Client Review

Client Review

Demo context: This template was applied to a historical public-sector meeting. It does not represent a real client-advisor relationship and is not current financial or investment advice. Relative dates refer to the period represented by the recording.

This review covers a historical public-sector meeting about COVID-19 impacts and strategic responses across tourism, aviation, shared services, and council finance. Participants included Andrew (Chair), Bruce (Audit & Risk Chair), Ken, Lou, Susan, Claire/Clare, Graham, Marcus, Sam, Liz, Kelvin, Peter (Chair of LASS), Andrew (LGFA), Mark Morgan (CEO, Hamilton Airport/WRAL), Scott Kendall (WRAL Finance Manager), Jason (tourism presenter), Roger, Philip, Steve, Bev, Elwin, and Councillor Gordon (Dave). Hazel’s apology was noted, and Jim’s planned departure at 1:30 PM was recorded. The meeting opened with board formalities, including corrections to prior minutes to add Graham and Bruce to the February 18 attendance.

Jason presented a comprehensive update on the Waikato/Waipā tourism sector. Prior to COVID-19, the district saw double-digit growth in visitor spend and commercial accommodation; since lockdown, international arrivals and overall expenditure have significantly declined, with some resilience only in essential categories (food and liquor). Impacts began in late January with the loss of China group travel, affecting tourism operators, retail, hospitality, transport, and major venues (Mystery Creek, Lake Karapiro), causing job losses and closures; Hobbiton was cited publicly as an impacted operator. Businesses have either gone into seasonal hibernation, reduced services and staff, or closed permanently. Jason detailed cross-sector mitigation: collaboration with Te Wāka, chambers, and local government for business and welfare support; repurposing tourism assets (caterers to food banks; transport for essential workers); and redeploying staff to Civil Defence and essential industries (kiwifruit/avocado harvesting). He emphasized domestic airline connectivity as a primary constraint and international recovery timelines of two to five years. Air New Zealand’s incremental domestic restart is tied to Alert Level 1; international connectivity will lag significantly. Regionally, postponed (not cancelled) events and delayed openings of major convention centers in Christchurch and Auckland create near-term opportunities for Claudelands and Mystery Creek. He confirmed most Waipā operators are domestically focused, and infrastructure like the Waikato Expressway will strengthen self-drive tourism. Strategic focus is the three-phase plan: Mitigate (advocacy, operator check-ins, workforce redeployment), Restart (business events/corporate travel first, shovel-ready tourism projects, Mighty Local campaign staged with easing restrictions), and Reimagine (with Tourism New Zealand and DOC) toward sustainable, community-led, net-benefit destination management. He thanked local government for rates relief, streamlined consenting, and funding, noting this partnership is essential for long-term transformation.

We then received the Hamilton Airport (WRAL) financial and operational update from Mark Morgan and Scott Kendall. Pre-COVID, WRAL was tracking to a record year; flight suspensions caused a near-total loss of aeronautical revenues, terminal closure (emergency services only), a paused terminal upgrade, and uncertainty for the on-site hotel following a brief period as a Ministry of Health isolation facility. WRAL executed its pandemic plan, reduced costs (including payroll and director fees), and accessed the wage subsidy. Critically, WRAL’s diversification into property development provides resilience and liquidity. A major unconditional land sale was expected to yield approximately $2.5 million in free cash flow, supporting a positive cash position through June 2021 under conservative modeling that assumed minimal Air New Zealand activity until October 2020 and passenger recovery to only ~40% across 2021–2022. Despite significant negative impacts on balance sheet and profit, Mark stated the board did not anticipate any need for shareholder financial support under the model presented. Two Crown Infrastructure Project applications were lodged (terminal redevelopment and related works). WRAL planned to meet with Jet Park that week for the hotel plan, continue work with Air New Zealand on service restarts, and monitor L3Harris flight school operations under ongoing international restrictions and pilot market conditions.

Peter (LASS Chair) and Kelvin updated on shared services and the Statement of Intent and half-year report to December 31, 2019. Peter outlined LASS’s vision of collaborative regional solutions delivering cost reductions and improved customer experience, with three roles: efficiency/effectiveness gains, increased regional influence, and better customer outcomes. The board is accelerating transformative projects with a fail-fast, fail-cheap approach, improved tracking, and communications, while reassessing legacy activities. COVID-19 has heightened LASS’s relevance: enabling public works to support private-sector planning/training, restraining non-essential spend to do more with less, and developing current council staff. Claire asked about resourcing risks; Peter noted proactive outreach and unexpectedly positive offers of redeployable staff, particularly from smaller councils, with variability expected. Claire also asked whether LASS’s energy and carbon management services feed into Waipā’s directed carbon audit; Kelvin clarified LASS’s services aren’t the specific audit but providers (e.g., Martin Lynch) could assist if requested by the executive team.

Andrew (LGFA) presented the funding environment since 2012: 67 member councils, long-term finance modeled on Scandinavian systems, interest savings and market access as core benefits, and largely locked-in sector lending margins across $10 billion. Current market rates are very low (short-term below 1%; a recent six-year $1 billion LGFA issue at 1.46%, implying around 1.70% for Waipā after margins). Investor confidence is supported by the Government’s signal to extend LGFA’s $1 billion standby facility and the Reserve Bank’s buyback program including LGFA bonds (up to $3 billion). Andrew flagged potential FY2020/21 covenant pressures (net debt to revenue) for higher-growth councils under revenue declines; LGFA has had no breaches to date. He noted capex cuts may be one of few tools—though that conflicts with recovery objectives—and emphasized there’s no compulsion to use LGFA. Bruce queried share capital differences; Andrew explained historical equity contributions and modest dividends (roughly cost of funds plus 2%), with borrowing benefits accruing similarly to shareholders and non-shareholders. In Audit & Risk Committee, Claire asked LGFA about social and environmental responsibility, specifically green financing. Andrew confirmed LGFA is prepared to offer green, social, and sustainable financing; councils must identify eligible projects and opt in. The committee supported this development, with LGFA to flag updates again at the annual council day in July. The financial report through March was reviewed (Nada): total income 74% of forecast, opex 72%, capex $71.3 million (51% of forecast). An arbitrage on March 12 used $6 million short-term borrowings, expected to yield ~$13,000 net interest. Ken cautioned the forecast column is outdated due to COVID-19, with a comprehensive reforecast underway. Health and Safety (Steve and Bev) reported on November–February; Claire queried accidents at council entrances (no significant hazards found; monitoring continues) and tracking of resource utilization (lead indicators—health monitoring, EAP, training—are used; strong grassroots processes via trained reps). Councillor Gordon raised staff mental health impacts under COVID-19; Steve confirmed active focus, with the next report to include pandemic impacts, and protocols being developed for Level 3 returns. Motions were carried to accept letters (Appendices Four–Six), the financial report, the Health & Safety report, and move to public excluded session.

Recommendations

• Engage with tourism operators on pivot strategies aligned to the “drive market” and domestic segments over the recovery period discussed; incorporate Jason’s 2–5 year international recovery timeline into scenario and cash-flow planning.
• For aviation-exposed reviews, reflect WRAL’s historical recovery assumptions (no meaningful Air New Zealand activity until October 2020; ~40% passenger recovery across 2021–2022) and expected liquidity from property sales through June 2021; monitor the assumptions against the period represented by the recording.
• Consider green, social, and sustainable LGFA financing where council-aligned projects have eligible emissions-reduction or environmental outcomes; prepare pipeline-identification frameworks to evaluate potential market support.
• Support adventure-tourism operators with compliance planning for possible regulatory changes following WorkSafe’s Whakaari/White Island investigation; review insurance and accreditation (Qualmark) impacts.
• For council finance teams, monitor net-debt-to-revenue covenant headroom; prepare contingency plans including capex phasing consistent with recovery objectives; assess the period-specific six-year borrowing rate discussed against short-term options and funding horizons.
• Coordinate with LASS on resource availability for transformative projects and explore integration of energy/carbon management services with Waipā’s carbon audit, ensuring scope clarity and executive authorization.

Action Items

• Sam to amend February 18 minutes to include Graham and Bruce as attendees.
• Review exposure across tourism, hospitality, and accommodation under a 2–5 year international recovery scenario; update cash-flow and runway models.
• Factor event postponements and domestic aviation restart timelines into revenue and liquidity planning for affected clients; map staged reopening triggers tied to Alert Levels.
• Monitor WorkSafe’s Whakaari/White Island investigation outcomes; brief adventure-tourism operators on potential new compliance costs, insurance requirements, and accreditation standards.
• Finance team to assess LGFA borrowing options (short-term below 1%, six-year around 1.70%) and model scenarios aligned to capital programs and COVID-19 revenue impacts; include potential use of green/social/sustainable financing for eligible projects.
• Governance/Finance to review FY2020/21 covenant headroom, prepare mitigation strategies (including capex phasing) consistent with recovery imperatives.
• Secretariat to record receipt of LASS SOI and half-yearly report to December 31, 2019, and LGFA SOI updates; ensure documents are available for compliance review.
• WRAL Board/management to finalize a revised Statement of Intent (SOI) reflecting new financial realities and present to shareholding councils in May; proceed with Jet Park meeting for hotel plan; coordinate with Air New Zealand on service restart; continue monitoring L3Harris flight school operations.
• Explore engaging LASS energy/carbon providers (e.g., Martin Lynch) to support Waipā’s carbon audit, pending executive confirmation of scope and authority.