Infracore boss explains deficit
Thirty job vacancies put company behind work targets
Rotorua Lakes Councilcontrolled business (CCO) Infracore has a $1 million deficit amid struggles to complete projects and an aging vehicle fleet needing replacement.
Interim chief executive Regan Fraser provided councillors with a confronting overview, of the period July 2023 to March, at a committee meeting on Wednesday.
“How has Infracore made it through this far?” Fraser said.
In 2023, Infracore began showing “visible signs of distress”, Fraser said.
This included the look and feel of open spaces declining, such as complaints over mowing. He said the council-controlled organisation (CCO) fell behind on jobs.
“The reason for that is pretty simple, we had 30 job vacancies.”
Infracore had a 60 per cent turnover in staff over a year and recruitment in the wider industry was difficult.
The council appointed an independent facilitator in May 2023 to oversee updated Service Level Agreements, provide information about services impacted by funding constraints, and review cost structures, systems and processes.
Fraser joined as interim chief executive in August.
The council also engaged consultants to find underlying issues and look at what the company offered.
One recommended it complete a full contract revision and update it to current industry standards. The other recommended the council retain the services of Infracore and undertake a review of the schedule of quantities, depreciation, cost fluctuation allowance and other key contract elements.
Infracore pricing was consistently lower than comparable providers, pay rates were lower and plant cost recovery was not included in Infracore rates, Fraser said.
Lower pay meant hiring was challenging and, subsequently, it could not do the work to get the revenue it had budgeted for, he said.
For the year to date, it sat at $1000 in revenue from projects compared to the $500,000 it had budgeted for.
Fraser said the problems all led to one thing — inflation — and this was not addressed within the current contract with the council which resulted in a period of underfunding.
“The adjustment for Infracore last year was 5 per cent, but the industry standard moved about 12.7 per cent.”
Infracore spent $498,000 more on administration than budgeted for, which Fraser attributed to replacing aged vehicles.
He said there was an assumption the council would replace old, unreliable fleet.
A lack of a blanket approach, however, led to repair and replacement costs exceeding that assumption.
Examples were $5000 for rust removal or $11,000 for a new transmission on a 14-year-old truck.
The new Service Level Agreements were about 80 per cent complete and would provide the council with options to work within a constrained budget. It would also inform Long-term Plan discussions.
Infracore agreed to pay employees the living wage as a minimum following strike action in March.
Councillor Conan O’brien asked Fraser whether he was comfortable with the deficit in regards to recent negotiations with the striking workers’ unions.
Fraser said it would fall within the existing budget.
Fraser claimed he was not an expert in many things, but retail was one.
Something he was excited for was an internal business case being developed for the company’s nursery.
He said revenue was more than double what it was about two or three years ago, but it “hasn’t quite had what it needed”.
Money would need to be spent to get it back where it should be, but Fraser said there would be no cost to the council.