Kalamunda Builds Asset Management Strategy to 2023 A Plan to ensure Sustainable Community Infrastructure

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1 Kalamunda Builds Asset Management Strategy to 2023 A Plan to ensure Sustainable Community Infrastructure

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3 Contents Page 1. Introduction Purpose & Objective Of The Strategy Key Strategices Key Benefits Of The Strategy Implementation Corporate Asset Management System 4 2. Strategies 5 3. Asset Management Process Key Performance Indicators Strategy Review References 17 Attachment 1: Background Community Profile Strategic Asset Management Within the Integrated Planning Framework Alignment With The National Asset Management Framework Roles And Responsibilities Legislative Control Of Asset Management 22 Attachment 2: Current Position & Status Of The Shire s Asset Planning Shire s Asset Stock Asset Stock & Replacement Costs Levels Of Service Snapshot Of Health Of Asset Stock Asset Management Maturity Measuring The Shire s Asset Management Maturity Snapshot Of Asset Management Issues Facing The Shire 31 Attachment 3: Long-Term Projections 32 Attachment 4: Asset Management Maturity Matrix 36 3

4 4 The objective of this Asset Management Strategy is to develop a structured set of key actions.

5 1.0 Introduction 1.1 Purpose & Objective of the Strategy The purpose of this Asset Management Strategy (AMS) is to provide a framework for the Shire of Kalamunda (the Shire) to meet its statutory obligations with respect to the Integrated Planning and Reporting Framework and Guidelines being introduced in Western Australia as part of the State Government s Local Government Reform Program. These reporting requirements and guidelines will be reflected in strategic asset management documents. The objective of this Asset Management Strategy is to develop a structured set of key actions to enable the Shire to improve its asset management practices in line with the Shire s Strategic Community Plan to 2023 and Asset Management Policy. The AMS together with a subsequent Asset Management Plan (AMP) for each asset class will provide the Shire with the comprehensive information and knowledge necessary for its short-term and long-term service delivery and asset management planning. Figure 1 Elements of WA Asset Management Framework Department of Local Government Asset Management Framework and Guidelines May

6 1.2 Key Strategies This Asset Management Strategy proposes the following nine Strategies Strategy 1: Asset Management Steering Group Strategy 2: Roles, Responsibilities and Skills Strategy 3: Asset Information Strategy 4: Hierarchy Strategy 5: Risk Management Strategy 6: Quality / Standards Strategy 7: Systems and Integration Strategy 8: Renewal vs New Assets / Funding Strategy 9: Continuous Improvement To be successful, it is impor tant that the community infrastructure is provided and maintained at a reasonable level. 2

7 1.3 Key Benefits of the Strategy Implementation In its Strategic Community Plan to 2023, the Shire has established six strategic priorities. For Strategic Priority 4 Kalamunda Develops: Using our land and assets diversely and effectively, a set of objectives for asset management including indicators have been developed, and will be measured and reported annually. To be successful, it is important that community infrastructure is provided and maintained at a reasonable level, commensurate with community expectations, technical requirements and affordability. Additionally, it will be necessary to implement strategies to enable the Shire to determine options for maintaining, refurbishing, upgrading, timely disposal and, when required, acquisition of infrastructure assets. Thus, the Shire has a critical need to adopt good asset management practices. By implementing this Strategy, the Shire is aiming to improve its asset management practices to provide a more sustainable service delivery process. The key benefits are: The ability to provide better outputs with fewer resources by better aligning the Shire s resources and needs. The ability to understand what condition the Shire s assets are in and to monitor the effect the Shire s actions are having on them. Having a key set of actions that will allow the Shire to manage the provision of these assets into the future at optimal long-term cost. Being able to determine appropriate levels of funding for operational actions on each asset class in line with service level targets. Being able to clearly define what service levels the Shire can deliver to the Shire s customers, the ratepayers and users. 3

8 1.4 Corporate Asset Management System To assist the Shire to successfully move forward with its asset management practices, the implementation of an Asset Management System called Assetic s MyData commenced in The solution chosen by the Shire is an advanced system, as it provides both operational and strategic solutions in one system. Developed specifically to meet the needs of Local Government Authorities in Australia, it is considered best of breed by its users. In order to undertake long term financial modelling and in line with contemporary good practice, the Shire is using a Condition Rating Scheme where assets are scored between 1 (Very Good) and 5 (Unserviceable). Currently the average conditions of the Shire s major infrastructure assets are: Roads 1.9 (very good) Footpaths 2.3 (good) Buildings 3.2 (average) The long-term projections drawn from the Corporate Asset Management System are covered in more detail in Attachment 3: Long-Term Projections. In order to under take long term financial modelling and in line with contemporary good practice, the Shire is using a Condition Rating Scheme where assets are scored 4

9 2. Strategies As noted in Attachment 2, the Shire has made significant improvements in asset management practices over the past two years as evidenced by the improvement in the Asset Management Maturity scores. It is vital that the Shire capitalises on its efforts to date with a relevant continuous improvement strategy. By adopting the following strategies, the Shire will move closer to the ideal Asset Management Maturity Score. The following strategies are a series of linked steps that will enable the Shire to produce advanced Asset Management Plans which will guide the long-term financial planning for its assets. Asset Management is an organisational imperative and needs to be reflected in a cross functional partnership arrangement. An Asset Management Steering Group (AMSG) needs to be driven by senior management and be focussed on delivering outcomes. Deliverable 1.1: A draft charter for the AMSG will be provided in the Asset Management Strategy (2013). Deliverable 1.2: AMSG to report to Development & Infrastructure Services Committee and Ordinary Council Meeting on a regular basis. Note that the Development & Infrastructure Services Committee and the Council will have the opportunity to review, comment and endorse the implementation of any new or revised direction in Asset Management. Strategy 1: Asset Management Steering Group (AMSG) Strategy 1: Asset Management Steering Group 5

10 Strategy 2: Roles, Responsibilities and Skills Asset Management needs to become second nature to the organisation. Many business units have a key role in ensuring successful asset management including: Operations and Engineering Finance Planning and Economic Development Community Development Asset Management responsibility needs to be adequately recognised in position descriptions to enable a culture change. Deliverable 2.1: Human Resources to ensure Asset Management responsibility is considered in every new and updated position description (ongoing). Deliverable 2.2: Relevant training in asset management to be provided for positions with Asset Management responsibilities (ongoing). Information needs to be continuously collected, validated and input into the system to allow planning, repor ting and investigation. 6

11 Strategy 3: Asset Information Information needs to be continuously collected, validated and input into the system to allow planning, reporting and investigation. This includes inventory, condition and valuation information. The Shire needs to consider regular data collection projects across the major asset categories: Roads Footpaths Car Parks Drainage Parks and Reserves Buildings Plant and Fleet Strategy 4: Hierarchy Preliminary work on the asset hierarchy has commenced and needs to be recognised in strategic documents, business plans, service agreements and work plans. Deliverable 4.1: AMSG to formalise asset hierarchy (2013/14). Deliverable 4.2: Asset Management staff to incorporate hierarchy and componentisation into final draft plans, maintenance and CAPEX programs (2013/14). Deliverable 4.3: Operations staff to update Service Agreements to reflect hierarchy (2013/14, 2014/15). Deliverable 3.1: Top three priorities for funding of data collection projects are: Roads inventory and condition (2013/14) Street tree and parks inventory (2014/15, 2015/16) Drain inventory and condition (2013/14 onwards) 7

12 Strategy 5: Risk Management Risk management is a key driver for asset treatments. The main element to robust risk management is Criticality (i.e. importance to the network, community or Shire operations). Deliverable 5.1: AMSG to undertake an assessment of criticality (2013). Deliverable 5.2: Asset Management staff to undertake risk assessment of critical assets and develop risk controls (2013/14). Deliverable 5.3: Staff to implement risk controls (2013/14). Strategy 6: Quality / Standards In order to improve quality, efficiency and effectiveness, standards are required across: Design and specifications Colours and styles Construction methods Supervision and Auditing (Subdivisions and Council works) Expenditure on new assets should be additional, recognising this increases the required renewal/ maintenance budget. Deliverable 6.1: AMSG to commence development of standards (2013/14). Deliverable 6.2: Asset Management and design staff to implement standards (2013/14). Deliverable 6.3: Project delivery staff to implement construction standards (2013/14). Deliverable 6.4: All staff to implement standards (2014/15). 8

13 Strategy 7: Systems and Integration Deliverable 7.1: Asset Management staff to work with vendor to seek further practical improvements to the software (2013/14). Deliverable 7.2: AM staff to look at the development of a range of field devices for the capture and recording of information relating to inventory, condition, works and defects (2014/15). Deliverable 7.3: AM staff to look at further integration with GIS, Finance, Records and other IT systems (2015/16). Strategy 8: Renewal vs New Assets / Funding The required annual renewal spend is over $16.7M. In addition the current backlog is estimated at above $16.7M (2012/13). To close the gap over 10 years would require an additional $1.7M per annum over the required renewal/maintenance spend ($16.7M + $1.7M = $18.4M pa). Expenditure on new assets should be additional to this, recognising this increases the required renewal/maintenance budget. Deliverable 8.1: Council and Senior Management to determine where current service levels can be reduced (2013). Deliverable 8.2: Shire staff to ensure maximum funding income is achieved through Developer contributions and available Grants Asset Required Renewal ($M) Current Gap ($M) Buildings $3.6 $7.1 Car Parks $0.2 $0 Footpath $0.2 $0.3 Roads $3.2 $2.1 Drainage $2.2 $6.1 Parks and Reserves $7.3 $1.1 Other Assets Unknown Unknown Total $16.7 $16.7 9

14 10 Strategy 9: Continuous Improvement Asset Management is an ongoing requirement. Technology and methods improve over time. Deliverable 9.1: AMSG to remain abreast of AM improvements and, where practicable seek to implement these (ongoing). Deliverable 9.2: AM staff to develop and maintain an improvement program that reflects the decisions of the AMSG (ongoing). The Shire is currently implementing a modern Asset Management process as a par t of the Asset Management System.

15 3. Asset Management Process The Shire is currently implementing a modern Asset Management process. The principal objectives of the new process are to: Provide accurate records of the Shire s assets. Facilitate efficient day-to-day management of the Shire s assets. Enable objective long-term asset planning based on a sound knowledge of the current state of the Shire s assets i.e. long-term impacts of funding decisions. Allow the adoption of Consumption Based Depreciation. Figure 2 is a systematic representation of the system showing the links to the Shire s computer-based systems. Linked systems provide tangible benefits to the Shire through the removal of data doublehandling which is both inefficient and a potential source of errors. Continuing inventory and condition based data collections are undertaken by a range of specialist contractors and consultants. The data collection task is ongoing. As new data becomes available, it is being quality-checked and then imported into the Asset Management System by the Asset Management team. On a continuing basis, the data in the asset register and the existing GIS system will be integrated. 11

16 12 MyPredictor Module Life Cycle Analysis Budget Optimisation Prediction Modelling Finance System Financial Projections Works Programming Strategic AM External CRM Mobile and PDA GIS System INTERFACES WITH MyData Module Premium (Tactical) Works management Maintenance Management Risk Management Service Levels MyData Module Premium (Tactical) Tactical AM The Shire of Kalamunda will assess the quality and effectiveness of its Asset Management practices. Single Corporate Register Condition Management Document management Figure 2 Systematic Representation of the Asset Management Process

17 4. Key Performance Indicators Asset Sustainability Ratio 2013/ / / / / / / / / /23 Capital Expenditure - Renewal & Replacements 7,423,329 5,842,525 6,108,067 7,170,697 5,576,437 7,177,850 8,677,539 9,921,752 13,343,985 12,598,095 Depreciation 9,877,138 10,441,105 11,183,925 11,808,425 12,400,931 12,881,259 13,331,209 13,767,952 14,323,757 14,657,173 Target > 90% 75.2% 56.0% 54.6% 60.7% 45.0% 55.7% 65.1% 72.1% 93.2% 86.0% The Asset Sustainability Ratio is an approximation of the extent to which the infrastructure assets managed by the local government are being replaced as these reach the end of their useful lives. Depreciation expense represents an estimate of the extent to which the infrastructure assets have been consumed in a period. Capital expenditure on renewals (replacing assets that the local government already has) is an indicator of the extent to which the infrastructure assets are being replaced. This ratio indicates whether a local government is renewing or replacing existing non-financial assets at the same rate that its overall stock of assets is wearing out. The Shire s Long term Financial Plan shows it will have difficulty in achieving the benchmark for the Asset Sustainability Ratio because the ratio does not take into account any funds spent on maintenance of assets or monies spent for the creation of new assets. On the counter side, the depreciation amount applied in this ratio is based on the aggregated depreciation amount of both new and renewal assets. This ratio will force Local Government to think very closely about building new assets before closely examining its renewal program. The Shire will not be in a strong position to spend the equivalent amount of funds on renewal projects to match depreciation levels until the outer years of the Plan. The Shire has planned for a number of major new asset projects in the next forthcoming year such as the Woodlupine Hub which impacts on the levels of spend on renewal of assets. Whilst renewal funding levels are impacted negatively when new assets are created there is a corresponding decrease in the asset maintenance and renewal for that new facility for a medium length of time. By 2015 the Shire will be required to introduce fair value accounting on infrastructure assets and this will also impact on the asset consumption ratio. It is inevitable under fair value that the Shire s assets will be revalued to a much higher amount than what is currently recorded under historical cost. Once a revised fair value is applied to the assets infrastructure there will be a subsequent review required of the amount of depreciation being applied. 13

18 14 Key Performance Indicators for Quality Assessment of Asset Management Practices KPI Asset Management Maturity Levels of Service Asset Management Performance Ratios Measurement Method Measured in terms of the maturity index in this Strategy. Target as per Maturity Charts in Attachment 4. Measuring actual vs targets. The Shire is yet to define desired Levels of Service. To be detailed in future revisions of the Asset Management Plans. As per the Shire s Strategic Community Plan to 2023 Strategic Priority 4. Ratios to be measured and reported annually. The Asset Renewal Funding Ratio indicates whether the local government has the financial capacity to fund asset renewal at existing revenue and service levels.

19 Asset Renewal Funding Ratio Planned Capital Expenditure Required Capital Expenditure 2013/ / / / / / / / / /23 14,079,067 15,970,517 14,405,488 12,061,252 9,577,428 12,825,335 12,264,219 13,901,010 17,478,203 15,378,085 14,079,067 15,970,517 14,405,488 12,061,252 9,577,428 12,825,335 12,264,219 13,901,010 17,478,203 15,378,085 Target > 95% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% The Asset Renewal Funding Ratio indicates whether the local government has the financial capacity to fund asset renewal at existing revenue and service levels. This represents the extent to which the required capital expenditure on renewals per the asset management plans have been incorporated into the 10 year financial model of the local government. The Shire has yet to finalise its asset management plans and hence the ratio is currently being estimated based on the capital expenditure that has been included in the Long Term Financial Plan. Asset Consumption Ratio The calculation for this ratio is based on Depreciated Replacement Cost of Assets (written down value) divided by the Current Replacement Cost of Depreciable Assets. The Shire is unable to calculate this ratio until the Fair Value of the Shire s assets has been assessed and determined. The Shire will have all it assets valued at Fair Value by June

20 5. Strategy Review Any strategy is recommended to be a dynamic document, reflecting and responding to changes over time. Reviews of this Asset Management Strategy should take place at the following intervals: Annual review of actions, KPIs, update financials. Full review every four years. Any strategy is recommended to be a dynamic document, reflecting and responding to changes over time. 16

21 6. References 1. Local Government Act 1995, Western Australia 2. Strategic Plan , Shire of Kalamunda 3. Kalamunda Advancing: Strategic Community Plan to 2023, Shire of Kalamunda 4. Integrated Planning and Reporting-Framework and Guidelines 2010, Department of Local Government, Government of WA. 5. Asset Management Framework & Guidelines 2011, Department of Local Government, Government of WA. 6. Asset Management Policy, Shire of Kalamunda 7. International Infrastructure Maintenance Manual Annual Report 2012, Shire of Kalamunda 9. Annual Business Plan Period 12-13, Asset Management Business Unit, Shire of Kalamunda 17

22 Attachment 1: Background 1. Community Profile The Shire of Kalamunda is located approximately 24 kilometres east of Perth, along the Darling Scarp. Geographically, the Shire of Kalamunda has three distinct areas: The Foothills/Plains: Forrestfield, High Wycombe, Maida Vale and Wattle Grove. The Escarpment: Lesmurdie, Kalamunda and Gooseberry Hill. The Eastern Rural Districts: Walliston, Bickley, Carmel, Pickering Brook, Piesse Brook, Paulls Valley, Hacketts Gully and Canning Mills. The Shire comprises an area of 324 square kilometres, the majority of which is made up of State Forest, National Parks, Regional Open Space and water catchment area. The balance is available for rural and urban purposes. Local industries include orchards, vineyards, intensive horticulture activities, grazing, minor sawmills, poultry, Government Works Depot and the CBH state grain terminal. The Shire encompasses rapidly growing urban areas in the Foothills, such as Forrestfield, High Wycombe, Maida Vale, Wattle Grove and an expanding industrial and transpor t hub. The Shire also encompasses rapidly growing urban areas in the Foothills, such as Forrestfield, High Wycombe, Maida Vale, Wattle Grove and an expanding industrial and transport hub adjacent to Perth airport. The Shire of Kalamunda also has a growing tourism sector and a number of significant attractions. These include Lesmurdie Falls, the Northern Terminus of the Bibbulmun Track, Munda Biddi Trail, the Perth Observatory, the Kalamunda History Village, Kanyana Wildlife and Rehabilitation Centre, Bickley Reservoir, the Zig Zag, Mundaring Weir and Federation Gardens. The Shire has an estimated population of 56,462 (2011 Census), rate revenue of $24,000,000 in 2012 and employs a workforce comprising of 253 fulltime equivalents. 18

23 2. Strategic Asset Management within the Integrated Planning Framework Asset Management is a key strategic link in long term planning. In simplest terms, asset management is about the way in which the Shire looks after its assets, both on a day-to-day basis (i.e. maintenance and operations) and in both the medium and long term (i.e. strategic and forward planning). It is a process of logic used to guide the planning, acquisition, operation and maintenance, renewal and disposal of assets. Its objective is to maximise asset service delivery potential and manage related risks and costs over their entire lives. Figure 3 illustrates the typical lifecycle of an asset and associated asset management functions - from planning for the need to increase an asset through to its ultimate disposal including audit and review of performance of that asset. The anecdotal evidence is that within local government the approach to funding infrastructure renewal has been last year s budget plus X%. That is to say, decisions are more budget driven than service delivery considerations. The Asset Management Team has recognised that this approach leads to a mismatch between service delivery and financial planning, reflected in the gradual reduction of condition in the asset portfolio. With a clear focus on Strategic Asset Management, there can be a focus on ensuring that the assets are capable of providing service, of an agreed quality, in a sustainable manner, for present and future communities. This involves strategically targeted expenditure rather than merely ad-hoc annual expenditure increases. The decision to adopt a Strategic Asset Management System which can deliver long-term prediction of service levels is fundamentally a step in the right direction for the Shire and this Strategy encapsulates the results of this service-centric analysis. Figure 3 Asset Lifecycle Diagram 19

24 Figure 4 below illustrates the framework for Strategic Asset Management and the Shire s corporate Strategic Asset Management System. The three noteworthy impacts here are: Budget and Service Level form a feedback loop as each is dependent on the other. Strategic Asset Management allows the optimal Service Level to be adopted for the available Budget with an understanding of the predicted outcomes. The adopted Service Level drives the required Funding Programs and thus remains connected to the Budget. Figure 4 - Service Driven Framework Strategic Asset Management allows the optimal Service Level to be adopted for the available Budget with an understanding of the predicted outcomes. 20

25 3. Alignment with the National Asset Management Framework In line with the recent Asset Management Framework and Guidelines 2011 for WA Local Governments, the Shire is committed to the following six key outcomes: Asset Management Plans. Defining Levels of Service. Linking to the Long Term Financial Plan. The key Strategies as documented in Section 2 demonstrate the Shire s direction in achieving the above outcomes. The KPIs described in Section 4 demonstrate how the Shire intends to measure the Shire s success. Attachment 4 provides an Asset Management Maturity diagnostic for the Shire. Governance and Management Arrangements. Data and System Requirements. Improvement of Skills and Processes. 4. Roles and Responsibilities The roles and responsibilities will be defined on a per asset basis as defined in the Asset Management guidelines. 21

26 5. Legislative Control of Asset Management In addition to using asset management as a tool to manage the community s assets and provide better services to the community, there are also legislative requirements that the Shire must comply with in relation to the management of its assets and these are as follows: 5.1 WA Local Government Act 1995 and Associated Regulations In very general terms the Local Government Act 1995 requires the Shire to provide for the good government of persons in its district and to plan for the future of the district. The Local Government (Financial Management) Regulations 1996 associated with this Act provide more specific controls in relation to asset management. Significantly, since June 2008 Regulation 5A requires the annual budget, annual financial report and other financial reports of a local government must comply with the AAS (Australian Accounting Standards). There are legislative requirements that the Shire must comply with in relation to the management of its assets 22

27 5.2 Australian Accounting Standards The following Australian Accounting Standards apply to Local Government: AASB 116 Property, Plant & Equipment prescribes requirements for recognition and depreciation of property, plant and equipment assets. AASB 136 Impairment of Assets aims to ensure that assets are carried at amounts that are not in excess of their recoverable amounts. AASB 1021 Depreciation of Non-Current Assets specifies how depreciation is to be calculated. 5.3 Other Acts and Regulations There is an array of other legislative requirements that need to be considered in managing infrastructure assets such as the Commonwealth Disability Discrimination Act 1992, Western Australian Building Act 2011, Building Regulations 2012, Occupational Safety and Health Act These legislative requirements are taken into consideration at a more detailed level in each of the specific Asset Management Plans. AAS 1011 Accounting Policies specifies the policies that the Shire is to have for recognition of assets and depreciation. AASB 1041 Accounting for the reduction of Non- Current Assets specifies the frequency and basis of calculating depreciation and revaluation basis used for assets. AAS 1015 Accounting for acquisition of assets method of allocating the value to new assets on acquisition. AAS 27 Financial reporting by Local Government. AAS 1010 Recoverable Amounts of Non-Current Assets specifies requirement to test the reasonableness of valuations. 23

28 24 Attachment 2: Current Position & Status Of The Shire s Asset Planning 1. Shire s Asset Stock This Asset Management Strategy is designed to take into consideration all of the Shire s assets. Assets can be described as the physical objects owned and/or maintained by the Shire to support the community s social and economic activities. Assets provide the foundation on which the community carries out its everyday activities whilst also contributing to the overall quality of life. The Shire manages a broad range of assets that have been grouped into nine key categories as set out below. The challenge for asset management is to understand the manner in which the Shire s assets perform over time and whether they can be maintained in a fit for purpose condition, given that many cannot be seen and/or were built many years ago. Asset Categories Assets can be described as the physical objects owned and/or maintained by the Shire to suppor t the community s social and economic activities. Asset Category Roads Footpaths Parks and Reserves Car parks Buildings IT Infrastructure and Furniture Plant and Equipment Land Drainage Includes assets such as: Sealed roads, Unsealed roads, Kerbing, Bridges and Culverts, Traffic management, Road related infrastructure Pathways and cycleways Parks, Irrigation, Parks Infrastructure On street parking, Off street parking, Parking infrastructure Civic buildings, Community buildings, Buildings infrastructure Computer hardware, Computer software, Furniture Major plant, Minor plant light fleet, Minor Plant non fleet, Community fleet, Equipment Land Assets Underground drainage, Above ground drainage

29 2. Asset Stock & Replacement Costs The Asset Stock Replacement Values Table sets out the current values of the categories of infrastructure assets that the Shire is responsible for. Figure 5 below shows the distribution of values. The 2012 Annual Report records a total capital expenditure from all sources on infrastructure as $13,518,844 which is 2% of the Total Replacement Value. It is estimated that the value will increase as Fair Value principles are implemented in Asset Stock Replacement Values Asset Category Current Replacement Cost Written Down Value 1 Average Condition 2 Roads $329,551,000 $267,440, Footpath $33,700,000 $24,140, Parks and Reserves $39,144,000 $22,368, Car parks $5,982,000 $3,880, Buildings $168,708,000 $52,330, Drainage $112,500,000 $46,875, Total Asset Value $689,585,000 $417,033,000 1 Determined from Average Condition on a straight-line basis. 2 Refer to the condition Scoring Scale on page 27 for explanation of Condition scoring method. Figure 5 Distribution of Asset Replacement Values based on Asset Categories 25

30 3. Levels of Service The Shire does not yet have a series of strategic Levels of Service (LoS) to guide the management of its assets. For each major asset category, the Levels of Service define a number of Performance Outcomes and Measures, KPIs and Targets for achievement. The Shire has yet to define Levels of Service and this will be detailed in future revision of the Asset Management Plans. 4. Snapshot of Health of Asset Stock By understanding the condition of the Shire s assets and the various types of distresses that affect them, the Shire can utilise this data to assist in maintaining the level of service the community desires; in the context of affordability, provide long term benefits and minimise the risk of asset failure. Figure 6 provides a snapshot of the overall condition of the Shire s road pavements. By understanding the condition of the Shire s assets the Shire can utilise this data to assist in maintaining the level of service the community desires Figure 6 Road Pavement Overall Condition 6% of pavements need major renewal based on the condition score descriptions and current service level. 26

31 Condition Scoring Scale Condition Score Condition Description 1 Very Good 2 Good 3 Average 4 Poor 5 Unserviceable Asset is in near perfect condition. Maintenance is minor and basic to maintain the asset in very good condition. Asset has deteriorated slightly and regular maintenance is required to maintain the asset in good condition. Moderate rehabilitation is required to improve the rank of this asset. Asset is in satisfactory condition but showing signs of wear and tear. Moderate levels of maintenance are required to maintain the asset in this condition. Significant rehabilitation is required to improve the asset to either rank 1 or 2. Asset is in below average condition with significant signs of wear and tear. Moderate maintenance is required to maintain the rank of this asset. Regular safety inspections are required as part of a risk management strategy. Improvement of the rank of this asset is likely to require full replacement rather than rehabilitation. Asset is redundant and awaiting disposal, minimum funds are allocated to maintenance, however safety inspections must be undertaken and minor works may be required on a reactive basis. The descriptions in the table are a general guide to assist in understanding the meaning of each condition score. In practice the condition score for an asset is determined by a range of measures and indicators that vary for each asset category. The detailed scoring schemes will be documented in the separate Asset Management Plans prepared for each of the significant asset categories.. 27

32 Figure 7 is a snapshot of the overall condition of the Shire s footpaths. The general state of the footpaths is 8% requiring significant attention and another 24% requiring minor works. Figure 7 Footpaths Overall Condition Figure 8 shows the overall condition of the Shire s buildings. The building assets will need to be a priority for the Shire with 48% requiring major capital works or renewal in the short term and the remainder requiring some level of minor works. The general state of the footpaths is 8% requiring significant attention and another 24% requiring minor works. Figure 8 Buildings Overall Condition The financial implications of the work required for roads, footpaths and buildings are discussed in Attachment 3. 28

33 5. Asset Management Maturity Asset Management Maturity is the level or ability of the Shire to achieve contemporary best practice asset management. In general terms contemporary best practice asset management for the Shire of Kalamunda means the following: The Shire knows what it owns or has responsibility or legal liability for. The Shire has recorded these assets in a register down to an identifiable level and the Shire valuations are reported at a component level. The Shire monitors the condition, functionality, capacity, performance, utilization and costs of assets down to the managed component level and aggregates this data up to give outputs of cost and performance at the portfolio levels. The Shire understands and has recorded the current levels of service in terms of reliability, repeatability and quality of service as well as the Shire responsiveness to any asset failures. The Shire understands the likely future levels of service required based on population growth, demographic changes and community expectations. The Shire understands the long-term (10 years plus) funding needs of the Shire municipality to meet customer expectations in both capital and maintenance expenditure. The Shire monitors and reports on the condition, performance and functionality of the Shire assets against prescribed service levels and regulatory requirements. The Shire has uniform processes across the whole organisation for the evaluation of any investment in: Capital Works Maintenance Operations The Shire has a consistent method of developing annual needs based budgets. The Shire regularly reports and compares actual performance against planned performance costs, service levels and responsiveness. 29

34 6. Measuring the Shire s Asset Management Maturity An Asset Management Maturity diagnostic of the Shire of Kalamunda based on the Step Watch Model (please refer is attached as Attachment 4: Asset Management Maturity Matrix. Separate tables of results are provided for the asset categories of Road, Footpaths, Parks & Reserves and Buildings. Each table provides a baseline of the Shire s asset management maturity levels four years ago (yellow), maturity level two years ago (Green), Shire s current maturity level (brown). The results clearly show that the Shire has made significant improvements in its asset management practices and systems over the past two years. Each table also shows the ideal maturity level of a Local Government Authority (blue). Specific actions to allow the Shire to continue to improve towards the ideal target are documented in Attachment 4: Asset Management Maturity Matrix. The Shire is facing a series of asset management challenges that are very common for Local Government throughout Australia. 30

35 7. Snapshot of Asset Management Issues Facing the Shire The Shire is facing a series of asset management challenges that are very common for Local Government throughout Australia. The majority of the Shire s infrastructure assets were first constructed at the same time the original suburbs were built. These assets are approaching the latter half of their expected life and, as such, the physical condition will rapidly deteriorate in the coming years without proper management. At the same time, population growth and changing demographics are challenging the capacity of existing assets to meet the increasing demands and changes in the Shire environment. Community expectations are also changing, which affect the ability of existing assets to meet the functional needs of the community. For the Shire, these challenges have manifested as the following specific issues: Adopting good-practice asset management strategies to ensure the long term sustainability of the community assets that it is responsible for. Ensuring that the required funding is available to upgrade the existing assets of the Shire to meet changing expectations of the community. Moving towards consumption-based funding analysis and optimised budgeting methods. Being able to reliably predict the condition of assets after 10 years time at the current rate of expenditure. Ensuring sound risk management and mitigation associated with the Shire s assets. 31

36 Attachment 3: Long-Term Projections The Shire of Kalamunda utilises a modern local government asset modelling and prediction tool: mypredictor, a component of the Asset Management System. The Shire has applied asset performance and life-cycle models, which simulate the behaviour of the asset in real-life. The life-cycle models are capable of infrastructure modelling to take account of: Different Level of Service objectives for the Shire s assets. Different asset management practices. Different financial strategies for funding asset maintenance, renewal and upgrade. 1. Long-term Asset Condition Projections 1.1 Road Assets Figure 9 is an example of the outputs available from mypredictor. It shows a 10-year projection for the change in road pavement condition if capital expenditure levels are maintained at current budget levels for that period. The bars on the graph depict the road pavement segments that are good (red) and near new (blue) condition and thus require little attention. The Shire of Kalamunda utilises a modern local government asset modelling and prediction tool. It is predicted that after the 10 years, the quantity of asset stock in fair condition (green) will increase. This indicates that the budget is not sufficient and an increased rate of asset decay will be the result. 32

37 While the obvious solution is a budget increase, this is not the only possibility. Other possibilities include: Community acceptance of a lower Level of Service from its assets, if funding were not increased (consultation). Changed asset construction standards to obtain longer life assets that may have a higher acquisition cost but lower whole-of-life cost. Changed asset maintenance practices to extend the life of assets. A budget increase at an earlier point in time to allow earlier renewal of decaying assets to reduce the magnitude of the overall renewal task. The investigation of these possibilities, which is the essence of contemporary good practice asset management, will continue using the Corporate Asset Management System. The results will be incorporated in a Road Asset Management Plan that will set the directions for providing sustainable roads for the community. Figure 9 10 Year Projection of Road Pavement Condition at Current Capital Budget Levels 33

38 1.2 Footpath Assets Figure 10 shows a 10-year projection for the change in footpath condition if capital expenditure levels are maintained at current budget levels for that period. While, like the road pavement, the footpaths start the period in generally good or near new condition, the number of segments in fair or poor condition is increasing from the outset. This indicates that the current budget is not adequate and suggests an immediate increase is required. However, like roads, this is not the only possible solution and the same broad range of opportunities also applies. These will be fully explored in the footpath section of the Road Asset Management Plan. The life-cycle costing of assets for their entire life span will be referenced into asset management plans for each individual asset category. Figure Year Projection of Footpath Condition at Current Capital Budget Levels 34

39 1.3 Building Assets Figure 11 below shows a 10-year projection for the change in building condition if capital expenditure levels are maintained at current budget levels for that period. This projection is markedly different to those for roads and footpaths in which it shows high levels of fair (green) and poor (purple) condition assets at the outset - this difference points to a historically insufficient budget provision. While the number of buildings in good condition grows progressively over the 10-year study period, this is at the expense of the remainder of the building assets. By the end of the ten-year period, more than half of the buildings are in fair (green), poor (purple), very poor (light blue) or end of life (brown) condition. This is a clear indication that funding to the current budget level will continue to be insufficient, if the same number of building assets are to be maintained into the future. The Corporate Asset Management System will be used during the preparation of the Building Asset Management Plan to determine the optimum budget forecast to deliver a Level of Service from the Shire s building assets that is both sustainable and affordable. Figure Year Projection of Building Condition at Current Capital Budget Levels 35

40 Attachment 4: Asset Management Maturity Matrix The Scoring Indicators are used to assign the current assessment to each of 15 measures of Asset Management Maturity for the major Asset Categories. The results for the Shire are set out on the following pages. The blue Ideal target in each matrix represents an achievable good practice target for Local Governments in Australia. Scoring Indicators are used to assign the current assessment to each of 15 measures of Asset Management Maturity for the major Asset Categories. 36

41 Scoring Indicators for Asset Management Maturity Assessments Rating Frequency Emphasis Formality Systems Results 0-9 Unawareness Never do this Not emphasised No formal process No system exists No results seen Awareness Occasionally do this Receives minimal emphasis; some efforts underway Done informally only; ad hoc procedures; minimal documentation Manual system exists; plans for automated systems are in place Minimal results; long way to go Systematic Approach Competence Excellence Sometimes done on an as needed basis for critical programs and activities Often do this on many programs Usually do this; omitted only in exceptional circumstances Moderately emphasised; try to adhere to this Generally emphasised; something that is done and checked Strongly emphasised; used to measure and reward Semi-formal process; some routine procedures exist Formal process exists; modestly documented; good but still evolving Formal, documented process; well tested and well followed Good system in place; widely available; meets all key user needs Good system in place; widely available; meets all key user needs Strong system in place; meets nearly all user needs Good results; getting there Good results; getting there Excellent results; still some room to improve Best Possible Always do this; standard operating procedure Heavily emphasised; one of the principles by which business is done Strict, formal process exists; well documented; not deviated from State of the art system in place Unparalleled results a total success 37

42 38 Asset Management Maturity Assessment for Roads Maturity Level - Roads Unaware Aware Syst. Approach Score Processes & Plans Corporate Registry Management Knowledge of Assets Service Level Specs & Measurement Demand Analysis & Management Strategic Planning & Lifecycle Analysis Asset Costing & Budgeting Works Management Performance Measurement Systems & Tools Asset Register System Strategic Planning Systems Works Management Systems Asset Costing Systems Customer Management Systems Plans & Records Management Spatial Mapping Systems Competence Excellence Legend 2008 Maturity level 2010 Maturity level Ideal Target Current condition

43 Asset Management Maturity Assessment for Footpaths Maturity Level - Footpaths Unaware Aware Syst. Approach Competence Excellence Score Processes & Plans Corporate Registry Management Knowledge of Assets Service Level Specs & Measurement Demand Analysis & Management Strategic Planning & Lifecycle Analysis Asset Costing & Budgeting Works Management Performance Measurement Systems & Tools Asset Register System Strategic Planning Systems Works Management Systems Asset Costing Systems Customer Management Systems Plans & Records Management Spatial Mapping Systems Legend 2008 Maturity level 2010 Maturity level Ideal Target 2011 Maturity level 39

44 40 Asset Management Maturity Assessment for Parks & Reserves Maturity Level Parks & Reserves Unaware Aware Score Processes & Plans Corporate Registry Management Knowledge of Assets Service Level Specs & Measurement Demand Analysis & Management Strategic Planning & Lifecycle Analysis Asset Costing & Budgeting Works Management Performance Measurement Systems & Tools Asset Register System Strategic Planning Systems Works Management Systems Asset Costing Systems Customer Management Systems Plans & Records Management Spatial Mapping Systems Syst. Approach Competence Excellence Legend 2008 Maturity 2010 Maturity Ideal Target 2011 Maturity

45 Asset Management Maturity Assessment for Buildings Maturity Level: - Buildings Score Processes & Plans Corporate Registry Management Knowledge of Assets Service Level Specs & Measurement Demand Analysis & Management Strategic Planning & Lifecycle Analysis Asset Costing & Budgeting Works Management Performance Measurement Systems & Tools Asset Register System Strategic Planning Systems Works Management Systems Asset Costing Systems Customer Management Systems Plans & Records Management Spatial Mapping Systems Unaware Aware Syst. Approach Competence Excellence Legend 2011 Maturity 2010 Maturity Ideal Target 2008 Maturity 41

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