actively under review with regular communication between officers and applicants taking place.
Council will recall that it previously resolved to waive all penalties and interest on outstanding rates through until 30 June 2020 and modify its postponement policy to apply to all ratepayers.

o 304 ratepayers sought a postponement of 2019/20 rates to 30 June 2020.

o To date, two rates remissions totalling $3,217.58 have been approved by me in accordance with the Policy and under delegation provided by the Council on 27 April 2020. A full report of all rates remissions granted under my delegation will be provided to the next Finance and Governance Committee meeting.

o One remission application which is over my $4,000 delegation is submitted in a separate report on this agenda for consideration and approval by the Council (by absolute majority).

· Rent relief for Council Tenants

To-date we have received 22 enquiries with 18 receiving full and two partial rent relief for the period through to 30 June 2020. Two are still being processed.

The total quantum of relief provided by Council to 30 June is $117K.

The Government recently passed the COVID-19 Disease Emergency (Commercial Leases) Act 2020 which gives effect to the Code of Conduct for commercial tenancies agreed by the National Cabinet in April. The Act will have an impact on how Council’s handles its commercial leases and we are awaiting the development of regulations under the Act in order to ascertain its application for Council. We are also working with Council’s contracted property manager for commercial leases, Devine Property, to ensure a consistent approach across Council’s portfolio and across the market more generally.

We are also investigating a policy and process for provision of relief for regular hires of Council facilities.

· Grants

The Council will recall that it previously allocated an amount of $30,000 for a business e-commerce grant. So far 88 small businesses have been successful in receiving $300 to help transition to e-commerce platforms. The total allocation will allow for 100 businesses to receive funding. At the time of writing there were 7 new applications in process - accordingly this allocation for funding is nearly exhausted.

An amount of $22,000 was also set aside for Quick Response Grants as an immediate response to assist the community. So far 14 applications have been successful. A full list of grants approved to date is at Attachment D.

An amount of $120,000 was set aside for business professional assistance grants ($700 each). At the time of writing no approvals had been granted however there has been strong interest from Hobart based business. It is expected the first group of applications will be approved by 27 May.

An amount of $160,000 was set aside for Community and Creative grants (up to $5,000 each). These grants are for projects to commence July 1 but to be lodged and assessed prior to June 30.

· Hobart Together

Officers also established a front facing portal on Council’s website – Resilient Hobart which picks up the themes of “Hobart Together’, ‘Resilient Hobart – Community’ and ‘Resilient Hobart – Business’. All three areas provide valuable information and further resources for the community to access. To date the site has received 2183 visits.

In addition a community survey was launched as part of this initiative seeking the community’s views on the needs and issues facing us all as a result of Covid-19. To date 371 surveys have been completed while there were over 900 visits to that part of the website. Results will be analysed and further information provided to the Council as soon as practicable.

Other Significant Council Activities

Since my last update, other actions have included:

· The Council formally took possession of the all-abilities pedestrian and cycle Rose Garden Bridge connecting the city centre with the Queens Domain on 28 April. The bridge was immediately opened to the public.

· In addition to city cleansing, waste services, infrastructure and open space maintenance, work has progressed on a number of capital works projects, including redevelopment of the Salamanca precinct. (See attachment B).

· The Hobart CBD became smoke-free from 15^th April 2020 representing another Australian first for Hobart.

· The Hobart City Council’s Single-Use Plastics By Law (No.1 of 2020) was passed as ‘examined’ at the Subordinate Legislation Committee meeting held on 8 May 2020.

· Given the draft Sustainable Hobart Strategy has been the subject of two workshops and a City Planning Committee meeting on 9 December 2019, it is intended to release the draft strategy under the General Manager’s delegation for public consultation only.

The cost of the public consultation will be nominal, utilising existing Council resources and platforms. There will be no budgetary allocations included in the 2020/21 draft Estimates until such time as the Council considers the responses from the public consultation process.

Draft 2020/21 Estimates

· The draft 2020/21 Estimates are now being prepared in line with the direction provided by Council at its last meeting on 27 April 2020, specifically:

o Zero rate increase to the general and service rates, excluding fixed charges which are calculated on the basis of the cost of the service

§ Landfill rehabilitation is expected to remain at 2019/20 levels;

§ green waste (including FOGO) to increase by $10 per service as previously resolved by Council; and

§ waste levy will increase slightly due to increased recycling costs.

o A freeze on other fees and charges, with the exception of penalties for legislative offences, which are set by legislation and automatically indexed each financial year.

o Rates relief package as outlined in the Council approved Financial Hardship Assistance Policy.

o Rent relief for the City’s tenants in line with the Commercial Tenancy Code and consistent with the Council approved Financial Hardship Assistance Policy.

o At the April Council meeting the Council confirmed it wished to see the entire value of the annual grants program maintained at $1.167million. As a Covid-19 recovery round the program will have three broad streams – Community, Creative and Business. The Council also resolved that arts and business advisory groups be formed to assist officers in determining the nature of the programs in these areas. These groups are being drawn together at the time of writing.

· Estimates of expected reductions in revenue as a result of the Covid-19 pandemic were outlined in the 27 April report. These estimates are continually being refined as the likely scenarios become clearer. At the end of the day however, these will remain officers’ best estimate of the likely impacts and are an inherent unknown.

o The draft Estimates are currently being based on an expected reduction in revenue of some $17.94M.

o Should revenue recover beyond current expectations, there is the opportunity for Council to revisit its expenditure as part of the quarterly budget review process.

· In light of these expected revenue impacts, expenditure is proposed to be reduced by some $5.11M across all items including employee costs, materials and services. It is going to be a very lean year with all expenditure regarded as discretionary proposed to be removed. This includes all travel and accommodation, new positions and vacancies resulting from attrition, non-mandatory training, projects and initiatives.

· This report seeks some guidance from the Council in relation to the Taste and Dark Mofo, and these are set out in the next section.

· In addition the proposed capital works program for 2020/21 has been reviewed and a revised draft is presented for initial Council consideration at Attachment E. Principles applied to reduce the overall cost include:

o Picking up projects deferred from 2019/20

o Risk based assessment of critical projects, with a focus on looking after the assets we have

o Deferral of other projects into future years

· While the Council’s own capital works program is focused on ‘must dos’, funding is being sought for ‘stimulus’ projects from a significant number of currently available funding sources. A full listing is at Attachment F.

· Despite these recommended reductions, the Council is still expected to face a significant underlying operating deficit, in the order of $12M for 2020/21.

· Furthermore borrowings required for the year, previously estimated in the Long Term Financial Management Plan at $15M, are likely to be in the order of $30M, subject of course to the Treasurer’s approval and meeting borrowing capacity requirements.

o KPMG had already been engaged to provide Council with independent expert advice in relation to refinancing options for its existing loans and will also be asked to provide further advice on the debt strategy going forward.

· It is proposed that the Council consider these matters in one (or a number of) workshops, commencing on 28 May 2020.
Workshops and formal meetings are also being scheduled with the Council’s Risk and Audit Panel.

It is envisaged that the full Estimates would be the subject of formal Council consideration at a special Council meeting on 29 June 2020.

· 2020/21 will be a very difficult year. Setting the Estimates for 2020/21 allows the Council to maintain revenue and basic operations but it is clear that a longer-term (3-5 year) recovery and resilience plan is required for the organisation in addition to social and economic recovery activities undertaken by the Council for the community.

· Council’s internal auditors, WL&F, are already assisting in scoping this work, which specifically will include a structural review of the City’s business model, including revenues, expenses, assets and liabilities. The aim will be to develop a sustainable business model which enables the Council to build financial resilience and be more able to cope with future shocks.

· It is recommended that we undertake a process to inform and explain the Council’s budgetary position to its community and engage with its community through 2020/21 regarding the long term recovery strategy.

Issues requiring further Council consideration

At its meeting on 27 April 2020, the Council asked that the General Manager undertake a review of the allocations to the Taste of Tasmania and Dark Mofo:

· Taste of Tasmania

o The future landscape of events has changed dramatically as a result of Covid-19. The future of many events in the immediate future is in doubt and the Taste of Tasmania is no exception. The Taste averages 30,000 to 35,000 people though the gates in a day. In recent years there have been days when that number has been in excess of 50,000 people. The site is at times extremely busy with peak loads in the shed and at the entertainment stages meaning that people are in very close proximity to each other for long periods of time.

o Many commentators are suggesting social distancing is here to stay for some time – at least until a vaccine for Covid-19 is developed and distributed – which could be 18 months away.

o There has been no indication yet of when or how large scale outdoor events such as the Taste should proceed – in fairness, it is too early for government to accurately give such a commitment.

o It is difficult to forecast how an event the scale of the Taste could practically work in an environment where social distancing is likely to be mandated. While not impossible to develop a process for a large event like the Taste, it is the firm recommendation of officers there are too many unknowns at this stage to be able to effectively plan for the Taste. Ideally planning should have already well and truly commenced for this year’s event with sponsors engaged and contracts for services being called for. Due to the uncertainty, none of this has been possible. Indeed the likelihood of commercial sponsorship at any meaningful event would seem remote.

o Council officers are in discussions with the State Government in respect to the Government’s sponsorship of the Taste. Further advice on this issue will be provided to the Council.

o Overlay upon this the Council’s own financial position and the vast call on its funds in a Covid-19 recovery period and it is difficult to justify budgeting $900,000 to $1million on an event that is unlikely to proceed when at this time the Council really needs the money elsewhere.

o Accordingly it is recommended that the Taste not proceed this year due the number of uncertainties for large events coupled with Council’s need to reprioritise funding for the coming year.

o Having said this, there is no doubt 2020 has been and will be an extremely hard year for our community and our businesses and a smaller celebration of this could be a fitting way to see out the year. As an alternative, and subject to public health restrictions, it may be feasible to run a smaller, shorter duration event around New Year’s Eve.
Accordingly Officers are considering a reduced amount to be allowed for in the draft Estimates. The event concept is still to be developed and it is proposed that I be delegated authority to progress this and keep the Council regularly updated.

· Dark MoFo

o At this time there is not the financial ability to budget for a cash sponsorship of Dark MOFO. Similarly it is proposed there will be no allocation for any other sponsorships in 2020/21 (Eg Hobart Hurricanes and Hobart International tennis). With regard to Dark MOFO, should it proceed, it is proposed that as a one-off the Council could consider granting the free use of Council (Taste of Tasmania) equipment such as the kitchens, tables and chairs. It should be noted that this needs to be a one off as the use of this equipment does create ‘wear and tear’ which under normal circumstances the hire fee is supposed to cover. It is noted that due to previous decisions to waive hire fees for the equipment for a range of events, there has been considerable cost incurred to maintain this equipment, which traditionally has had to come out of the Taste budget.

Community Recovery

· The City of Hobart’s COVID-19 Social Recovery Plan guides the work of the organisation when responding to the human and social recovery needs of the community throughout and following the COVID-19 situation.

· Elected members will be aware that the Premier recently announced the establishment of a state wide economic and community recovery advisory group to be chaired by Mr Don Challen. There is little detail around the exact remit of this group at this time but it is proposed that a joint submission be made with the other three Hobart metropolitan councils providing information and input relevant to issues in Greater Hobart.
It is proposed that the Council authorise me to participate in making the submission.

· At its March meeting, the Council resolved to form its own economic and business recovery advisory group at the appropriate time. However given the above work being undertaken by Council staff and the formation a business group to advise on the business grants process it is submitted that, until the activities of the State wide group become clear, it is not necessary yet to formalise an arrangement for the City.

· Officers are also developing an economic recovery plan for the City. This plan in part will take its cue from the State’s Economic and Social Recovery Advisory Group. However importantly officers are conducting a wider global search as to how key cities around the world are looking to manage economic recovery.

In addition Council staff are surveying a large number of Hobart businesses to directly ascertain their needs. So far over 100 businesses have been interviewed.

City Government Arrangements

· An initial budget workshop will be held on 28 May 2020 to provide Elected Members with an initial briefing.

Further workshops may be required prior to formal consideration of the Estimates by the Council at a special meeting proposed for 29 June 2020.

· The next scheduled Council meeting is proposed to be 22 June with Council Committees remaining in abeyance until that time.

· Current arrangements for planning delegations are also proposed to remain in place for that time, noting that Elected Members may ‘call in’ any application for Council consideration.

· During the abeyance of Committees, a number of responses to Questions Without Notice have been provided. In order to finalise these, a separate report attaching the responses is included on this agenda.

REcommendation

That:

1. That the information be received and noted.

2. The Council note the Financial Report as at 31 March 2020 and approve the changes to the 2019/20 Estimates listed in tables 2,3,6 and 10 of Attachment A, the financial impacts of which are to decrease the underlying result by $7.64M to a deficit of $9.53M

3. The Council note actions taken by the General Manager since the last regular Council meeting on 27 April 2020 in responding to the Covid-19 emergency, as well as those other significant Council activities outlined in this report.

4. The Council note amendments to the Council approved 2019/20 capital works program as outlined at Attachment B.

5. The Council continue to authorise the General Manager to take all further actions necessary to address the Covid-19 pandemic for the period from 26 May to 22 June 2020 inclusive.

6. The Council pursuant to Section 6(3) of the Land Use Planning and Approvals Act 1993, delegate the General Manager and Director City Planning to determine all applications that would otherwise be determined by the City Planning Committee or the full Council unless called in by an Elected Member for the period from 26 May to 22 June 2020 inclusive.

7. The Council note the information provided in this report regarding preparation of the Estimates for 2020/21 and note that a workshop on the Estimates will be held on 28 May 2020 for elected Members to receive an initial briefing.

8. The Council approve the proposed 2020/21 capital works program as outlined in Attachment E for inclusion in the 2020/21 draft Estimates noting additional projects which could be progressed subject to securing external grants (Attachment F).

9. Officers progress the preparation of a Recovery and Resilience Plan for the organisation with the support of the Council’s internal auditors, including a structural review of the City’s business model, including revenues, expenses, assets and liabilities. The aim will be to develop a sustainable business model which enables the Council to build financial resilience and be more able to cope with future shocks.

10. The General Manager undertake a process to inform and explain the Council’s budgetary position to its community and engage with its community through 2020/21 regarding the long term recovery strategy.

11. The Council not proceed with the Taste of Tasmania for the 2020/21 year. Further the Council delegate to the General Manager the development and delivery of an alternative New Year’s Eve event should Covid-19 restrictions make such an event practical. To that end, an appropriate allocation be included in the 2020/21 draft Estimates.

12. The Council resolve that for the 2021 Dark MOFO, should it proceed, no cash sponsorship be payable and that the event organisers be offered the free use of the Taste of Tasmania equipment in lieu. This decision be reviewed in December 2020.

13. The Council authorise the General Manager to participate in making a joint submission to the Premier’s Economic and Social Recovery Advisory Council with the other three Hobart metropolitan councils providing information and input relevant to issues in Greater Hobart.

14. The Council note that the next scheduled Council meeting will be 22 June 2020 and that Council Committee meetings remain suspended.

As signatory to this report, I certify that, pursuant to Section 55(1) of the Local Government Act 1993, I hold no interest, as referred to in Section 49 of the Local Government Act 1993, in matters contained in this report.