Agenda of Forestry Committee

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Forestry Committee

OPEN MINUTES

Minutes of a meeting of Forestry Committee held in the Council Chambers, 15 Forth Street, Invercargill on Wednesday, 3 June 2015 at 9am.

present

Chairperson	Brian Dillon
Deputy Chairperson
Councillors	Lyall Bailey
	Stuart Baird
	George Harpur
	Ebel Kremer
	Neil Paterson

IN ATTENDANCE

Group Manager Services and Assets, Ian Marshall, Committee Advisor Maree Fyffe,
IFS Managing Director, Dan Minehan, IFS Forest Manager, Reece McKenzie and
IFS Harvest Manager, Hamish Anderson.

1 Apologies

An apology was received from Mayor Tong.

Moved Cr Paterson, seconded Cr Kremer

and resolved that the Forestry Committee accept the apology.

2 Leave of absence

There were no requests for leave of absence.

3 Conflict of Interest

There were no conflicts of interested noted.

4 Public Forum

There was no requests to speak.

5 Extraordinary/Urgent Items

There were no Extraordinary/Urgent items.

6 Confirmation of Minutes

Resolution

Moved Cr Bailey, seconded Cr Baird

That the Meeting minutes of Forestry Operations Committee, 18 February 2015 be confirmed.

Reports for Recommendation

7.1	Forestry Operations Committee - Financial Report for the period ended 31 March 2015 Record No: R/15/4/7320
	Mr McKenzie spoke to the financial report advising the forestry business had continued to consolidate during the third quarter of 2014/2015. As it approached the end of the financial year, all harvest revenue had now been received. The last remaining income this quarter consisted of $24K for a small area of windthrow and road lining at Dipton and $43K for the completion of harvesting at Waikaia. Total income for the year to date now stood at $1.94M. This comprised of $1M from Dipton and $935K from Waikaia. There was a variance between the budgeted and actual income at the forest level due to planned changes to harvest scheduling after budgets. The net result was an income gain of $87K (5%) compared to budget. 1 Expenditure for the year to date stood at $781K, and compared favourably with budgeted expenditure of $995K. The predominant areas of expenditure to date were for: · Harvesting commission of $163K at Dipton and Waikaia. · Pruning investment at Ohai of $148K. · Land preparation and releasing at Waikaia, Ohai and Dipton of $126K. · Road repair and construction in Dipton of $90K. 2 The net position for the year to date stood at $1.15M surplus, which was still well ahead of the budgeted position of $854K (excluding forest revaluation of $400K). Forecasting ahead until the end of the year, it was expecting another $70K of expenditure to cover the remaining pruning at Ohai, pre-plant spraying, forestry inventory, valuation and maintenance operations. 3 Some variances did remain between reported and invoiced expenditure, identification and reconciliation of these is ongoing.

	Resolution Moved Cr Bailey, seconded Cr Harpur and resolved that the Forestry Operations Committee: a) Receives the report titled “Forestry Operations Committee - Financial Report for the period ended 31 March 2015” dated 1 May 2015. b) Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002. c) Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

7.2	IFS Growth Forest Manager's Report of Forestry Activity for the period to 31 March 2015 Record No: R/15/4/7435
	Mr McKenzie spoke to the Forestry Activity report. Health and Safety There had been 10 reported incidents for the last 12 months. Two of these were for the current period and were near misses. The Committee had a discussion around the collection of health safety data and how this was reflected in the report. IFS advised its report included staff, contractor and subcontractors. All reported incidents are thoroughly investigated with corrective action being taken. Cr Kremer asked what was the trigger point to report a oil/fuel spill to Environment Southland. Mr Anderson advised it was 20 litres. Cr Baird asked if there was a trend for more incidents occurring on Mondays. Mr McKenzie advised he had not noticed anything, but a trend had been noted after the likes of Christmas holidays and these times were closely monitored. Cr Baird asked what sort of insurance was held by IFS for its forests. Mr Minehan advised it held Fire and Public Liability insurance for any incidents caused by IFS. If an incident was caused by a member of the public, Council’s insurance would take effect. Cr Baird asked about windstorm cover. Mr Minehan advised that this can increase the premiums by up to 70%. Mr Marshall advised that their risk of Council’s forests was minimised due to its spread and that it was less likely to be affected by wind damage in all its forest stands, and therefore did not have insurance for this risk. Mr Kenzie advised work to continually identify its hazards continued and was ongoing. Re-establishment One aerial releasing operation of 160 hectares was completed in Waikaia. Planting areas in Dipton and Waikaia had survival surveys completed with excellent results. Mechanical land preparation of 46 hectares had been completed in Waikaia. Harvesting Mr Anderson referred to figures on page 23 of the agenda, remarking it had been a reasonably successful harvest. Cr Dillon noted the Dipton harvest was down on the harvest from its estimate. Mr Anderson advised this was due to the quality of logs, the wetness and gaps. Cr Dillon suspected that this was due to its first rotation and would be factored in for next time. Roading A new road had been constructed in Dipton. Silviculture Mr McKenzie advised the pruning crew had made a good progress at Ohai and was pleased with what they had achieved as this area was very strong with gorse and blackberry and the area was hard work and thought it had received a fair price for the condition. Mr McKenzie reported the tending programme was now complete. Weed Control/Maintenance With a budget of $36K, $22K had been spent on maintenance operations. It was noted that tracks had been mowed in Waikaia and Gowan Hills Road, along with boundary spraying at Ohai, Gowan Hills and Dipton. A shared fenceline repair had been carried out at Morley Creek, Ohai. Cr Harpur asked about a section of land near Ohai that had not been sprayed. Mr McKenzie advised this was because this land was owned by NZTA and that options had been suggested. Although NZTA’s responsibility, it did not wish to pay anything. Mr McKenzie advised he was more than happy to bring these options back to a future meeting if the Committee would like to revisit. Security and Trespassing Several cameras had been installed. Hunting permits were issued for SDC forests. A successful horse trek event had been organised by the Balfour Lions in Waikaia. There had been some unauthorised activity in Gowan Hills including one pig hunting party reported to Police. IFS was known for being tenacious and that it had a robust process in place and would refer to Police if necessary. Emissions The Council had filed the 2014 voluntary return and received 4,400 ETS Units. In total it had 31,280 NZU. Log Prices Mr Minehan reported there had been a crash in April due to the market in China and the tonnage had dropped by $30.00 a tonne. Cr Dillon remarked it had been a good and informative report.

	Resolution Moved Cr Kremer, seconded Cr Paterson and resolved that the Forestry Operations Committee: a) Receives the report titled “IFS Growth Forest Manager's Report of Forestry Activity for the period to 31 March” dated 6 May 2015. b) Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002. c) Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

7.3	Updated Wood Availability Forecasts received from Ministry for Primary Industries Record No: R/15/4/7287
	Mr Marshall advised Dr Parnell Trost had forwarded a report from the Ministry for Primary Industries and gave an update on wood availability forecasts. Mr Marshall advised that Dr Trost was unable to attend today’s meeting due to other work commitments but was happy to answer any questions Councillors had, or attend a future meeting. Mr Minehan advised it was self explanatory and that IFS had done a lot of work around this if Councillors had any questions.

	Resolution Moved Cr Harpur, seconded Cr Bailey and resolved that the Forestry Operations Committee: a) Receives the report titled “Updated Wood Availability Forecasts received from Ministry for Primary Industries” dated 6 May 2015. b) Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002. c) Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

The meeting closed at 10am.

CONFIRMED AS A TRUE AND CORRECT RECORD AT A MEETING OF THE Forestry Operations Committee HELD ON
3 JUNE 2015

DATE:...................................................................

CHAIRPERSON:...................................................

Forestry Committee

26 August 2015

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Strategic purpose of the Forestry Business Unit.

Record No: R/15/8/14346

Author: Ian Marshall, GM - Services and Assets

Approved by: Ian Marshall, GM - Services and Assets

☒ Decision ☐ Recommendation ☐ Information

Purpose

1 This report is intended to achieve clarity and confirmation about the strategic purpose of the Southland District Council Forestry business unit.

Executive Summary

2 The report discusses aspects of management of the forest estate and contemplates how the issues of Recreational amenity, Sale and Acquisition, Local Support, Supporting Research and Management Support for Urban Plantings should be managed.

Recommendation

That the Forestry Operations Committee:

a) Receives the report titled “Strategic purpose of the Forestry Business Unit. ” dated 18 August 2015.

b) Determines that this matter or decision be recognised not significant in terms of Section 76 of the Local Government Act 2002.

c) Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

d) Supports further development of the Forest Estate Management Plan to incorporate the issues of Recreational amenity, Sale and Acquisition, Local Support, Supporting Research and Management Support for Urban Plantings

Content

Background

3 The management of the Forestry business unit is outsourced to forestry consultants IFS Growth Ltd. In order to bring the management of the forestry business up to date it is necessary to redevelop the management contract for the forestry unit and then re-negotiate the contract with IFS Growth. This mandate was issued by the committee previously. Work began on the contract redevelopment by personnel from IFS and SDC. Working through the process it became evident that it was critical that the management contract aligned with the estate management plan and more particularly with the Council’s overall objective for the Forestry unit.

4 This lead to discussion about the strategic objective and the need to revisit the objective with the Committee to validate important assumptions. These assumptions will be the basis for the future management of the Forestry unit regardless of who is managing the business.

5 The longstanding primary objective for the SDC forestry activity (as per Mission Statement approved by Council on 2 May 1966) is:

6 To carry out successfully the growing, harvesting and marketing of plantation forests so as to provide the best possible return for its owners.

7 This objective was endorsed again by the Council in 22 June 2000.

8 In the Business Plan for the year to 30 June 2008 presented to the Committee meeting on 26 September 2007;

9 The primary objectives of management of the Council’s forests are:-

· Production of wood products to maximise the return on the owner’s funds - this means the production of the largest quantity of wood fibre of the highest quality for the least capital expenditure.

· Management of the forest estate in a sustainable and environmentally friendly manner.

- approved by the Forestry Committee on 14 May 1997; endorsed by Council 26 July 2006.

10 The Councils most recent long term document, the Council’s 2015-2025 10 Year Plan states; “The primary reason for owning the forestry estate is to make money and pay a dividend to Council. This helps to keep rates down. Council is responsible for ensuring the forestry estate is managed sustainably, while also creating the best possible returns”.

11 So clearly the primary objective is well established, understood and actively pursued.

12 What are less clear are the secondary objectives in particular the Committees and the Council’s appetite for disposals (sale) or acquisition (enlarging the estate). What also is less clear is to what extent it is a purpose of the Forestry unit to support the local timber industry by making logs available to the processing plants in Southland. And if that is an objective to what extent, if any, is the committee prepared to trade-off nett profit for the sake of making logs available for the local wood processing infrastructure and plants.

13 What is also unclear is the priorities of associated benefits that can be derived from or delivered via the forestry activity such as;

· Landscape amenity

· Recreational amenity

o Hunting

o Walking

o Biking

o Horse riding

· Firewood collection

14 Other goals are captured in historic Forestry Business Unit business plans including;

· Supporting research

· Management Support for Urban Plantings

· Environmental sustainability

15 Issues

16 There are a number of issues then that need to be guided by the direction of the committee.

17 Sale and Acquisition

18 The Committee’s direction is sought on the Council’s appetite for disposals (sale) or acquisition (enlarging the estate). The principle that has operated in recent years is that sale of the estate is not being sought and likewise additions to the estate are not being sought. If however an unsolicited offer is forthcoming it will be presented to the Committee for decision whether to further analyse the offer. Is this principle still valid?

19 Local Support

20 The Committee’s direction is sought as to what extent is it a purpose of the Forestry unit to support the local timber industry by making logs available to the processing plants in Southland. Does the Committee accept that it will support the local timber processing industry by actively making a share of the harvest available to this market?

21 And if that is an objective to what extent, if any, is the committee prepared to trade-off nett profit for the sake of making logs available for the local wood processing infrastructure and plants? What reserve is to be placed on the harvest, in the form of a discount, to the local processing plants? It has to be realised that not always are there conflicts between local plants and other buyers as the log grades being produced only suit one or other of the markets. The discussion here relates to the situation where local and other markets are competing for the same log grades.

22 A suggested principle is that a reserve price is set that is the equivalent to the export market price and that the trees are offered to the local industry on the basis the tender price meets or exceeds the reserve.

23 Recreational Use

24 The issues to be considered are to what extent if any are these activities to be permitted or not in the forest estate. The current regime has been to allow minimal activity other than the operations necessary for the operation of the commercial forest activity.

25 Regardless of what activity is required or proposed the number one priority must be the health and safety risks. To that end the commercial operations in the forest must be dominant in priority and no other activities can be permitted if and when it is in conflict with these operations.

26 Given that health and safety is paramount and that the forestry operations have priority it is still possible to contemplate that other activities be allowed or permitted in the forest estate.

27 The likely list includes;

· Recreational amenity

o Hunting

o Walking

o Biking

o Horse riding

· Firewood collection

28 Hunting and firewood are permitted now on a very limited basis. IFS issue permits to people who have a history of operating in the area and are known as good operators. This permit system works for the honest operators and is a means of controlling unsafe operators.

29 The recreational activities will be more difficult to control. If these activities are to be allowed then they can be controlled by conditions notified via electronic social media such as web sites, facebook and twitter. The conditions can also be notified by signs at the forest entrances.

30 More work needs to be done on the detail of each of these opportunities for each of the forest areas. The Estate Management Plan 2013-3023 does not include discussion on these recreational activities. If the Committee provides general direction on the principle of allowing these activities then instruction can be given to consider which, when, where and how these activities can occur and be managed. The outcome of the process would be a new section in the plan that documents the findings and would be subject to adoption by the Committee.

31 The suggested approach is that recreational activity be permitted in the forests when and where it is practical and safe. In some forests eg Dipton, it may be appropriate there be no general recreational activity permitted. The Estate Management plan be amended to include a section for each forest on recreational activity.

32 Supporting Research

33 This objective as included in the 2001 business plan and remained in place in subsequent plans. It would have been more actively pursued during the time when the Council employed and in house Forestry Manager. There are plantings in the Gowan Hills forest that are part of a clone series of seedlings. This indicates an historic level of support for that programme.

34 The Supporting Research objective should stay as part of the management strategy. However it should not be given a high focus nor have budget committed to it unless a business case is proposed and adopted for a specific programme.

35 Management Support for Urban Plantings

36 This activity relates to urban plantings, woodlots and plantations that are outside of the commercial forest estate. Typically these plantings are on small pieces of land such as reserves, cemeteries, unformed road. They all have some connection to the Council through ownership of the land or ownership of the trees being traced back to the Council, committee or sub-committee of Council.

37 The current management regime is that these lots are managed as and when requested by representatives of the owners. This is often the Area Engineer responsible for the area they are in.

38 Detail of these lots is variable. The current process requires that when advice is sought on one of these lots then the history of it is researched. The information is then compiled into an appendix in the Forest Estate Management Plan. IFS provide appropriate management, silviculture or harvesting services on a project by project basis. This is an entirely appropriate solution. After a number of years detail will have been gathered and compiled into the Plan. Until the data set is extensive it makes sense to manage each on an as needed basis.

Factors to Consider

Legal and Statutory Requirements

39 Health and Safety in Employment Act 1992 has many provisions that are relevant to the operations in and the use of the Forest estate. The provisions of this Act will take precedence over any activity that may compromise safety.

40 The Councils Open Spaces Strategy does not specifically list the plantation forests as potential recreation areas but the areas are potential recreation areas and so the principles of the strategy should be considered;

41 PRINCIPLES

42 The principles below underpin the way we will work to achieve the outcomes and vision set out in this strategy. We will:

· Involve the community in managing and maintaining open space

· Take the long view - consider future generations

· Make best use of the network of open space and assets that we already have

· Ensure we use our resources wisely and work within financial constraints

· Transparent and accountable decision making and management

· Work with partners and stakeholders to achieve outcomes

Community Views

43 The Communities views have been sought through the development of the Open Spaces Strategy but they have not been specifically sought in relation to use of the plantation forests for recreational purposes.

Costs and Funding

44 No cost implication have been identified at this time.

Policy Implications

45 The current policy objective for the Forestry unit is discussed above. No change is proposed to that policy.

46 The Council’ Procurement Policy although not directly relevant has some parallels in section 7.4 it discusses locally based suppliers in a procurement context. This has some relevance in a selling context too. The policy states;

47 7.4 Locally Based Suppliers

In maintaining the provision of goods and services in the long term, Council has an interest in ensuring that there is a viable and competitive market able to provide goods and services now and into the future. In some areas of procurement, this may mean ensuring the ongoing viability of locally based suppliers. Council also has an interest in the economic well-being of the District, under the Local Government Act 2002.

Council will, therefore, choose to procure goods and services from locally based suppliers where:

· The value for money offered by the locally based supplier is at least as good as suppliers based outside the District or the province of Southland; and/or

· There is a need to ensure market capacity and capability in the long term; and/or

· Community will benefit from selection of local provider, through stronger commitment and/or local accountability.

Council will also bundle its procurement in a manner that ensures locally based (smaller) suppliers are able to supply, where this is practical ie it is cost effective and does not compromise efficient management systems.

Analysis

Options Considered

48 The option is to consider how other activities should be allowed in the production forests or not.

Analysis of Options

Option 1 – Incorporate the issues of Recreational amenity, Sale and Acquisition, Local Support, Supporting Research and Management Support for Urban Plantings into the Forest Estate Management plan.

Advantages

Disadvantages

· Greater clarity for the Forest management personnel

· Greater utilisation of the forest space.

· Support for the local industry,

· Potential risks to manage.

· General public in the forests.

· Easier access by the public creates the opportunity for illegal activities to occur.

Option 2 – Not allowing activities other than commercial forestry operations to be permitted in the production forest.

Advantages	Disadvantages
· The opposite of option 1	· The opposite of option 1

Assessment of Significance

49 The issue is not significant in terms of the significance policy

Recommended Option

50 Allow activities other than commercial forestry operations to be permitted in the production forests

Next Steps

51 If the Committee resolves to allow in principle these activities occur then it will be a requirement for the Forestry management consultant to research the issue to inform the Committee of the activities and locations where they might be appropriate and how they might be controlled.

52 Upon approval by the Committee the consultant would draft appropriate sections for the next update of the Forest Estate Management plan to then be approved by the Committee.

Attachments

There are no attachments for this report.

Forestry Committee

26 August 2015

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Delegation of Authority to Sell Trees for Harvesting - Forestry Business Unit

Record No: R/15/8/14348

Author: Ian Marshall, GM - Services and Assets

Approved by: Ian Marshall, GM - Services and Assets

☒ Decision ☐ Recommendation ☐ Information

Background

1 The Forestry Committee delegation is recorded in the Delegation Register as:

DELEGATION:

Power to Act:

1. To carry out any activity within the scope of the Annual Business Plan of the Forestry Business Unit.

2. To sell or otherwise dispose of any trees, logs, tree seeds, firewood or other forest produce, consistent with the directions of the Forests Management Plan.

3. Establish and carry out any operations or industry relating to the felling, cutting, extraction, removal, conversion, manufacture, transport distribution or sale of forest produce.

4. To engage the services of specialist consultants when appropriate.

2 It is the second point that is relevant to this report;

2. To sell or otherwise dispose of any trees, logs, tree seeds, firewood or other forest produce, consistent with the directions of the Forests Management Plan.

3 This delegation currently resides with the Committee and has not been sub-delegated to management.

4 Issues

5 The issue that arises because of the current delegation is the time constraint imposed because only the Committee can approve a sale (harvest) contract. A more responsive management methodology is required. In order for maximum returns to be gained from the sale of trees it is necessary to have a dynamic responsive process that will allow timely sales pitched to meet the market conditions.

6 The overall harvesting strategy is incorporated in the Forest Estate Management Plan and that is the guiding document for harvesting operations. This plan sets out the harvesting plan for each forest. The issue comes with putting that harvesting plan into operation. Under the current delegation regime it is necessary for a Forestry Committee meeting to be held in order to approve any individual sale. Given the interval between meetings this is not an efficient or practical way to operate. The sale process is a management function that is guided by the Estate Management Plan which is approved by the Forestry Committee acting in its governance role.

7 A key governance role of the Committee is to ensure the objectives of the business unit are met. The major objective is;

To carry out successfully the growing, harvesting and marketing of plantation forests so as to provide the best possible return for its owners.

8 In order to achieve this objective, harvesting operations need to be carried out at the optimal time to achieve the best financial return.

9 The management responsibility of the Forestry Business Unit sits with the Group Manager Services and Assets. It is logical then that the delegation to sell trees or other forest products is delegated to the Group Manager Services and Assets. You can think of the selling process as the equivalent process to procurement but in reverse. Instead of the process being about delegations to procure services in accordance with an approved plan what is needed is the equivalent delegations for sale of trees and other forest produce in accordance with the approved plan.

10 To ensure the Committee retains the overall control of the Forestry Unit the delegation should be framed in terms of complying with the adopted Forest Estate Management Plan and the wording of the Committee’s delegated Power to Act in 2.2 above is concise and appropriate. In order to retain a solid link between the management action and the governance plan and to minimise the fraud risk, it would be appropriate to make the delegation a joint one between the Group Manager and the Chairman of the
Forestry Committee.

Proposal

11 The proposal that achieves the requirements discussed above is that the Group Manager Services and Assets and Forestry Committee Chairman jointly be delegated the power to act - to sell or otherwise dispose of any trees, logs, tree seeds, firewood or other forest produce, consistent with the directions of the current Forests Management Plan which has been approved by the Forestry Committee.

Recommendation

That the Forestry Operations Committee:

a) Receives the report titled “Delegation of Authority to Sell Trees for Harvesting - Forestry Business Unit” dated 20 August 2015.

b) Determines that this matter or decision be recognised not significant in terms of Section 76 of the Local Government Act 2002.

d) Delegates the power to act to the Group Manager Services and Assets and Forestry Committee Chairman jointly - to sell or otherwise dispose of any trees, logs, tree seeds, firewood or other forest produce, consistent with the directions of the Forests Management Plan as approved by the Forestry Committee.

Attachments

There are no attachments for this report.

Forestry Operations Committee

26 August 2015

This report covers activity over the three month period to 30 June 2015, since the last formal meeting on 3 June 2015.

1. Health and Safety

Reported incidents past 12 months = 15.

This period = 2.

Type of incident

Activity

Forest

Crew

Task

Incident date

Description

Cause

Prevention

Comments

Forms signed and investigation completed

Environmental

Spraying

Dipton

Heli Ops

Spraying

08/04/15

Heli operator has caused spray drift onto neighbouring property. Operator was flying into the boundary rather than along it & no buffer maintained.

Operator didn't follow correct procedures & maps. Was inducted on the day.

Operator not preferred for future operations.

Farm owner has been notified and is ok with situation at this stage. Heli Ops will provide feed as required by farm owner.

Were 3 issues with this operator. 1 - overspraying, 2 - leaking nozzles over mature trees, 3 - spraying wrong area.

30/06/15

Vehicle & property damage

Silviculture

Ohai

IFSFO

Pruning

21/05/15

Gate was unlocked but chain was stuck in gate. Went to drive around it & sunk into a ditch. Side of the gate struck the back door denting it

Driving in an area that shouldn't have been driving in.

Avoid situations that can cause potential damage to the gear or to truck. Stop - think - make smarter decisions.

9/6/15 Gate repaired at IFSFO cost.

14/07/15

Forestry works for this period have employed eight contractors including:

· Aerial spraying - Dipton and Waikaia (2),

· Pruning - Ohai (1),

· Forest inventory- All (1),

· Log collection - Waikaia (1),

· Pest control - Gowan Hills (1),

· General maintenance activities (1).

From a health and safety perspective all of these operators (including IFS Growth staff supervisors) require pre-operation induction, forest specific hazards and regular supervision to ensure all safe practices are being carried out.

Hazard Management

IFS Growth continues to actively identify and manage hazards in SDC forests. From a health and safety perspective anyone (including IFS Growth staff and landowners, or their representatives) entering a forest (that we manage) should ensure that they have a list of hazards for that forest prior to entering the forest. IFS Growth can be contacted at any time for requests for an up to date hazard map and/or list for SDC forests.

2. Re-establishment

All of the scheduled cutover areas in Dipton and Waikaia were helicopter sprayed during April, in preparation for 2015 planting. These sites are now ready to plant as of July with a total program of 89 hectares. Two contractors have been engaged to complete this programme.

3. Harvesting

There was no harvesting activity during this quarter, with the effective completion of the 2014/15 SDC harvest programme during January.

The year end result for the 2014/15 sales been successful for the Council, with sales of $1.9M and net gain of $108K to budget. All income has been been generated from harvest sales out of Dipton and Waikaia Forests, a volume of approximately 40,000 tonnes.

The up and coming 2015/16 sales programme is to be reveiwed and determined by Council. The volume available is similar to last year with approximately 31,000 tonnes from Dipton and 9,000 tonnes from Ohai. There could be some exchange of volume with Waikaia as the local and export market determines.

4. Roading

There has been no roading activity during this period.

5. Silviculture

The entire tending program is now completed of the 80 Ha scheduled for 2014/15.
All of this season’s work has been in the Ohai Forest comprising of 52 hectares of P1+2 lift and 28 hectares of third lift pruning. There was no thinning scheduled for SDC forests for 2014/2015.

6. Forest Health

There are no forest health issues to report.

7. Weed Control/Maintenance

There has been minor maintenance during this period, with $4K spent. Activities have included:

· Clearing tracks in Waikaia and Ohai following snow events, and

· Improving side trenches at Ohai security gates.

8. Security and Trespassing

Hunting permits are currently not being issued for SDC forests.

Permits issued during this period have included:

· Aerial pig shooting for TB monitor at Gowan Hills,

· One firewooder at Ohai,

· Long standing duck hunting party at Ohai.

9. The Emissions Trading Scheme

· The Council’s post-1989 forest areas (129.2 ha) = 31,280 NZU.

During this quarter the Council has filed the 2014 voluntary return and received 4,400 ETS units.

· The Council’s pre-1990 forest areas (1,384 ha) remain at 82,914 NZU.

The NZU market has been steady around the $6.80 mark on light trading.

10. Log Prices

Domestic Log Prices

Domestic log prices continue to remain stable.

Export Prices

Export prices have started to improve by $2 to $3/m³. An A Grade Log is currently worth $73/m³, up 6% on one year ago.

Regional Log Price Summary

Source: IFS Growth Dataset

11. Revenues and Expenditure

The full year financial performance for the forestry business has been strong, with all budget targets exceeded. This has resulted with income of $1.9M (up 5%), expenditure $768K (down 9%), and an overall net position of $1.2M (up 17%).

Reece McKenzie

IFS GROWTH

Forestry Committee

26 August 2015

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Financial Report to 30 June 2015

Record No: R/15/8/14907

Author: Ben du Mez, Graduate Accountant

Approved by: Ian Marshall, GM - Services and Assets

☐ Decision ☐ Recommendation ☒ Information

Management Comment

With consolidated net surplus, before revaluation, of $1.7 million, the forestry business unit has produced another solid profit performance. This result is $0.86 million favourable to the 2014/15 budget and includes income of $2.3 million less $0.6 million of expenditure. Additional to this is a forest estate revaluation gain of $0.11 million, which brings the net surplus result to $1.8 million.

In terms of income, timber sales from the Waikaia and Dipton forests generated $1.9 million from a volume of approximately 40,000 tonnes harvested. Any sales initially budgeted for Ohai have been deferred a year to allow older wood at Waikaia forest to be brought forward. There has been no change in the annual volume cut as a result.

Other income of $0.37 million includes interest on reserves and the revaluation gain of New Zealand Units held and received during the year for the ETS.

The expenditure reported was significantly lower than the $1 million budgeted for the 2014/15 year. However, it should be noted that these reported figures for expenditure include accruals. Actual invoiced expenditure incurred (including administration) is closer to $0.8 million. This cost largely reflects road access, harvest commissions and land preparation in Dipton and Waikaia, silviculture operations particularly at Ohai, and general maintenance and property security operations across all of the forests.

Another good result for the business unit is the slight gain in asset value provided by the 2015 forest valuation. The estates timber valuation is now $11.33 million, compared to $11.22 in 2014. A reduction of discount rate to 8.5% and growth of the resource within the estate has improved this value. The reported land value of $0.84 million is book value, with current market value of $2.5 million prepared by the valuer.

Reece McKenzie

FOREST MANAGER

IFS GROWTH

Recommendation

That the Forestry Operations Committee:

a) Receives the report titled “Financial Report to 30 June 2015” dated 20 August 2015.

Attachments

There are no attachments for this report.

Chairperson	Brian Dillon
	Mayor Gary Tong
Councillors	Lyall Bailey
	Stuart Baird
	George Harpur
	Ebel Kremer
	Neil Paterson