Asset Management Plan and Strategy 2013/2017 by Wagga Wagga City Council

Asset Management

PLAN

2013/2017

Table of Contents Section 1 - Introduction ................................................................................................... 2 What Council Provides ........................................................................................... 2 The Value of Infrastructure ..................................................................................... 2 Council’s Asset Management Goals ....................................................................... 4 Community Engagement and Asset Management .................................................. 5 Core and Advanced Asset Management ................................................................ 5 Core Asset Management Performance Targets ...................................................... 6 Section 2 – Levels of Service .......................................................................................... 7 Current Levels of Service ....................................................................................... 7 Satisfactory Condition ............................................................................................ 7 Desired Level of Service......................................................................................... 9 Section 3 – Future Demand .......................................................................................... 10 Demand Forecast ................................................................................................. 10 Demand Management Plan .................................................................................. 10 Changes in Technology ........................................................................................ 11 New Assets for Growth ......................................................................................... 11 Section 4 - Lifecycle Management ................................................................................ 12 Acquisition ............................................................................................................ 12 Assessment of Requirements ............................................................................... 13 Asset Identification and Recording ....................................................................... 14 Asset Creation, Acquisition and Upgrade Plan ..................................................... 15 Selection Criteria .................................................................................................. 15 Operations and Maintenance................................................................................ 15 Risk Management ................................................................................................ 17 Renewal ............................................................................................................... 20 Disposal ............................................................................................................... 21 Asset Rationalisation ............................................................................................ 22 Section 5 - Plan Improvement and Monitoring ............................................................... 23 Financial Statements and Projections................................................................... 23 Funding Strategy .................................................................................................. 23 Life Cycle Costs ................................................................................................... 23 Valuation Forecasts.............................................................................................. 24 Key Assumptions Made in Financial Forecasts .................................................... 24 Improvements to Key Assumptions ...................................................................... 27 Asset Management System .................................................................................. 27 Information Processes .......................................................................................... 28 Performance Measures ........................................................................................ 28 Monitoring and Renewal Procedures .................................................................... 28

Introduction Section 1 - Introduction What Council Provides To support the community, Council maintains a network of physical infrastructure within the Wagga Wagga Local Government Area (LGA). This infrastructure provides a platform for economic and social development, strengthens the link between the community and the natural environment and creates a sense of place for the local community and its visitors. This infrastructure is integral to the community’s well-being and their quality of life. The infrastructure assets managed by Council include formed roads, bridges and culverts, footpaths, public shelters, kerb and gutter, stormwater and sewer infrastructure, recreational assets, open spaces, landfills, Council businesses and community buildings. A comprehensive list of these infrastructure assets is maintained in Council’s Asset Register and details of the individual asset categories are held in the supporting Sections of this Asset Management Plan.

The Value of Infrastructure All assets in the Wagga Wagga LGA included in this Asset Management Plan are audited under Council’s inspection regime, rated against the asset reference sheets and captured in Council’s electronic mapping system. This process allocates a condition rating to each individual asset, or section of asset. This condition rating scale ranges from excellent to very poor. In 2010 the condition rating of average was considered to be a satisfactory level of service or condition. This service level remains Councils adopted position. The calculated fair value of the existing network of infrastructure assets in the Wagga Wagga LGA is $1.168 billion (as at June 2012). To return all infrastructure identified as being in an unsatisfactory condition (poor and very poor) to a condition deemed satisfactory (at least average), it is estimated to cost $100 million (in 2012 dollars). This represents 8.6% of the infrastructure assets in the Wagga Wagga LGA. Council’s current annual expenditure on maintaining this asset base is $15.5 million (in 2010 dollars). The projected annual maintenance expenditure required to achieve the target maintenance events included in the supporting Sections of the Asset Management Plan and ensure the assets are in a ‘satisfactory’ condition is $21.9 million (in 2010 dollars). This indicates an annual shortfall in maintenance of $6.4 million (in 2010 dollars).

Introduction The following table provides details of the value of asset categories included in this Asset Management Plan as at June 2012. Asset Category

Number of Assets

Unit

67 bridges 103 bridge sized culverts 27 footbridges

each

$32,738,335

$3,052,481

each

$3,436,471

$210,425

4,343

each

$25,496,486

$3,427,524

Footpaths

220

$47,798,238

$20,451,488

Shared Paths

51.6

$4,271,533

$923,805

Kerb and Gutter

668

$174,975,281

$11,097,759

399.4

$403,859

$37,228

$10,434,235

Bridges

Car Parks Culverts

Line Marking Open Spaces

Asset Value

Estimated cost to return network to satisfactory condition

9.23

Bus/Taxi Shelters

each

$810,233

$167,376

Roundabouts

each

$1,993,783

$96,630

Medians

22.6

km2

$10,668,781

$179,757

Roads - Sealed

1169

$177,669,930

$14,087,679

Roads - Unsealed

1118

$64,343,010

$2,770,500

each

$15,816,919

508

each

$74,245,183

$1,718,213

Civic Theatre

each

$6,418,125

LMC

each

$18,710,714

Oasis

each

$17,148,519

$4,828,000

341

each

Airport Buildings

Recreation Assets

$8,801,000

$305,393

$4,215,589

$132,812

Play Grounds

Fences

121

$7,489,771

$482,467

Levee Banks

19.5

$19,531,812

$17,900,000

Sewer pipes

622km pipes 37 pump stations 6 treatment plants

$306,227,749

$9,948,569

Stormwater

371km pipes 52.5km open drains 10.6km detention banks

$127,504,280

$8,441,792

Landfill

each

$6,395,316

Transfer Stations

each

$363,667

$1,167,908,818

$100,259,898

Total

Introduction NB The data in the above table is generated from Council’s asset management system. It reflects the asset base at the time the data was exported from the system. The figures in the supporting Sections of this Asset Management Plan may vary due to the timing of the export of the data for the individual asset category. NB The current liability in this table for the levee is based on the generic business rule that the satisfactory condition for all assets is average. For the levee it is considered to be good and the supporting Section provides details on that basis.

Council’s Asset Management Goals Council’s goal in managing infrastructure assets is to meet the required level of service for each asset category in the most cost effective manner for present and future consumers. The key elements of Council’s infrastructure asset management are: • • • • • • •

taking a life cycle approach developing cost-effective management strategies for the long term providing a defined level of service and monitoring performance understanding and meeting the demands of growth through management and infrastructure investment managing risks associated with asset failures sustainable use of physical resources and continuous improvement in asset management practices. 1

demand

The Asset Management Plan and supporting Sections are fundamental to the achievement of these key elements of asset management. The cornerstones of the Plan are: • • • • • • •

defining levels of service – specifies the services and levels of service to be provided by Council for each asset type condition assessment – specifies the technical tools used to assess the condition of each asset life cycle management – how Council will manage its existing and future assets to provide the required services financial summary – what funds are required to provide the required services asset management practices – how the organisation will manage its assets and the tools it will use to accomplish this monitoring – how the Plan will be monitored to ensure it is meeting Council’s objectives asset management improvement plan

The main goal of such a Plan is to ensure that assets acquired support and meet the strategic and annual objectives of the organisation and that the cost of providing the service to the community does not outweigh the benefits.

IIMM 2006 Sec 1.1.3, p 1.3

Introduction Community Engagement and Asset Management This introduction of asset management as a future works and corporate sustainability tool must include the active engagement of and consultation with the community to explain the impact on all people that use the infrastructure asset network, and to determine the community’s service level expectations for infrastructure assets. For example, an acceptable level of service may relate to the frequency a park is mown, or the number of trip hazards in a length of footpath that the community deems to be satisfactory for that particular asset. Quality information from community members and stakeholders ensures the current and future infrastructure across the Wagga Wagga LGA is managed by Council to achieve the principles of equity, access, participation and right. This information from the community and stakeholders will be integrated with data, research and technical and financial information to create a comprehensive Asset Management Plan. The level of service for each asset category defines what Council intends to deliver to the community with respect to its assets and the level of service the community can afford. The level of service for each asset category is being developed in the coming years and will be based on community expectations, legislative requirements and internal Council policy. When developed, the level of service for each asset category will focus on how the community experiences the asset (relating to factors such as condition, quality, reliability, responsiveness, sustainability, timeliness, accessibility, cost and functionality) and technical characteristics required to deliver the asset. There is a direct relationship between the level of service provided by an asset and the cost to provide it. As the level of service becomes higher, the cost to provide it also increases. As Council moves towards strategic asset management, Council will consider these two factors in relation to each asset category and for the infrastructure network as a whole.

Core and Advanced Asset Management This Asset Management Plan is prepared as a ‘core’ asset management plan in accordance with the International Infrastructure Management Manual (IIMM 2011). It is prepared to meet minimum legislative and organisational requirements for sustainable service delivery and long term financial planning and reporting. Core asset management is a ‘top down’ approach where analysis is applied at the ‘system’ or ‘network’ level. The Plan, in its current form is intended to meet the requirements for the resourcing strategy of the Integrated Planning and Reporting Bill (2009) of the Local Government Act and to provide Council with the decision making capacity to manage its infrastructure in the best interests of the community, to provide assets that deliver the service level expectations of the community and to ensure the maximum utilisation of Councils resources and funding.

Introduction Future revisions of this Asset Management Plan will move toward ‘strategic’ asset management using a ‘bottom up’ approach for gathering asset information for individual assets to support the optimisation of activities and programs to meet agreed service levels. Strategic Asset Management “employs predictive modelling, risk management and optimised decision making techniques to establish asset life cycle treatment options and related long term cash flow predictions.” (IIMM 2011)

Core Asset Management Performance Targets The following tables detail the key performance targets and measures for Council’s core asset management. Assets Registered A

Details of assets established in a register

Assets mapped in Council’s Information System (ArcGIS)

GIS updated on an ongoing basis

File and annual reports of past studies, works

Assets recorded

Geospatial

Standards Prescribed for Asset Condition A

Draft minimum preferred standards

Adopted in relevant section

Asset Audit/Condition Surveys Completed A

Asset inspection regimes developed and implemented

Condition surveys completed at prescribed frequency

Planning Cycles Completed and Implemented A

Related sections reviewed as specified

Asset Management Plan updated annually

Levels of Service Section 2 – Levels of Service Current Levels of Service “An objective of Asset Management Planning is to match the level of service provided by the asset with the expectations of the customer. Asset Management Planning will enable the relationship between level of service and cost of service (the price/quality relationship) to be determined. This relationship can then be evaluated in consultation with customers to determine the optimum level of service that the community is prepared to pay for.” (Page 3.6, IIMM (2011)) Council has characterised service levels in two definitions aligned with the IIMM. These two levels of service are a community level of service and a technical level of service. Community Levels of Service relate to how the community receives or derives benefit from the service of each asset in terms of safety, quality, quantity, reliability and responsiveness. Supporting the community service levels are operational or technical measures of service developed to ensure that the minimum community levels of service are met. These technical levels of service may relate to cost/efficiency and legislative compliance. These technical measures relate to service criteria such as:

Service Criteria

Technical measures may relate to

Quality

Component deterioration

Quantity

Area of parks per resident

Availability

Number of users versus need

Safety

Pavement width and condition

Satisfactory Condition Council’s Surveillance Team continues to use an ‘average’ condition as a satisfactory level of service for all asset categories covered by this Plan. The use of ‘satisfactory’ as the current service level allows Council to develop projections of asset renewal funding requirements for the future in support of the Long Term Financial Plan, providing estimates of the funding required for each category to be remediated or renewed so each individual asset is ‘satisfactory‘ or above. All assets included in this Plan are audited under Council’s inspection regime, rated against the asset reference sheet and captured in Council’s electronic mapping system. This process allocates a condition rating to each individual asset, or section of asset. This condition rating scale is from excellent to very poor. Council’s Asset Integrity Team can quantify each condition and also the funding required to remediate all assets to a ‘satisfactory’ or above condition, and provide the financial data necessary to inform the Long Term Financial Plan.

Levels of Service The following graphs indicate the proportion of the asset categories in each condition. The graphs are based on information from the asset management system as at 2012/13. The colours on the graphs indicate the condition of the network as follows: Excellent Good Average Poor Very Poor

Sealed Roads

Unsealed Roads

Bridges

Kerb and Gutter

Culverts

Carparks

Shared Paths

Footpaths

Bus and Taxi Shelters

Line Marking

Roundabout

Medians

Buildings

Playgrounds

Bins

Seating

Sporting Equipment

BBQ

Fences

Stormwater Mains

Levee Banks

Sewer Mains

Waste Management Facilities

Levels of Service Desired Level of Service At present, indications of desired levels of service are obtained from the Customer Satisfaction Survey (2006, 2009, 2010), residentsâ&#x20AC;&#x2122; feedback to Councillors and staff, service requests and correspondence. Council has yet to quantify desired levels of service from the community.

Future Demand Section 3 – Future Demand Demand Forecast Factors affecting demand include population change, changes in demographics, seasonal factors, vehicle ownership, consumer preferences and expectations, economic factors, agricultural practices and environmental awareness for example. Demand for infrastructure is generated predominantly through either: • •

an increased utilisation of existing infrastructure brought about by the factors above or the requirement for new infrastructure to meet the needs of growth in new development.

The demand created by these two circumstances requires analysis to consider the ramifications to existing infrastructure networks and the ability of these networks to cope with the increased infrastructure. This analysis applies in all cases ranging from new subdivisions creating an increased load on an existing sewer network and treatment plant, to that same subdivision increasing traffic across existing road networks potentially creating the need to upgrade that existing infrastructure to cope with the increased utilisation and demand.

Demand Management Plan Demand for new services will be managed through a combination of managing and maintaining existing assets, upgrading of existing assets and providing new assets to meet this demand. Demand management practices include non-asset solutions, insuring against risks and managing failures. The planning for infrastructure due to demand is a constant process of review and assessment of existing infrastructure and its ability to cope with increasing demand, versus the need to augment with new infrastructure. Demand on infrastructure is created through increased utilisation generated from a growing population and changing patterns of behaviour, ranging from social demographics to transport options and solutions. Often this increasing demand will stem from urban or residential growth increasing the utilisation of a range of community infrastructure Council develops strategies for demand management on single or groups of affected assets and continues to manage the relationship between existing and new asset requirements in the context of asset management. This demand management also includes asset rationalisation as discussed in this plan. This demand forecasting and analysis is performed by the Infrastructure Capacity section of the Infrastructure Planning Division of Council, in consultation with the Planning Directorate. The outcomes of these plans form elements of future capital works programs captured in Council’s Long Term Financial Plan.

Future Demand Changes in Technology Technology changes are forecast to have little effect on the delivery of services covered by this Plan at this time. Changes in technology will be considered at each annual review of the Asset Management Plan.

New Assets for Growth The new assets required to meet growth will either be acquired from land developments or constructed by Council. The new asset values are summarised in the graph below based on known Section 94, 94A and 64 funded capital items generated by growth at the time the Plan was developed. Also included are those capital items required to be funded from the Councilâ&#x20AC;&#x2122;s general income that are necessary due to growth and relate to upgrading of existing infrastructure, proportional to increased demand. Figures are based on Councilâ&#x20AC;&#x2122;s draft Long Term Financial Plan 2013 - 2023.

Acquiring these new assets will commit Council to fund ongoing operations and maintenance costs for the period that the service provided from the assets is required. These future costs are identified and considered in developing forecasts of future projected operating and maintenance costs.

Lifecycle Management Section 4 - Lifecycle Management Life cycle management details how Council plans to manage and operate the asset category at the agreed level of service while minimising life cycle costs throughout the useful life of the asset. This section identifies and describes the four key phases of the asset management life cycle of local government assets, namely: acquisition, operation and maintenance, renewal, and disposal.

Acquisition There are six elements to the asset acquisition phase of the cycle. They are: 1. 2. 3. 4. 5. 6.

planning assessment of requirements feasibility study acquire (procure or construct) asset identification, recognition and recording and recording and accounting

These elements are not carried out in an entirely sequential manner; some elements overlap and the planning element should be evident in all other elements. Congruence of the asset management process with all stages of planning is vital to ensure the process adds value to an organisation. Ad hoc asset management processes are unlikely to result in optimum asset management, for example to have assets acquired, maintained or disposed of in accordance with the organisationâ&#x20AC;&#x2122;s goals and objectives. It can have serious consequences for Council, particularly in longerterm sustainability.

Lifecycle Management Sound and effective use of planning in all phases of the asset management cycle will assist Council in: • • • • • • • • •

setting levels for service delivery assessing the functional adequacy of existing assets identifying surplus or under-performing assets assessing the assets required for new policy initiatives evaluating options for asset provision (for example, private versus public investment) evaluating options for funding asset acquisition ensuring funds are available when required ensuring assets are maintained and disposed of in an optimum manner and evaluating asset management performance, with the goal of continuous improvement

The development of an Asset Management Plan as part of Council’s planning processes provides the best means of delivering value-added asset management. The Plan must cover the complete asset management cycle and be integrated with Council’s strategic and other planning documents. Assessment of Requirements Assessing Council’s requirements for assets is a major and evolving challenge. It involves making judgements on future services and organisational direction and the making of predictions that may change at the next election. Appropriate and effective asset planning, however, is driven by the longer-term Financial Plan requirements that must transcend the impacts of elections. Council should deliberately apply strategic thinking in making predictions to minimise risk and uncertainty. Questions that must be satisfactorily answered are: • • • • • • • • • • • •

What alternatives are available for service delivery? What changes can be expected to service demand over the planning time frame? What is the condition of existing asset holdings? What are the short-term asset requirements? What are the long-term asset requirements? What existing assets meet the requirements? What further assets are required? Does Council need to acquire further assets or can the service be met by a service provider? What assets are no longer viable to retain? What alternatives are available for asset provision (public or private)? What alternatives are available for asset acquisition (purchase or construct)? What new skills will be needed to operate new assets?

Lifecycle Management Requirements need to be regularly reviewed, particularly as circumstances change. Such reviews should be part of the ongoing planning processes of Council. Once requirements have been defined and the options costed, a decision on the best option can be made. This decision will be the beginning of further planning – the plan to acquire the asset. A purchasing/design and/or construction specification and a budget for the asset should be developed as well as a time frame for its acquisition and obtaining the necessary funding. A realistic budget, cash flow and timetable must be set as insufficient funds or project management might seriously jeopardise the asset acquisition process. This must include whole of life costing for the new asset including acquisition, maintenance, renewal and disposal. The key to adding value to the organisation in the asset acquisition element is project management. Once the broad asset requirements are known, the process should be managed through Council’s Project Management Framework utilising a project team that has the necessary skills and experience to ensure all aspects of the acquisition process are completed in a way that meets the service delivery and economic objectives of Council. Asset Identification and Recording Australian Accounting Standards (AAS) require Local Government to identify, value and record all of their assets. A common problem has been identifying what assets the local authority controls or ‘owns’. Ways in which asset registers are created and maintained range from the manual recording of basic details in a series of bound volumes, to the use of specifically designed asset management software. There is much information that can be recorded about assets. Council needs to be diligent and apply a strategically driven approach to the data held and used. Data held needs to be regularly subject to executive management scrutiny so that information can be reliably provided without the unnecessary overhead of gathering, storing and cleansing data that is not explicitly used by Council and is not required for decision making or reporting purposes. Councils are custodians of a significant portfolio of community assets for which they are held accountable. Councils therefore need information about the portfolio to fulfil this reporting duty and also to enable them to manage the assets effectively. In order for this information to be provided efficiently and effectively it is highly desirable that it be kept in one integrated data set. Whilst recording or accounting for assets may be regarded by some as an issue for accountants, it is important to recognise that engineers and asset managers utilise the same information. It is important, therefore, that the professions work together to establish accepted methodologies and approaches. The asset management policies and processes developed by Councils Asset Management Team are documented in the supporting Sections of this Plan to assist consistent decision making and reporting. On acquisition, an asset is usually valued at its construction cost. The construction costs include any costs necessary to place the asset into service. It is important that a value

Lifecycle Management is placed on all assets, as the value and its diminution over time, provide information for decisions made about the contribution, or otherwise, by assets to an organisationâ&#x20AC;&#x2122;s goals and objectives from an economic perspective. Asset Creation, Acquisition and Upgrade Plan New works are those works that create a new asset that did not previously exist, or works which upgrade or improve an existing asset beyond its existing capacity. They may result from growth, social or environmental needs. Assets may also be acquired at no cost to the Council from land development. These new assets required to meet growth are considered on page 11 of this Asset Management Plan under the heading New Assets for Growth. Selection Criteria New assets and upgrade/expansion of existing assets are identified from various sources such as the Community Strategic Plan, Development Control Plans and other planning documents and proposals identified by partnerships with other organisations. Candidate proposals are inspected to verify need and to develop a preliminary renewal estimate. Verified proposals are ranked by priority and available funds and scheduled in future works programmes. New assets and services are funded from Councilâ&#x20AC;&#x2122;s capital works program and grants where available.

Operations and Maintenance Most public-sector assets, particularly long-lived assets such as buildings, roads and footpaths require maintenance over their lives. There are basically five matters for asset maintenance consideration. They are: 1. 2. 3. 4. 5.

planned maintenance unplanned maintenance maintenance of asset records revaluation and reassessment

Planning is an important part of the maintenance phase. The time frame over which some assets are to be maintained adds a degree of complexity to the planning involved. The development of planned maintenance schedules should involve a multidisciplinary approach. It is critical that the planning is undertaken as the resources required to maintain the assets in optimum condition for the least cost will require the evaluation of a range of factors for different assets. The selection of appropriate maintenance schedules is crucial to minimise asset maintenance costs while prolonging the service effectiveness of assets. It may appear to be a paradox to plan for unplanned maintenance, but unplanned maintenance consumes resources. It is essential that provision be made for time, money and skills to be available to quickly restore assets that fail in service to their operating effectiveness. Alternatively, contingency plans (business continuity planning/disaster recovery planning) should be made where catastrophic failure of major infrastructure assets has the potential to severely disrupt the provision of services to the community.

Lifecycle Management Routine Maintenance Plan Routine maintenance is the regular on-going work that is necessary to keep assets operating, including instances where portions of the asset fail and need immediate repair to make the asset operational again. Maintenance includes reactive, planned and cyclic maintenance work activities. Reactive maintenance is unplanned repair work carried out in response to customer or service requests and management/supervisory directions. Assessment and prioritisation of reactive maintenance is undertaken by Council staff using experience and judgement. Planned maintenance is repair work identified and managed through a Maintenance Management System (MMS). MMS activities include inspection, assessing the condition against failure/breakdown experience, prioritising, scheduling, actioning the work and reporting what was done to develop a maintenance history and improve maintenance and service delivery performance. Cyclic maintenance is the replacement of higher value components or sub-components of assets that is undertaken on a regular cycle, for example repainting and building roof replacement. This work generally falls below the capital threshold. Maintenance expenditure trends are shown in the following graph.

As can been seen from the graph above the maintenance budget required to meet the target maintenance events (as detailed in the supporting Sections of this Asset Management Plan) exceeds the current maintenance expenditure levels.

Lifecycle Management The supporting Sections of this Asset Management Plan contain information relating to the necessary funding for each specific asset category and the subsequent growth to that funding with the corresponding development of assets to that category. Future revision of this infrastructure Asset Management Plan will include linking required maintenance expenditures with required service levels. Maintenance of Asset Records In addition to the financial and technical information requirements for statutory reporting and to enable effective management, asset records must be kept. Maintenance of asset records adds value to the asset management process. Appropriate asset records that record relevant acquisition, operation maintenance, renewal and disposal information can be invaluable sources of information throughout the asset management process. The benefits of comprehensive asset records include: â&#x20AC;˘ â&#x20AC;˘

a record for each asset containing information such as condition, fair value, location, materials and so on recording maintenance performed ensures that it is not done twice and enables a review to confirm that it has been carried out, the expenditure of that maintenance and the subsequent change to the asset value

Australian Accounting Standards require assets to be revalued on a regular basis. This requirement ensures that assets are recorded at a value that reflects what the market would pay to acquire the asset or what it might cost to replace the asset in its present form. The Integrated Planning and Reporting Bill (2009) requires assets to be revalued annually. This can only be achieved with high quality asset data. The value of asset holdings recorded provides an indication of the level of resources that might be required to replace those assets in their current form.

Risk Management Categories of Risk Council has an adopted risk management framework which identifies risk in three major categories, which are as follows. 1. Opportunity-Based Risk There are two main aspects of opportunity-based risks; risks associated with not taking an opportunity and those associated with taking an opportunity. Opportunity-based risk may or may not be visible or physically apparent, it is often financial, it can have a positive or negative outcome, and it can have both short-term and longer-term outcomes. It can be managed by assessing the upside and downside of the risk. The use of cost-benefit analysis will make the nature of the risks clearer. An example of an opportunity-based risk in Council is the acquisition of new financial software. Should the software meet expectations then productivity is likely to be increased, along with staff morale. However, should the software prove difficult to

Lifecycle Management implement or unable to meet Council’s expectations, then both productivity and staff morale will fall and stakeholder confidence will be lost. 2. Uncertainty-Based Risk Uncertainty-based risk is the risk associated with unknown and unexpected events. Uncertainty-based risks are; unknown or extremely difficult to quantify, catastrophic or disastrous in nature, associated with negative outcomes, and not possible to control or influence. Examples of uncertainty-based risks for Council include: physical damage or damage to buildings by fire or flood; loss of a vital supplier; and influenza pandemics. 3. Hazard-Based Risk Hazard-based risk is the risk associated with a source of potential harm or a situation with the potential to cause harm. This is the most common risk associated with Council, as addressed by occupational health and safety programs. Hazard-based risks include: • •

physical hazards – including noise, temperature or other environmental factors chemical hazards – including storage and/or use of flammable, poisonous, toxic or carcinogenic chemicals • biological hazards – including viruses, bacteria, fungi and other hazardous organisms • ergonomic hazards – including poor workspace design, layout or activity and equipment usage • psychological hazards – that may result in physical or psychological harm, including bullying, sexual discrimination, workload or mismatch of job specification to employee capability Council generally addresses hazard-based risks through its OH&S program.

Areas of Risk Council faces two main risk areas: 1. Strategic Risk Council has identified the following strategic risk areas: • • • • • • • • •

financial governance stakeholder management corporate planning environmental asset/project management procurement and contract management human resource management knowledge management (including Information Technology)

Lifecycle Management Strategic risk is managed through Council’s annual Risk Management Plan due to the potential affect a failure in this area can have on Council’s operations. 2. Operational Risk These are risks that relate to the day-to-day operations of Council. They result from inadequate or failed internal processes, people and systems. The two main, interdependent components are operational integrity and service delivery. Operational risk arises from inadequate internal controls, inadequate or no documentation, poor planning and implementation, or inadequate supervision. Council has identified the following operational risk areas or categories: • • • • • • •

contract administration and procurement Workplace Health and Safety management project management and delivery public liability management human resource management fraud and corruption business continuity management

An assessment of risks associated with service delivery from infrastructure assets has identified critical risks to Council in both categories of risk. The risk assessment process identifies credible risks, the likelihood of the risk event occurring, the consequences should the event occur, develops a risk rating, evaluates the risk and develops a risk treatment plan for non-acceptable risks. Critical risks, being those assessed as ‘High’ - requiring immediate corrective action and ‘Significant’ – requiring prioritised corrective action identified in the Risk Management Framework (2008) are summarised in the following table. Risk Level

Insignificant

Minor

Moderate

Major

Catastrophic

Almost Certain

Significant

High

Likely

Moderate

Significant

High

Possible

Low

Moderate

Significant

High

Unlikely

Low

Moderate

Significant

High

Low

Moderate

Significant

Rare

Low

Lifecycle Management Renewal Renewal is the periodic replacement of assets or asset components. It is the renewal of existing assets that returns the service potential or the life of the asset to that which it had originally. Work over and above restoring an asset to original capacity is upgrade/expansion or new works expenditure. In the asset operation and maintenance phase, there will have been assessment of the asset on a continuous basis. This history of assessment provides valuable information as the asset nears the end of its useful life, and during its useful life at times when major expenditures are approaching. Council, armed with such information may choose to seek alternate asset options to support services rather than to continue with more of the same as used in the past. The usage of the asset, the regularity of its maintenance, the extent of unplanned maintenance and any associated downtime, can help to determine the retirement or disposal date of the asset. The current value of the asset is also a factor that should be considered. Its value may be such that an earlier or later disposal date is indicated. Two other factors that must be carefully considered in assessing the condition of an asset are the technical and commercial obsolescence aspects of an asset’s condition. In developing an asset renewal profile, there are a number of concepts to consider: • •

•

asset age – the elapsed time since the asset was constructed or acquired and brought into service current replacement cost as new – the cost to reconstruct/renew the asset. This cost is calculated on a full-cost attribution basis. In the case of major infrastructure assets, the cost will include the cost of design and construction and the indirect costs of the construction/acquisition useful life of the asset - generally, there are two approaches typically used to develop the asset renewal profile

One uses the age of the asset, in conjunction with its useful life replacement cost as new, to develop the profile. The other uses replacement cost of the remaining asset and its remaining useful life in age. Once the renewal profile is created, consideration can be given to deal with expenditure peaks and troughs.

and current the current lieu of asset strategies to

Typically, the strategies may include: • • •

extending the life of existing assets by specific maintenance strategies renewing some assets earlier than planned where the increase in expenditure appears to be of a permanent nature, planning for the transfer of funds from other areas or additional rate revenue

Lifecycle Management Asset Renewal Plan Assets requiring renewal are identified from condition data obtained from the asset register. Candidate proposals are inspected to verify accuracy of condition and to develop a preliminary renewal estimate based on adopted unit rates. Assets identified for renewal are ranked by priority and available funds and scheduled in future works programs. Renewal will be undertaken using ‘low-cost’ renewal methods where practical. The aim of ‘low-cost’ renewals is to restore the service potential or future economic benefits of the asset by renewing the asset at a cost less than replacement cost where possible. Renewals are to be funded from Council’s capital works program and grants where available.

Disposal Disposal, retirement or rationalisation of assets generally will occur due to changes in community demands or needs. Assessment of the need for assets is a part of the Council review process that determines whether it is meeting the needs and expectations of the community. Challenging the status quo and investigating innovative options for meeting the community service needs is all part of this process. Extensive community consultation is required to confirm community acceptance of disposal. As with acquisition decisions, to dispose of an asset requires thorough examination and must be taken within the integrated planning framework of Council that takes account of service delivery needs, corporate objectives, financial and budgetary constraints and the overall resource allocation objectives. Disposal options including demolition should be considered at the outset when completing the acquisition plan. The preservation of some assets means that, while the asset life cycle applies to all assets, some may not be considered for disposal for cultural or heritage reasons. There must be a defined relationship between the growth of Councils asset base, its income and capacity to maintain the service delivery of that asset base to meet community expectation, whilst continuing to deliver all the services required of Council. Currently there is no defined relationship between the growth of Council’s asset base and the subsequent funding to maintain the asset. This shortfall will be addressed by: • • • •

improving the distribution of funds to these assets funding asset renewal and maintenance based on condition rationalising assets as required managing assets to meet community service expectations

Lifecycle Management Asset Rationalisation The reassessment of an assetâ&#x20AC;&#x2122;s usefulness to Council should be made on a regular basis, on two criteria. They are: 1. the need for the asset. Does the organisation have a continuing need for the asset? Is the asset still providing a required service to the community? Is that service provision what the customers expect? Is there a more cost-effective way to provide that service? 2. the useful life of the asset. At acquisition, the asset will have been designed for a useful life, dependent on the factors outlined in the section on useful life. Where factors change, the useful life of the asset should be reassessed. Usage of the asset may have been more or less than planned. The condition of the asset may be better or worse than expected at this point in its life. Any change in the expected useful life of an asset will have accounting implications â&#x20AC;&#x201C; the value of the asset may need to be adjusted.

Plan Improvement and Monitoring Section 5 - Plan Improvement and Monitoring This section contains the financial requirements resulting from all the information presented in the previous sections of this infrastructure Asset Management Plan. The financial projections will be improved as further information becomes available on desired levels of service and current and projected future asset performance.

Financial Statements and Projections The financial projections are shown in the following graph for projected operating capital expenditure (renewal and upgrade/expansion/new assets). These projections are included in Council’s draft Long Term Financial Plan 2013 – 2023.

Funding Strategy Projected expenditure identified in the above graph is to be funded from Council’s capital budgets and include developer contributions and potential grant funding. The funding strategy is detailed in the Council’s 10 year long term financial plan.

Life Cycle Costs The life cycle cost of an asset is defined as ‘the total cost of that asset throughout its useful life including planning, design, construction, acquisition, operation, maintenance, rehabilitation and disposal costs.” This value must be used in the development of estimates for the delivery of new assets for Council. The introduction of life cycle costing will dramatically change the forecast capital expenditure listed above as capital costs. Capital costs will no longer reflect just ‘build’ cost but will include whole of life.

Plan Improvement and Monitoring Whole of life costs, on the other hand, are defined as the average annual cost required to sustain the agreed service levels. Whole of life costs include maintenance and asset consumption (depreciation) expense. This can be compared to â&#x20AC;&#x2DC;life cycle expenditureâ&#x20AC;&#x2122; to give an indicator of sustainability in service provision. Life cycle expenditure includes maintenance plus capital renewal expenditure. Life cycle expenditures will vary depending on the timing of asset renewals. A gap between life cycle costs and life cycle expenditure gives an indication as to whether present consumers are paying their share of assets they consume. The purpose of this infrastructure Asset Management Plan is to identify levels of service that the community needs and can afford and develop the necessary funding plans to provide the services. Future revisions of this Plan will include details of this ratio.

Valuation Forecasts Asset values are forecast to increase as additional assets are added to the asset base from construction and acquisition by Council and from assets constructed by land developers and others and donated to Council. The carrying amount of the asset categories (depreciated replacement cost or fair value) will vary depending on the rates of addition of new assets, disposal of old assets and consumption and renewal of existing assets. The entire asset base is required to be revalued annually under the Integrated Planning and Reporting Bill (2009). This requires each asset condition to be always accurate as the condition is directly proportional to the annual depreciation percentage applied to the renewal cost of the asset. This process is applied to each asset and subsequently each asset class, determining the renewed value of the asset class, the annual depreciation and the cumulative depreciation of the asset in total.

Key Assumptions Made in Financial Forecasts This section details the key financial assumptions made in presenting the information contained in this infrastructure Asset Management Plan and in preparing forecasts of required operating and capital expenditure and asset values, depreciation expense and carrying amount estimates. It is presented to enable readers to gain an understanding of the levels of confidence in the data behind the financial forecasts.

Plan Improvement and Monitoring Key financial assumptions made in this Asset Management Plan are:

1. Unit Rates Council has quantified unit rates for all assets for the construction or purchase cost of each asset. In some cases these unit rates are simply the purchase price of an asset for example a pit lid, or as complex as the inclusion of a variety of materials, plant and labour rates combined to create a single unit rate for an asset. This level of complexity does build in a certain error to the unit rate which when applied across the asset base can lead to a compounding error in the value of that asset base and the subsequent cost to maintain or renew the asset to deliver a service level or standard. Currently, Council includes the cost to dispose of an asset in the unit rate of that asset type. As Council moves towards strategic asset management this cost may be captured separately.

2. Annual Maintenance Cost per Unit In addition to the above, Council has determined an annual maintenance cost or rate per asset unit to create the direct and quantifiable link between the quantity of the asset and the funds required on an annual basis to maintain that asset, and the delivery of that assetâ&#x20AC;&#x2122;s service level or standard. As with the unit rate above, there is the potential for error to exist in these maintenance unit rates as the complex nature of the development of these rates can lead to the over or under stating of a particular element of a particular maintenance event. For example pot holing in sealed roads is quantified at a rate of $881.34m3. This figure is extrapolated from the per tonne rate of the material divided by the potential depth and area of average pot holes to create a unit rate.

3. Depreciation Methodology In 2008 Council adopted a depreciation methodology used to develop the fair value of its assets as required by the Division of Local Government. The depreciation methodology adopted is a Diminishing Value Depreciation Method. The methodology can be diagrammatically represented as follows.

(APV 2008)

Plan Improvement and Monitoring Essentially, the asset lifecycle is divided into five distinct phases. These phases are categorised by the condition of the asset. These phases are detailed in the table below. Rating 1 2 3 4 5

Description of Condition Excellent Good Average Poor Very Poor

Details Only minor maintenance and inspection required Minor maintenance required plus cyclic maintenance Maintenance required Significant renewal/upgrade required Unserviceable - replace or reconstruct

Rather than attempt to predict a â&#x20AC;&#x153;total lifeâ&#x20AC;? for the asset, the methodology places increased confidence in the asset phases where most information is known and where there is increased confidence. Typically, for assets that are consumed at an increasing pace, there is more confidence and knowledge towards the end of the asset life cycle as this is where most Asset Management activity is experienced and more data collected. The key to the methodology is to identify the factors that indicate a reduction in Future Economic Benefit or drive the future asset management decisions. The consumption (depreciation) of the asset can be calculated by using the time of transition for each phase taking into account the relative reduction in asset value. Due to the significant uncertainty about predicting the eventual total life of an asset there is only small room for error using the traditional straight-line approach. A miscalculation of 5% in total life will drive a 5% (material) error in the annual calculation of depreciation. Whereas, under the adopted methodology there is significantly reduced risk of error at all phase levels. In the phases of each assets life where most consumption (and therefore depreciation) is greatest the risk of error is reduced as compared to the traditional straight-line approach. This is because this phase is generally very short and the confidence levels are high due to the fact that it is also the point in an assets life that receives the most asset management attention and data collection. For most infrastructure assets this occurs towards the end of the assetâ&#x20AC;&#x2122;s useful life and reflects an increase in usage due to increased populations, loading and volumes of traffic flow for example.

Plan Improvement and Monitoring Improvements to Key Assumptions Accuracy of future financial forecasts may be improved in future revisions of this infrastructure Asset Management Plan by the following actions. 1. Improving Unit Rate Accuracy As described above Council has quantified unit rates for all assets for the construction or purchase cost of each asset. Whilst the complexity of the development of these unit rates may allow an element of error to be included in the original rate, the continual review of these rates, based on financial data captured against each asset, will see a reduction of error in the unit rates. The Asset Management ‘system’, by capturing the necessary data to supply the legislated financial reporting requirement, will itself redefine the unit rates as more and more data is captured to refine the values. 2. Improving Maintenance Rate Accuracy As with the unit rate above, there is the potential for error to exist in these maintenance unit rates as the complex nature of the development of these rates can lead to the over or under stating of a particular element of a particular maintenance event. A periodic review of these figures utilising the information captured against each asset will refine these unit rates. 3. Improving Condition Data As the depreciation associated with each asset is determined by the asset condition, a continual ‘live’ update of asset condition and the continual surveillance of the community’s asset will improve the financial information of the organisation.

Asset Management System Council maintains all asset data in a spatial format on a Geospatial Information System (ArcGIS). This data is readily available to be exported from that format into a variety of formats to suit a variety of needs. These needs include: • • • • • •

works programming current Asset Fair Value data expenditure forecasting condition summary extrapolation/manipulation of data and asset location and details

The responsibility for Asset Management is documented in Council’s POL-001 Infrastructure Asset Management Policy.

Plan Improvement and Monitoring Information Processes The key information sources into this infrastructure Asset Management Plan are: • • • • • • •

the asset register data on size, age, value, remaining life of the network the unit rates for categories of work/material the adopted service levels depreciation rates etc projections of various factors affecting future demand for services correlations between maintenance and renewal, including consumption models and data on new assets acquired by Council

The key information sources from this infrastructure Asset Management Plan are: • • • • •

the assumed Works Program and trends the resulting budget, valuation and depreciation projections the useful life analysis current condition ratings and business rules associated with Asset Management for any infrastructure asset category as contained in this Plan

These will impact Council’s Long Term Financial Plan, Delivery Program, strategic business plans, annual budget and departmental business plans and budgets.

Performance Measures The effectiveness of the infrastructure Asset Management Plan can be measured in the following ways: •

•

the degree to which the required cashflows identified in this infrastructure Asset Management Plan are incorporated into Council’s Long Term Financial Plan and Strategic Management Plan the degree to which 1-5 year detailed works programs, budgets, business plans and organisational structures take into account the ‘global’ works program trends provided by the infrastructure Asset Management Plan

Monitoring and Renewal Procedures This infrastructure Asset Management Plan will be reviewed during annual budget preparation and amended to recognise any changes in service levels and/or resources available to provide those services as a result of the budget decision process. The Plan is updated annually and due for revision June 2014. Future versions of this Plan will identify those sections of the Plan that have been improved.

References Wagga Wagga City Council, ‘Community Strategic Plan 2011 – 2021’ Wagga Wagga City Council, ‘Risk Management Plan’ Wagga Wagga City Council, ‘Long Term Financial Plan 2012 – 2022’ Wagga Wagga City Council draft ‘Long Term Financial Plan 2013 – 2023’ Wagga Wagga City Council, ‘Combined Delivery Program and Operational Plan 20122013’ Wagga Wagga City Council, ‘Asset Management Policy for Infrastructure Assets’ (POL-001) Wagga Wagga City Council, ‘Asset Management Strategy for Infrastructure Assets’ ‘International Infrastructure Management Manual’, Institute of Public Works Engineering Australia, Sydney, IPWEA, 2011 Institute of Public Works Engineering Website, www.ipwea.org.au

strategy.

Asset Management

strategy.

Document Review

ASSET MANAGEMENT STRATEGYINFRASTRUCTURE ASSETS POLICY REFERENCE NUMBER:

POL - 048

Original publication date July 2010 Revision number

Issue Date

Approved at

Approval date

July 2010

Ordinary meeting of Wagga Wagga City Council

1 September 2010

June 2012

Ordinary meeting of Wagga Wagga City Council

25 June 2012

This document is to be reviewed annually. Next review date: June 2013 RESPONSIBLE DIRECTOR

Director Infrastructure Services

Council is the custodian of the communityâ&#x20AC;&#x2122;s assets and has a responsibility to manage these assets to maintain their ability to provide an acceptable level of service to the community.

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Table of Content SECTION 1 - INTRODUCTION .......................................................................................... 4 INTEGRATION OF ASSET MANAGEMENT AND COUNCIL’S FUTURE DIRECTION .................. 5 SECTION 2 - DEFINITIONS ............................................................................................... 6 SECTION 3 –LEGISLATION ............................................................................................... 8 ACCOUNTING REGULATIONS ......................................................................................................... 8 LOCAL GOVERNMENT ACT 1993 ................................................................................................. 8 WORKPLACE SAFETY ACT 2012.................................................................................................. 8 ROADS ACT 1993............................................................................................................................ 8 PLANNING & ASSESSMENT ACT 1979 ....................................................................................... 9 DISABILITY SERVICES ACT 1993 ................................................................................................ 9 LOCAL GOVERNMENT AMENDMENT (PLANNING AND REPORTING) ACT 2009.................. 9 SECTION 4 – COUNCIL’S PLANNING PROCESS ...................................................... 10 COUNCIL’S TRADITIONAL ASSET MANAGEMENT STRATEGY ............................................... 11 COUNCIL’S ADOPTED ASSET MANAGEMENT STRATEGY....................................................... 11 IMPLEMENTATION FRAMEWORK ................................................................................................. 14 ASSET MANAGEMENT CYCLE ...................................................................................................... 15 SECTION 5 – FUNDING ASSET MAINTENANCE AND RENEWAL ....................... 20 SECTION 6 – IMPLEMENTATION OF THE STRATEGY ........................................... 21

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The Asset Management Journey Since 2007, when Wagga Wagga City Council started to change the way data relating to the community’s assets was collected and utilised, a new approach for asset management has been gaining momentum. This philosophy has been built on the principles of the International Infrastructure Management Manual, yet is unique to Wagga Wagga City Council. This new approach has long term goals, continuously improves methodologies used, is focused on the lifecycle of infrastructure assets and is based on individual asset data and risk management. To ensure the infrastructure which supports our community is sustainable for future generations we must strive to optimise the decisions made to manage it. This means that decisions need to analyse financial considerations, the life cycle of the asset, social and environmental responsibilities as well as the impact on economic development as a result of the decision. The community’s satisfaction will also need careful consideration. Council’s first Asset Management Strategy focused on organisational change. A change from the traditional asset management practice of maintaining a technical list of assets divorced from a financial asset register and maintaining them based on the expected life of the asset. To a new approach where individual assets are condition rated and maintained based on this rating, regardless of their age and where the associated costs are integrated with Council’s long term financial plan. Reflective of the improving nature of asset management in Council this Asset Management Strategy is made up of sections, which build on each other. The first section titled The Asset Management Strategy, was developed in 2010 and sets the direction and parameters for asset management within Council. This section is then supported by documents which outline the initiatives to be implemented and the milestones to be achieved for Council to progress through the asset management journey, these documents are called Strategic Direction – The focus for Asset Management. In 2011 there are two such documents, one includes the period from 2007 to 2011 and the other begins at 2012. As milestones are achieved, the outcomes will be reported and included on Council’s website.

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Introduction Section 1 - Introduction The City of Wagga Wagga has invested significant funds in infrastructure assets over many years in order to service the needs and enhance the quality of life of the communities within the Local Government Area (LGA). The importance of these assets to our community and their significance in relation to Wagga Wagga City Council’s budgets means that asset management must be a critical part of Council’s planning and service delivery. This strategy recognises the need to manage assets effectively as part of an overall service delivery philosophy rather than from a purely technical position. This means that the effective management of assets has a direct relationship to the asset’s ability to deliver services to a defined standard. Failure to adequately maintain existing assets, plan for the renewal or replacement of existing assets and develop new assets will result in agreed levels of service not being met by Council. The objective of this Strategy is to describe how Council will meet its commitment to asset management as documented in its Asset Management Policy and the process by which Council will implement the Infrastructure Asset Management System. This Strategy and the individual Asset Management Plans, developed as a result of the Strategy, will provide Council with detailed comprehensive information and knowledge to assist it with its short and long term planning to achieve its vision for the LGA. Infrastructure assets in the Wagga Wagga LGA include the following: • • • • • • • •

roads - including footpaths, kerb and gutter, bridges, public shelters, culverts and carparks recreation facilities, which are assets contained within parks and open spaces drainage infrastructure buildings and their components airport saleyards sewer infrastructure and flood protection infrastructure.

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Introduction Assets which are evolving in importance, some of which are also unique to our LGA, but are not contained within the Strategy include: • • • • • •

office furniture and equipment information technology assets art works image and marketing items such as the community art flagpoles library content and public art

Integration of Asset Management and Council’s Future Direction Council prepares a ten year Community Strategic Plan on behalf of the community in the Wagga Wagga LGA. The purpose of the Plan is to identify the community’s main priorities and aspirations for the future and plan strategies to achieve these goals. Eight future directions form the basis of the Community Strategic Plan, the Asset Management Strategy and supporting suite of documents integrate with three: • • •

Future Direction 2 – a community with health and wellbeing Future Direction 3 – viable and connected rural and urban communities, and Future Direction 6 – a sustainable environment

The implementation of the Asset Management Strategy and the Asset Management Plan and supporting sections will contribute the following Strategies of the Community Strategic Plan: • • •

2.4 keep our community spaces clean and healthy 3.2 improve and maintain local community facilities, and 6.4 develop sustainable built and natural environments for current and future generations through effective land-use management and planning

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Definitions Section 2 - Definitions The following terms are used in this Strategy and associated asset management documentation for the City of Wagga Wagga: Asset A physical component or sub component of infrastructure which has value, enables services to be provided and has an economic life of greater than twelve months. Asset Management The combination of management, social, financial, economic, engineering and other practices applied to physical assets with the objective of providing the required level of service in the most cost-effective manner. Asset Management Plan A plan developed for the management of infrastructure assets associated with the delivery of a service that combines multi-disciplinary management techniques (including technical and financial) over the lifecycle of the asset in the most cost-effective manner to provide a specified level of service. Asset Management Strategy A strategy for asset management covering the development and implementation of plans and programmes for asset creation, operation, maintenance, rehabilitation/replacement, disposal and performance monitoring to ensure that the desired levels of service and other operational objectives are achieved at optimum cost. The strategy includes Councilâ&#x20AC;&#x2122;s methodology for achieving these outcomes. Average Annual Asset Consumption (AAAC) The dollar amount of the replacement cost consumed per year of the life of the asset. Current Replacement Cost The cost of replacing the service potential of an existing asset, by reference to some measure of capacity, with an appropriate modern equivalent asset. Depreciation The wearing out, consumption or other loss of value of an asset, whether arising from use, passing of time or obsolescence through technological and market changes. It is accounted for by the allocation of the cost (or revalued amount) of the asset less its residual value over its useful life. Economic Life The period from the acquisition of the asset to the time when the asset, while physically able to provide a service, ceases to be the lowest cost alternative to satisfy a particular level of service. The economic life is at the maximum when Page 6

Definitions equal to the physical life; however obsolescence will often ensure that the economic life is less than the physical life. Fair Value The fair value of an asset when no depth of market can be established is defined as the current replacement cost less the accumulated depreciation calculated to reflect the consumed or expired service potential of the asset. Where a depth of market can be established, fair value is the most advantageous price reasonably obtained by the buyer in an arms length transaction between knowledgeable and willing parties Level of Service The defined service quality for a particular activity (e.g. roads) or service area (e.g. street lighting) against which service performance may be measured. Service levels relate to quality, quantity, reliability, responsiveness, environmental acceptability and cost. Life A measure of the anticipated life of an asset or component; such as time, number of cycles, distance intervals, consumption etc. Lifecycle Cost The total cost of an asset throughout its life including planning, design, construction, acquisition, operation, maintenance, rehabilitation and disposal costs. Replacement To complete replacement of an asset that has reached the end of its life, so as to provide a similar, or agreed alternate, level of service. Replacement Cost The cost of replacing an existing asset with a substantially identical new asset. Risk Management Coordinated activities to direct and control an organisation with regard to risk. Service Standard The service delivered by a particular asset as expected by the community. This service delivery standard is expressed in the form of a number representing asset condition (ie. 1-5) Sustainability Sustainability for asset managers is not simply about prolonging the life of their assets, and ensuring that they operate efficiently and economically. It is also about considering how the delivery and operation of their asset impacts on the environment and on society.

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Asset Management Legislation Section 3 –Legislation Council is required to comply with the following legislation and standards in relation to asset management. Accounting Regulations The following Australian Accounting Standards apply to Local Government: • • • •

AASB 116 Property, Plant and Equipment AAS 27 Financial Reporting by Local Government AAS 136 Impairment of Assets AAS 137 Provisions, Contingent Liabilities and Contingent Assets

Local Government Act 1993 Section 8 - The Councils charter is: •

•

to directly or on behalf of other levels of government provide (after due consultation) adequate, equitable and appropriate services and facilities for the community and to ensure that those services and facilities are managed efficiently and effectively to bear in mind that it is the custodian and trustee of public assets and to effectively plan for, account for and manage the assets for which it is responsible, and to engage in long term strategic planning on behalf of the local community

Section 403 (2) Asset Management Planning- included in Council’s resourcing strategy for the provision of resources required to implement the Community Strategic Plan, this comprises the Asset Management Strategy and Plan. Workplace Safety Act 2012 An act to promote and improve standards for workplace safety and welfare. The Act places obligations on employers to provide a safe working environment (including plant maintenance) for its employees and to ensure that they are adequately trained and that the plant they use is safe and fit for purpose. Roads Act 1993 The Act specifies a new framework and principles for the management of the road network as well as specifying the rights and duties of road users, the roles and functions of road authorities and the preparation of Road Management Plans. Page 8

Asset Management Legislation Planning & Assessment Act 1979 The Act specifies the framework that applies for planning the use, development and protection of land in the present and long-term interest of all members of the community. Disability Services Act 1993 This Act requires Council to ensure that the service it provides does not discriminate against any person or group of persons. Where existing infrastructure does not conform to current design standards, then Council may produce an action plan detailing the actions it intends to undertake to ensure that all of its assets comply to universal access provisions and Codes of Practice. Local Government Amendment (Planning and Reporting) Act 2009 The Integrated Planning and Reporting framework aims to: •

• • •

improve integration of various statutory planning and reporting processes undertaken by councils as required by the Local Government Act 1993, the Department’s Guidelines and the Environmental Planning and Assessment Act 1979 strengthen Councils’ strategic focus streamline reporting processes ensure that the Local Government Act 1993 and the Integrated Planning and Reporting Guidelines support a strategic and integrated approach to planning and reporting by local councils.

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Council’s Planning Process Section 4 – Council’s Planning Process Council’s planning process is continuous, allowing Council to implement its vision over the next four years and further into the future. Not only does this planning set goals and objectives for the next four years but it also links with a longer term strategic view for the future needs of the community it serves. This longer term view is derived from Council’s Community Strategic Plan and reflected in the Long Term Financial Plan. As infrastructure provides the platform for community wellbeing, economic development and environmental sustainability, asset management is a key feature of the planning framework and forms part of the resourcing strategy. The relationship between Wagga Wagga City Council’s Community Strategic Plan and annual planning is shown below:

Council’s planning process provides an over-arching framework, under which key strategic components such as this Asset Management Strategy are developed. Page 10

Council’s Planning Process As part of our business, Council owns and maintains assets depreciated to a value of approximately $1.2 billion (in 2010 dollars) which enables the delivery of services to the community. Council acknowledges that it has a duty and responsibility to maintain these assets and strives to ensure that optimum usage is achieved and that the community’s expectations are met.

Council’s Traditional Asset Management Strategy Wagga Wagga City Council has managed its assets in a traditional manner by maintaining a technical list of assets divorced from any financial asset register, and monitored the condition of those assets based on a technical deterioration model. This model identifies the frequency of intervention for any preventative or corrective maintenance action and applies that to its assets, thereby treating each individual asset to some form of maintenance at a point in its life cycle that equates to that intervention period. This model has no relationship to community expectations of service delivery of the asset nor does it allow for differing rates of deterioration of assets of a similar category. This variable deterioration is identified in part through asset surveillance. This surveillance identifies assets deteriorating at increased rates and highlights these assets for maintenance at reduced intervals. The application of a standard intervention timeframe across every asset category would, in principle, allow for simplistic application of maintenance funding across asset categories by dividing the sum of a particular category by the intervention frequency thereby determining the amount of annual intervention required and the subsequent annual cost. Unfortunately the varying rates of asset deterioration and the subsequent reallocation of maintenance, and therefore funding to address the varying asset deterioration, has led to a situation whereby current practice is to allocate a budget based on historical expenditure levels but there is no clear link between a budget allocation and long term service consequences. This leads to funding and budget distribution that has no direct relationship to asset condition, life cycle, renewal or depreciation.

Council’s Adopted Asset Management Strategy This Strategy details how Council will meet its commitments stated in the Asset Management Policy which was adopted by Council in February 2009, and revised in 2011. Council allocates significant funds to the improvement of its asset base (i.e. creating new assets). Approximately 64% of the funds allocated by Council are directed to creating new assets or improving the level of service provided by existing assets. As the asset base continues to grow Council’s sustainability will decrease unless additional funding is provided, or Council begins to rationalise its current asset base. This may mean not replacing assets when they reach the Page 11

Councilâ&#x20AC;&#x2122;s Planning Process end of their useful life, disposing of assets by selling them, or stemming the growth of the asset base by reducing the development of new assets. There are a number of individual asset categories that are significantly under funded, based on their general condition. The implications of this underfunding lead to these asset categories deteriorating at an accelerated rate which is greater than the rate their condition is being improved, this increases the potential for asset failure. The below graph indicates the actual annual funding for asset maintenance as identified in Councils audited annual reports versus the required annual maintenance, also identified in the audited annual reports for the period. The graph clearly highlighting a funding shortfall for the period 2000/01 to 2010/11 between the required maintenance for infrastructure assets and the funds actually allocated. In fact, the graph represents a shortfall estimated at $84 million dollars over the previous decade in maintenance funding identified as required to maintain these assets to a â&#x20AC;&#x2DC;satisfactoryâ&#x20AC;&#x2122; condition. This reported shortfall is a clear indication that the traditional methodology for maintaining infrastructure has failed.

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Council’s Planning Process The infrastructure assets of Council at 30 June 2009 as reported in the audited Annual Financial Statements are as follows: Asset Drainage assets (including sewer and flood protection) Roads (including kerb and gutter, footpaths, car parks and bridges) Buildings TOTAL

Replacement Value $985,302

Written Down Value $792,996

$362,357

$300,900

$103,754

$92,197

$1,451,413

$1,186,093

Local Government faces a major challenge in asset management, Councils across NSW must to try maintain existing assets to standards which meet the needs of the community regarding service delivery for its infrastructure. Wagga Wagga City Council, in recognising the significant investment required to maintain our infrastructure assets, has taken a strong position and is committed to funding the depreciation costs of our existing asset base over a period to ensure the infrastructure is maintained to a condition which will enable it to provide the level of service agreed to by the community. This strategy sets the future direction of asset management within the Wagga Wagga LGA. In order to do this effectively, it must consider other Council strategies and plans and how they impact on this Strategy. In turn, this strategy will impact on some of these plans and may require them to be reviewed and altered as necessary to ensure consistency between strategies and plans. This Asset Management Strategy may impact on the following Council documents: • • • • • • • • • • • •

Risk Management Strategy Resource Recovery Strategy Sewer Business Plan Parking Strategy Shared Path Strategy Integrated Movement Study Playground Strategy Urban Salinity Management Plan Recreation and Open Space Strategy Forward Works Plan Road Corridor Strategies Long Term Financial Plan Page 13

Council’s Planning Process • •

Community Strategic Plan and Cultural Plan.

Further consideration of these strategies will be undertaken as part of the preparation of detailed asset management plans as a number of these are asset specific. This Asset Management Strategy must consider the requirements of the Community Strategic Plan and Council’s IT and E business Strategies. In relation to the IT and E business Strategy, this Asset Management Strategy requires the review of asset management systems and therefore this review will be done under the guidance of the existing policies and recommendations within the IT Strategy.

Implementation Framework The philosophies underpinning the development and implementation of asset management within Wagga Wagga City Council are as follows: •

• • •

• •

involvement of all stakeholders (including the community, elected Councillors and staff, Government Departments) in the development of strategies, policies and service standards, the delivery of services and in the decision making of relevant matters concerning Council’s infrastructure adoption and implementation of best practice asset management achievement and maintenance of financial sustainability of all Council assets Managers responsible for delivering a service will also be responsible for the management and care of assets involved in the delivery of their services asset management is not a stand alone function but must be integrated in the delivery of services asset management is a corporate tool and is supported by the entire organisation

The following principles guide Council and its staff in making decisions and formulating policies and strategies: •

•

funds will be allocated to asset categories based on assessments of community need, community satisfaction, utilisation of the asset, importance of the asset to the community and Council, risk, impact on the environment and other matters generally in accordance with quadruple bottom line analysis an integrated planning approach will be used to obtain the best outcomes for the community and Council in relation to asset management Page 14

Council’s Planning Process The current responsibilities for asset management within Council are detailed in Council’s Asset Management Policy. Implementation of this Strategy is the responsibility of the Manager, Infrastructure Planning in consultation with the Asset Management Reference Group. This Strategy, the Asset Management Plan and supporting Sections will be reviewed by the Asset Management Reference Group on an annual basis. The Manager Infrastructure Planning is responsible for the review and amendment of this Strategy.

Asset Management Cycle

The above diagram outlines the Asset Management Cycle adopted by Council that supports this Asset Management Strategy. The principles embodied in the cycle support community based service delivery expectations of asset functions and provide continual up to date information on Council’s asset base. This information pertains to each individual asset’s condition, financial status, service delivery capacity and depreciated position. This cycle will allow the organisation to provide asset data to the elected Council and the community on the service delivery capacity of its assets, the true asset category condition and Council’s true depreciation position. It will Page 15

Council’s Planning Process allow renewal budgets to be based on holistic infrastructure data allowing funding distribution to more closely reflect infrastructure condition and community expectation. The condition of each individual asset will be captured and collated in a single database. This database will identify those assets not deemed to be meeting the community service delivery needs and will form the basis of a works program, to which funding can be allocated by the elected Council. As the condition of the asset is improved via maintenance or renewal, the information relating to the works will be captured in the database. Appropriate elements from that information will be allocated to the individual asset to change its condition rating and also its financial position, identifying if the work was either capital or maintenance and the subsequent change to the depreciation of the asset. The newly changed asset will then be listed as being above the agreed level of service and will be monitored as its delivery and performance is consumed over its lifetime. When the asset condition decreases to below the agreed level of service, the asset will again be added to the list of assets requiring maintenance or renewal for consideration in forming the works program. Key elements of the Asset Management Cycle Asset Register Council will implement a system to catalogue all assets contained within the categories identified in the Asset Management Policy (POL-001). This register of assets will capture all associated data for every asset including, but not limited to: • • • • • •

• •

•

unique identification number location – captured via GPS and stored in Councils ARCGIS system date of birth- date asset was introduced into service dimension construction material asset sub-category- certain assets are comprised of sub assets and these assets will be recorded as such. An example of subcategories is the breakdown of a sealed road into, formation, pavement and seal. Generally an asset is broken into sub assets when elements of the asset are consumed at varying rates and therefore have varying depreciation and service life. The sub categorising of assets allows accurate recording of asset deterioration and associated depreciation and provides more accurate financial and condition data for Council asset condition data – based on specific criteria for each asset category asset performance - related to assets where condition is not the defining parameter for asset renewal or maintenance (i.e. some underground assets) annual depreciation Page 16

Council’s Planning Process • • • • • •

accumulated depreciation original cost replacement cost residual value unit rates for renewal step change cost (i.e. the cost to improve an asset by one or more condition ratings)

Service Standards – Works Programming A significant output of the Asset Management System is the production of annual work programs based on asset condition, contained in the Asset Register. These work programs are a result of the assessment of each asset in each category against a certain service delivery standard developed by Council, based on community consultation. These service standards are created to identify the minimum community accepted standard for every asset category based on the asset’s ability to provide service, rather than its technical condition. These standards will correlate to a condition rating number which will allow assets to be categorised based on condition. The assessment of assets against these standards will identify those assets requiring maintenance, in the form of maintenance, replacement or renewal of a particular sub category or the entire asset. This list of assets requiring maintenance will provide the data used to determine the annual works program. The actual assets to receive maintenance from this list each financial year, and therefore provided for in the budget, will be determined by: • • • •

the capacity of the organisation to perform maintenance the distribution of available funding to all asset categories competing for maintenance to increase the service delivery standard the level of risk the asset is considered to pose to the community and/or Council staff and Council’s internal strategic decision making in relation to asset maintenance ( e.g. which asset categories take priority)

Completed Works Upon completion of the elements of the annual works program, advice will be received by Council’s Asset Integrity Section who will update the condition of the asset. The advice will contain information about the works carried out, the list of materials used, the amount of work completed and other information including cost. This advice will be provided to the Asset Integrity Section via the Divisions responsible for the delivery of the works. This includes advice from Development Services on developer contributed assets.

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Council’s Planning Process This information will be uploaded against the particular asset (or sub asset) to identify the asset’s renewed condition and subsequent change to the asset value and depreciation etc. The continual capture of data by the Asset Management System will provide Council with an accurate, current and valid valuation and depreciation methodology for all assets. Data Feedback The return of data from those Divisions of Council performing the annual works program will be by way of: •

•

electronic update – the application of software available on worksites to upload information pertaining to works program details. This data may contain such information as amended condition rating, materials used, variations to location data, material costs and so on informal notification – unsolicited information pertaining to changed asset condition from the community, Council staff or contractors performing works formal notification – asset condition data reported by contractors and consultants performing asset renewals or maintenance

The Asset Register will be updated based on methods developed by Council’s Asset Integrity Section as it is unlikely that one method will suit all functions providing information to the Asset Management System. Continual management of this asset knowledge will maintain an accurate financial position for Council in relation to its infrastructure and will also provide immediate and accurate information on the condition, service delivery standard and renewal requirement of a single asset or asset category. In addition Council will gain the ability to track, monitor and forecast asset depreciation and future costs for renewals to the community, subject to a variable service delivery standard model determined by the community. New Assets Council’s infrastructure asset base increases by several means, including: •

•

delivery of Council’s Capital Works Program. Council will develop strategic infrastructure plans relating to the retrofitting of existing assets to meet increasing or changing standards of infrastructure, or the development of new infrastructure to meet the growing needs of the community the inheritance of developer delivered infrastructure. As new subdivisions and growth areas of the City and surrounds are developed there is a requirement to create the necessary infrastructure for the subdivision. This infrastructure is developed as a condition of consent associated with the Development Approval process and once accepted by Council the infrastructure (eg roads, footpaths, drainage, open space etc) is included in Councils asset base

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Councilâ&#x20AC;&#x2122;s Planning Process New assets will be introduced to the Asset Management System via notification to the Asset Integrity Section of the Infrastructure Planning Division. Each asset will be assigned a unique identification, and the financial and relevant technical details associated with the asset will be recorded against this number. The new asset will then be treated in the same manner as existing assets.

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Implementation of the Strategy Section 5 â&#x20AC;&#x201C; Funding Asset Maintenance and Renewal Asset management influences the funding of maintenance and renewal of assets as well as the replacement, improvement or acquisition of assets. The levels of funding for these activities are contained in Councils Long Term Financial Plan, the Four Year Delivery Plan and annually in Councils Operational Plans. The development of service standards for assets and the condition rating of assets against these standards will provide Council with a priority list of works that will identify assets requiring intervention to improve their condition to meet the community expectation of asset service delivery. Council will be able to make data based decisions on asset improvements in the context of the entire asset category, thereby allocating adequate funding to the asset on an annual and future basis. This will assist in preventing the decline of assets due to inadequate funding based on the current budget process that doesnâ&#x20AC;&#x2122;t provide for more than a fiscal yearâ&#x20AC;&#x2122;s worth of data. Forecasting asset renewal and maintenance budgets against community service standards will assist to ensure that adequate funding is allocated to each asset category over a period necessary to ensure the standard is met and maintained. This will assist in removing the inconsistent application of funding from year to year and replace it with a process that will effectively forecast funding required to maintain assets which meet the community expectation.

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Implementation of the Strategy Section 6 â&#x20AC;&#x201C; Implementation of the Strategy The implementation of the Strategy will be demonstrated through the achievement of a set of strategic milestones as outlined in the Strategic Direction for Asset Management documents. The focus of the milestones will change over time as Council progresses through the asset management journey.

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strategy.

Asset Management

strategic direction. 2007 - 2011.

Strategic Direction in 2007 Asset Management Strategic Direction in 2007 The focus of this Strategy in 2007 is to develop initiatives and processes to enable Council to implement a new approach to asset management, where individual assets are condition rated and maintained based on this rating, regardless of their age and where the associated costs are integrated with Councilâ&#x20AC;&#x2122;s long term financial plan.

Asset Management Focus in 2007 1. To continuously improve Councilâ&#x20AC;&#x2122;s knowledge regarding the current asset base, including physical asset condition and financial information. 2. To promote the sustainable use of the communityâ&#x20AC;&#x2122;s infrastructure assets. 3. To innovatively present the infrastructure data, asset management practices and financial information to internal stakeholders and the community. 4. To develop and begin to implement a change to asset management procedures and principles. 5. To provide innovative asset management technology to stakeholders. 6. To encourage relevant Council stakeholders to become part of the new approach to asset management.

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Strategic Direction in 2007 Asset Management Strategic Milestones in 2007 The Strategy will be implemented through the following milestones. These milestones will be occurring concurrently or sequentially, subject to their dependency on other action items. Develop Asset Register     

Develop Asset Register system/process Create unique identifier system Appoint unique identifiers to every asset Capture all available asset maintenance data Capture all current asset condition data

Develop Asset Management Plans       

Develop cost models for all asset categories Develop asset life cycles Develop condition assessment criteria and model Develop intervention levels Develop cost of asset renewal Develop unit cost per asset Develop business rules associated with asset categories including ‘whole of life’ costing

System Structure/Software/Processes   

Decide on a platform for the Asset Management System Identify system development pathway Develop condition data collection tools

Develop Report Functions    

Develop works report from condition data Develop ‘work order’ or similar system Develop 'works completed' report tool Develop data reports for asset management

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strategy.

Asset Management

strategic direction. 2012 - 2016.

Strategic Direction 2012 Asset Management Achievements 2007 to 2011 Council’s first Asset Management Strategy was actioned through the achievement of the following milestones. Asset Register The development of an effective asset register is a long term goal based on the methodology of continuous improvement. The process began in 2007 with an asset audit to spatially map the quantities and location of infrastructure assets across the Wagga Wagga LGA. Based on this information, an asset register was created using Council’s electronic mapping system, ArcGIS. As further information about the individual asset is collected it is added to the register. As at 2011 the register includes the following information for each unique segment of infrastructure assets included in the Asset Management Plan: 

asset type



asset location



total network quantity



condition ratings for each asset segment

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the last inspection date

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images of the asset, and

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characteristics of the asset components.

Asset Management Plans Council has developed an Asset Management Plan and 20 supporting sections, based on the following key elements:        1

taking a life cycle approach developing cost-effective management strategies for the long term providing a defined level of service and monitoring performance understanding and meeting the demands of growth through demand management and infrastructure investment managing risks associated with asset failures sustainable use of physical resources, and continuous improvement in asset management practices.1

IIMM 2006 Sec 1.1.3, p 1.3

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Strategic Direction 2012 The Asset Management Plan and supporting sections are fundamental to the achievement of these key elements. The cornerstones of the Plan and supporting sections are:       

Asset Management System In 2011 Council purchased an asset management software system. This system will allow Council to develop its systems and processes for the management of workflow and asset management activities between office-based computer systems and mobile field operations staff and contractors. The system will assist in capturing and managing unique asset information, including measurements, construction dates, condition ratings, inspection results and schedules, photos, current asset value, residual value and recognise subcomponents. It will automate the process of work orders, have a relationship with the ledger and allow for predictive modelling. Works reports from condition data, works completed tool and data reports for asset management This milestone closes the loop between the data captured in the asset register and the works implemented throughout the Wagga Wagga LGA. Each month stakeholders from across Council are asked to report on works completed. This data is then used to update the asset register.

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Strategic Direction 2012 Asset Management Journey The milestones achieved to date focus on developing the tools required to implement the new approach to asset management. They are concerned with capturing asset data, using this data to support decision making and communicating the methodologies of asset management Council has adopted. While these are significant milestones, they represent the beginning of the asset management journey. The second phase of the asset management journey will concentrate on:     

changing the organisational culture to align with the new asset management approach continuously improving the understanding of asset management principles throughout the organisation encouraging stakeholder engagement in the new approach engaging with the community to define their level of service for infrastructure assets, and integrating the Asset Management Planning documents with Council’s other strategic plans.

The below image represents the asset management journey from the beginning when an organisation decides to base decisions on the condition rating of assets to an advanced philosophy based on optimised decision making. Based on the achievements to date, it is estimated that Council is in between traditional and core asset management. It is expected that the implementation of phase two of the Asset Management Strategy will see Council progress to core asset management.

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Strategic Direction 2012 Asset Management Strategic Direction in 2012 The implementation of this Strategy will develop initiatives to progress Council through the asset management journey. It will build on the current asset management framework and improve the practices which influence the quality of strategic decisions relating to infrastructure networks and promote the organisational change required to support this.

Asset Management Focus in 2012 1. To begin to understand the level of service, satisfactory to the community for asset categories included in the Asset Management Plan 2. To continuously improve Councilâ&#x20AC;&#x2122;s knowledge regarding the current asset base, including asset condition and financial information 3. To continuously improve the communication methodology and documentation relating to infrastructure data, asset management practices and financial information 4. To continue to improve asset management systems, information and procedures to support effective decision making 5. To continue to support an organisational culture which encourages involvement in the new approach to asset management

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Strategic Direction 2012 Asset Management Strategic Milestones 2012 to 2016 Levels of Service   

Develop innovative community engagement initiatives Implement community engagement initiatives across the Wagga Wagga LGA Set the level of service for each asset category based on the outcomes of the community engagement

Asset Unit Rates    

Develop a register of asset components to be given a uniform unit rate Research the unit rate for each asset component in cooperation with stakeholders Define the accepted unit rate for each asset component Develop a Unit Rate Supporting section of the Asset Management Plan for internal use

Continuous Improvement of Asset Management Documentation     

Identify gaps in the current Supporting Sections of the Asset Management Plan Develop initiatives to address the gaps identified Review and update Supporting Sections of the Asset Management Plan Review and update condition data and financial information Improve the integration of the asset management planning documents with Council’s strategic plans

Nature Strip Supporting Section      

Locate and spatially map current asset base Develop condition rating methodology and inspection regime Conduct condition rating of the network Develop current liability of the network Establish intervention levels, targeted maintenance events and projected costs Develop the Nature Strips Supporting Section Page 6

Strategic Direction 2012 Implementation of Asset Management Software     

Training of Council Assetic Administration Team Setup of roads and bridges asset categories Go-Production, system up and running for Admin Team Go-Live , system up and running for Council staff o Develop supporting business rules Set up remaining asset categories in production and go live

Asset Management Procedures for Council    

Develop a list of procedures to be included Develop procedures in cooperation with stakeholders, based on Council’s processes and systems Collate procedures and communicate them with stakeholders Develop a supporting section of the Asset Management Plan for internal use

Council Capitalisation Policy 

 

Consult with stakeholders to establish and agree on:  capital activity versus operational activity  minimum capital value for specific activities identified as capital activity Develop the policy document Policy approved by Corporate Review Committee, ETeam and Council

Asset Management Maturity   

Develop and implement initiatives to survey and benchmark Council’s progression through the asset management journey Assess if the asset management documentation contribute to Council’s strategic objectives Assess if the Asset Management Plans are integrated with Business Owner plans

Asset Management Reference Group Workshops  

Develop initiatives to engage stakeholders in asset management workshops Develop and implement a schedule of asset management workshops for the Asset Management Reference Group Page 7

questions?

comments? contact us. contact us Wagga Wagga City Council PO Box 20 Cnr Baylis & Morrow Sts Wagga Wagga NSW Ph: 1300 292 442 Fax: (02) 6926 9199 Email: council@wagga.nsw.gov.au