5 August 2020

Media: Local Democracy Reporter

Topic: Infracore capital injection

Enquiry

This enquiry seeks further clarification relating to an original enquiry about the funding injection for InfraCore. Reporter published story prior to receiving the clarifications sought here.

My original questions are in bold italic

The council's earlier answers are in italic

My follow up questions are in bold yellow highlighted

Working in collaboration with Union partners, InfraCore has streamlined the collective agreement into a tiered structure that enables better management of the business, based upon wage tiers within.

How, and to what extent (in dollar figures) has this impacted the financial situation of Infracore? Does it mean wages have cost more as a result of a renegotiated collective agreement? What does 'streamlined' mean - does that mean a renegotiation? Please use plain language.

During the 2018 financial year, InfraCore implemented a new financial system which encompasses the field management add-on NextService. InfraCore is now a fully mobile and agile workforce, with the ability to dispatch employees to jobs efficiently, enabling better outcomes for the community. InfraCore respond to around 400 reactive jobs a month (across the infrastructure and recreational spaces contracts).

How, and to what extent (in dollar figures) has this impacted the financial situation of Infracore?

During the 2020 financial year, InfraCore rolled out three new values for the organisation being Dynamic, Authentic, Accountable. These values have been driven by the Senior Leadership Team, through the appointment of the Chief Executive, Matt Scott in July 2019. The realignment in workplace values has seen an improvement in employee engagement (as measured through an employee engagement survey) and increased metrics from a health and safety perspective.

How, and to what extent (in dollar figures) has this impacted the financial situation for Infracore? What does 'realignment' mean in this context? Are there higher costs for health and safety requirements as a result? Or do you just mean expectations have been raised in that area in terms of 'values'?

During the 2020 year, the Senior Leadership Team was also realigned. There was no additional overhead spend as a result of this realignment.

What does 'realignment' mean in this context? Do you mean restructured? If there was no additional overhead spend as a result of the 'realignment' how is it relevant to Infracore's financial situation and its requirement of $750,000?

InfraCore are working in partnership with Rotorua Lakes Council to deliver efficient business outcomes while also delivering positive social good via employment opportunities.

How, and to what extent (in dollar figures) has this impacted the financial situation for Infracore?

For the 2020 financial year, InfraCore met all non-financial KPI's in relation to the Service Level Agreements held with Council. The current unaudited position, draft, for the year ending 30 June 2020 indicates a small net surplus result.

How, and to what extent (in dollar figures) has this impacted the financial situation for Infracore?If Infracore is indicating a (draft) net surplus result, why does it require $750,000?

InfraCore provides services that benefit the wider community through the provision of the maintenance of the 3 waters network, as well as the provision of maintenance for the parks and recreational spaces. The investment for capital will enable the purchase of new machinery, which will in turn reduce the increased repair costs seen in the current fleet.

This answer addresses why the capital injection might benefit Infracore and therefore the community, not why the method (buying shares and acquiring equity) is beneficial to the council / ratepayers. I understand that in the private sector at least, acquiring equity means you have greater ability to borrow. Is that how this works in this case? How does it benefit the council to own more shares in Infracore?

Is the council 'bailing out' Infracore?

InfraCore is budgeting a break-even position for the FY2021 year, including introducing social initiatives for employment opportunities.

Can you please provide a yes or no answer to this question (Is the council 'bailing out' Infracore?) and explain why?

Could Infracore's current financial situation have been foreseen, mitigated or avoided?

The current unaudited position, draft, for the year ending 30 June 2020 indicates a small net surplus result.

Could Infracore's current financial situation have been foreseen, mitigated or avoided?

Response

The following was provided, attributable to CFO Thomas Coll:

1. Re is this a bailout: No. As reported, InfraCore's draft result for the 2019/20 financial year is a surplus, better than the anticipated result which, pre-COVID was for the CCO to end the year on budget. A surplus, therefore, is very pleasing and InfraCore is in a solid financial position, tracking to break even this financial year (2020/21) and well placed to deliver both its core services and positive social outcomes.
2. Regarding streamlined collective agreement: No, wages have not cost more. The collective agreement has been updated and simplified.
3. Regarding benefit of this method of providing funding (through buying of shares):This is a commonly used financial mechanism and as explained during last week's Council meeting - and as reported by you - is not taxable, which a funding increase would be. It is not uncommon for shareholders to invest further in a business and the amount of $750,000 is what the CCO requires to purchase new equipment. This will enable the CCO to deliver its services more efficiently and effectively, lower operating costs, take on more work and maintain its positive trajectory.
4. Regarding benefit to Council and community of providing this funding:Increased efficiency and effectiveness will also enable InfraCore to take on more work, contributing to the CCO's ongoing sustainability and potential, keeping it in work and people in jobs. The CCO contributes to the district's long-term vision and to Rotorua's Build Back Better economic recovery. InfraCore has, for example, partnered with Council to provide work for 25 people who are unemployed due to COVID with funding received by Council from the Provincial Growth Fund, providing three months of work clearing rural roadsides which will benefit both the employees and the community as a whole. A successful, efficient and effective CCO is of benefit to both Council and to the community, providing essential services and keeping people in jobs.
5. In response to clarification sought regarding financial impact of new systems, structures, processes and values to InfraCore's overall position:[Felix, please note, there are no "dollar figures" to put to each of these, they are not quantified in dollar terms. They have been highlighted to provide background on improvements InfraCore has implemented to improve efficiency and effectiveness - see comment below explaining this] New systems, structures and processes, and an improved culture and staff engagement lead to improved efficiency and effectiveness of staff and the organisation as a whole - both operationally and financially, including through cost savings. That's obviously good for the CCO, for Council as the shareholder and ultimately for the communities we service.
6. Re why, if it recorded a [draft] surplus last financial year does InfraCore need this funding:Council is not doing this to prop up the CCO's finances, it is a shareholder injection for InfraCore to acquire new equipment. It is not uncommon for shareholders to invest further in a business. [Previous Council response] Working in collaboration with Union partners, InfraCore has streamlined the collective agreement into a tiered structure that enables better management of the business, based upon wage tiers within.[Resporter's subsequent question]How, and to what extent (in dollar figures) has this impacted the financial situation of Infracore? Does it mean wages have cost more as a result of a renegotiated collective agreement? What does 'streamlined' mean - does that mean a renegotiation? Please use plain language.See above point 2[Previous Council response] During the 2018 financial year, InfraCore implemented a new financial system which encompasses the field management add-on NextService. InfraCore is now a fully mobile and agile workforce, with the ability to dispatch employees to jobs efficiently, enabling better outcomes for the community. InfraCore respond to around 400 reactive jobs a month (across the infrastructure and recreational spaces contracts).[Reporter's subsequent question] How, and to what extent (in dollar figures) has this impacted the financial situation of Infracore? See above point 5[Previous Council response] During the 2020 financial year, InfraCore rolled out three new values for the organisation being "Dynamic, Authentic, Accountable". These values have been driven by the Senior Leadership Team, through the appointment of the Chief Executive, Matt Scott in July 2019. The realignment in workplace values has seen an improvement in employee engagement (as measured through an employee engagement survey) and increased metrics from a health and safety perspective. [Reporter's subsequent question] How, and to what extent (in dollar figures) has this impacted the financial situation for Infracore? What does 'realignment' mean in this context? Are there higher costs for health and safety requirements as a result? Or do you just mean expectations have been raised in that area in terms of 'values'?See above point 5[Previous Council response] During the 2020 year, the Senior Leadership Team was also realigned. There was no additional overhead spend as a result of this realignment.[Reporter's subsequent question] What does 'realignment' mean in this context? Do you mean restructured? If there was no additional overhead spend as a result of the 'realignment' how is it relevant to Infracore's financial situation and its requirement of $750,000?There was no restructure, in this context the 'realignment' was a realignment of focus and way of working. See above point 5 re relevance to financial situation.[Previous Council response] InfraCore are working in partnership with Rotorua Lakes Council to deliver efficient business outcomes while also delivering positive social good via employment opportunities. [Reporter's subsequent question] How, and to what extent (in dollar figures) has this impacted the financial situation for Infracore?See above point 5[Previous Council response] For the 2020 financial year, InfraCore met all non-financial KPI's in relation to the Service Level Agreements held with Council. The current unaudited position, draft, for the year ending 30 June 2020 indicates a small net surplus result.[Reporter's subsequent question] How, and to what extent (in dollar figures) has this impacted the financial situation for Infracore?If Infracore is indicating a (draft) net surplus result, why does it require $750,000?See above point 5 and point 6[Previous Council response] InfraCore provides services that benefit the wider community through the provision of the maintenance of the 3 waters network, as well as the provision of maintenance for the parks and recreational spaces. The investment for capital will enable the purchase of new machinery, which will in turn reduce the increased repair costs seen in the current fleet.[Reporter's subsequent question] This answer addresses why the capital injection might benefit Infracore and therefore the community, not why the method (buying shares and acquiring equity) is beneficial to the council / ratepayers. I understand that in the private sector at least, acquiring equity means you have greater ability to borrow. Is that how this works in this case? How does it benefit the council to own more shares in Infracore?See above point 3[Reporter's initial question] Is the council 'bailing out' Infracore?[Council's initial response] InfraCore is budgeting a break-even position for the FY2021 year, including introducing social initiatives for employment opportunities.[Reporter's subsequent question] Can you please provide a yes or no answer to this question (Is the council 'bailing out' Infracore?) and explain why?See above point 1Could Infracore's current financial situation have been foreseen, mitigated or avoided?The current unaudited position, draft, for the year ending 30 June 2020 indicates a small net surplus result.Could Infracore's current financial situation have been foreseen, mitigated or avoided?We are not clear what you mean by this question. See above point 1 regarding InfraCore's current financial situation and point 3 regarding share purchase.

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Media: Local Democracy Reporter

Topic: Outcome of Code of Conduct complaint against councillor

Enquiry

We have put the council's press release here to Reynold Macpherson for reply, and below is his statement.

We invite the mayor and or council to respond to his statement as soon as possible if desired.

Reynold Macpherson:

"I reject the six-month process as cynical harassment because it knowingly avoided the reconciliation requirements of the Harmful Digital Communications Act, employed the Council's advocate to back up the complaints, and used the Audit and Risk Committee stacked with mayoral appointments to prevent me getting procedural and natural justice. The root cause of the dispute was the Mayor weaponizing the Code of Conduct on behalf of those embarrassed by my criticism of how Southstar Shuttles were treated late last year and when another of her political affiliates lied about the capability of the Rotoiti Wastewater Treatment Plant. She should now apologize for failing to deliver utu on their behalf. "

Response

The following was provided in response:

See below from Mayor Steve Chadwick. There is no comment from the council organisation.

From Mayor Steve Chadwick:

Councillor MacPherson's statements demonstrate to me a complete rejection of his responsibilities as a councillor and a lack of preparedness to apologise for doing wrong. To me, this poses serious questions as to his suitability as a representative and a leader of our community at large.

Please refer to the statement on Council's website for further comment from the mayor regarding this process, the outcome and for background information. Please note this was not issued as a press release, which you referred to it as in your email earlier.