Operations Committee. District Engineer and Utilities Manager. Appendix A: Significance Assessment

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1 Report To: From: Operations Committee District Engineer and Utilities Manager Date: Thursday, 3 July 2014 File reference: Document: Appendix A: Significance Assessment Decision-making: Subject: Lite Business Case and Significance Assessment Reservoir Canal Road Water Main Renewal Lite Business Case Recommendation: THAT the report be received, and THAT the Council makes its decision on which option to choose based on that option being the most cost effective, and good quality for District based on the requirements of s10 of the Local Government Act 2002, and THAT no additional consultation be undertaken, and THAT Option Two, the renewal of 2.3km of water pipe in Reservoir Canal Road at an estimated cost of $115,000, be approved for construction, and THAT this expenditure be funded from the 2014/15 Annual Plan provision of $593,000 for Mains Renewals by reallocation of funds currently provided for a pipe renewal project in Waihi which will not be required in the medium term. 1

2 Executive Summary Name of Project and Project : Business case focus: Risk Rating: Overview: Findings: Reservoir Canal Road water pipe renewal Renewal Low This project is aimed at replacing an aged section of water pipe currently located within the road. Pipe breaks and associated repair work over time have degraded the road quality. The pipe location is preventing road reconstruction works and poses an ongoing risk to the integrity of the local road A 2.3km section of water pipe in Reservoir Canal Road should be replaced and relocated outside the road surface. Financial Commitment: Recommended option $115,000 The $115,000 shown above is for capital expenditure. The project meets the purpose of local government as it is an activity that provides local infrastructure. 1 The Case for Change 1.1 Overview Maintenance and reconstruction work on Reservoir Canal Road has been deferred for a number of years pending renewal and relocation of this water pipe. Issues with the water pipe in its present location can be expected to result in ongoing frequent repairs to the road which will result in rapid loss or reduction of the intended benefit of road maintenance and reconstruction work. Further deferral of this work is likely to lead to more costly maintenance and reconstruction measures becoming necessary. A total of 40 leaks have occurred since March 2010 in a 2.3km section of this road, incurring an average of $6,840 per year in pipe repair costs for this section of road. The pipe is reinforced concrete and has a base life expectancy of 120 years. The pipe is currently 74 years old. Failures are typically occurring at joints, probably caused by seasonal pipe movement arising from poor soil conditions, further affected by traffic loadings directly above the pipe. This report reviews options to replace this pipe, avoiding the risk that ongoing repair requirements pose to the quality of the road itself. This project meets the purpose of local government as cited in the Local Government Act 2002 as it is an activity that provides core infrastructure to the District. 2

3 1.2 Sensitivity Analysis Internal and External Plans The policies, strategies and plans of Council taken into account when developing this proposal, are: Water Asset Management Plan Road Asset Management Plan Long Term Plan There are no legislative or regional requirements to be taken into consideration. This project is consistent with Council policies and strategies and also consistent with the relevant Waikato Regional Councils policies and plans Funding sensitivity specific funding provision has been made for this work. Capital funding is however available within the water supply activity from a sum of $500,000 set aside for the renewal of a large section of cast iron water pipe in Waihi. A recent condition assessment of that Waihi pipe has shown it to be in good condition and will not require renewal in the near future. A proportion of this funding can be re-allocated within the water activity without impacting on water debt funding or servicing costs Risks There are no political, financial or technological risks involved with this project Community Interest There has been no community interest in works of this nature to date. The Water activity would typically only expect to attract community interest where high profile failures occur, funding issues arise, or environmental prosecutions are made. 1.3 Significance and Inconsistent Decisions This project is not considered significant. 2 Community Outcomes This project aims to help achieve the following Council Community Outcomes: Prepared Interactive Sustainable Lifestyle We provide a range of services and facilities to meet our District s needs and expectations for a safe environment. We are a proactive Council that provides leadership and communicates effectively with all sectors of our District. We plan for the wise use and management of all land and resources for the continued benefit of our District. We provide an environment that encourages vibrant communities and an enhanced quality of life. 3

4 Progress Kotahitanga We have a positive climate that encourages balanced and sustained economic growth throughout our District. We take a collaborative approach with both Mana Whenua and Tangata Whenua in our District. Prepared a reliable and robust water supply system affords a high level of protection against public health risks. Sustainable Wise use and management of capital resources. 3 Assessment of options Staff have identified three options, one of which is the status quo, and analysed the relative costs and benefits in terms of: Current and future interests of the District; The extent to which Council s Community Outcomes could be contributed to; The ability to meet present and future needs of both households and businesses in relation to Council s statutory responsibilities; Relationships of Maori (if applicable); and any other relevant matters. 3.1 Option One: Status Quo (Do nothing) Cost benefit analysis of the status quo for households and businesses. The analysis below looks at the costs and benefits to households and businesses both now and in the future. Interests Benefit Cost Social Economic capital expenditure The risk of road deterioration caused by water leaks and repairs, needing road rehabilitation, estimated capital cost $300,000, annual interest and depreciation cost $22,500. Cultural Environmental Ongoing water line annual repair costs (average $6,800 per annum) Budget implications A decision to not proceed with this work would result in a capital saving of an estimated $115,000 for the pipeline but a future capital expenditure on road reconstruction estimated at $300,000. Ongoing annual costs are estimated at $29,300 including the risk item. 4

5 3.1.3 Community Needs It is considered that this option does not meet current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses. This is due to the expectation that more extensive road rehabilitation would eventually be required at higher cost than renewing the pipes. 3.2 Option Two Replace entire concrete pipe section This project option proposes the following works: Replace the entire 2.3km length of concrete water pipe and relocate to adjacent land outside the road footprint Costs benefit analysis of option for both households and businesses. The analysis below looks at the costs and benefits to households and businesses both now and in the future. Interests Benefit Cost Social Economic Cultural Environmental Removes the risk of road deterioration caused by water leaks and repairs, needing road rehabilitation, estimated capital cost $300,000, annual interest and depreciation cost $22,500. Expected to reduce annual pipe repair costs by $6,800 Capital expenditure of $115,000 Annual interest and depreciation cost $8, Budget implications An Engineers estimate for this option is $115,000. Funding by reallocation of a portion of the Waihi renewal budget is proposed in this report. Using this provision will result in zero impact on forecast rates. Expenditure of the capital amount will incur annual costs estimated at $8,600. These may be offset against the saving of $29,300 ongoing annual costs for Option 1, a net benefit of $20,700 annually Community Needs It is considered that this option does meet current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses. This is due to the expectation that the need for extensive future road rehabilitation at higher cost than renewing the pipes will be avoided. 3.3 Option Three Upgrade worst 1.75km section of pipe This project option proposes the following works: Replacement of the 1.75km of water pipe which has suffered the highest failure rate. 5

6 3.3.1 Costs benefit analysis of option for both households and businesses. The analysis below looks at the costs and benefits to households and businesses both now and in the future. Interests Benefit Cost Social Economic Cultural Environmental Removes the risk of road deterioration caused by water leaks and repairs, needing road rehabilitation, estimated capital cost $225,000, annual interest and depreciation cost $16,870. Expected to reduce annual pipe repair costs by $5,200 Capital expenditure of $ Annual interest and depreciation cost $7,350. Retains risk of road deterioration caused by water leaks and repairs, needing road rehabilitation, estimated capital cost $75,000, annual interest and depreciation cost $5,625. Ongoing pipe repairs $1,775 annually Rough order costing shows that carrying out renewal in the worst affected areas would cost $98,000. This option would replace all pipe in the worst affected area, however leaves around 550m of this same pipe material under carriageway which will eventually cause similar failure, probably in the near future Budget implications An Engineers estimate for this option is $98,000. Funding by reallocation of a portion of the Waihi renewal budget would be proposed. Using this provision will result in zero impact on forecast rates. Expenditure of the capital amount will incur annual costs estimated at $7,350. Remaining annual risk cost of road deterioration estimated at $5,625. Ongoing pipe repairs $1,775 annually. Total annual cost $14,750. Total annual benefit ($16,870+$5,200) is $22,070. Net benefit is $7,320 annually Community Needs It is considered that this option does not meet current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses. This is due to the residual risk that the conditions which have occurred in this pipe material under road carriageway will occur in the remaining 550m of pipe, requiring its renewal in the short term. 3.4 Preferred option Option two is preferred as the most cost effective, and good quality for District based on the requirements of S10 of the Local Government Act The option is the most cost effective for households and businesses both now and into the future since it effectively addresses the risk of future damage to Awaiti Canal Road from the water reticulation. The recommendation is the option which best meets the purpose of Local Government in terms of its efficiency, effectiveness and appropriateness. 6

7 4 Procurement Plan It is proposed that a quotation be sought from Council s Construction and Maintenance Business Unit (C&M) for this work and if the quotation is within the Engineer s estimate that C&M be authorized to proceed with this work under supervision by Council s Technical Services Unit. 5 Engagement Strategy There are no external stakeholders affected by this project. Based on the fact that the project is not considered significant it is recommended that no consultation be arranged. During the planning stages of this decision Council staff have determined that there are no significant relationships for Maori and their culture and traditions with their ancestral land, water, sites, waahi tapu, valued flora and fauna, and other taonga. 6 Recommendation It is recommended: THAT Option Two, the renewal of 2.3km of water pipe in Reservoir Canal Road at an estimated cost of $115,000, be approved for construction, and THAT this expenditure be funded from the 2014/15 Annual Plan provision of $593,000 for Mains Renewals by reallocation of funds currently provided for a pipe renewal project in Waihi which will not be required in the medium term. Mike Charteris Utilities Manager Ken Thompson District Engineer 7

8 APPENDIX A Significance Policy Assessment Matrix Policy Standard Yes/ Matters for consideration General Approach Thresholds Criteria Do the consequences or impacts of the issues, assets, or other matters, affect a large number of residents and ratepayers to a moderate extent? Do the consequences or impacts of the issues, assets, or other matters, affect a small number of residents and ratepayers to a large extent? Does the issue, asset, or other matter, have a history of generating wide public interest within the District, the Waikato Region or New Zealand generally? >$1,000,000 above cost in approved Annual Plan and/or Community Plan > $1,000,000 unbudgeted expenditure Does it involve any transfer of ownership or control, or abandonment of a strategic asset? Significant impact on Council ability to deliver HCP? Private Sector partnership? Does it involve a strategic asset? Will there be a change in the level of service? Will there be a change in the method of service delivery? Will there be a change in the capacity of Council to provide the service? Procedure If yes is answered to any of the general approaches, thresholds or criteria the Management Team will consider the issues and prepare a proposal as to the degree of significance to award the issue, asset or other matter by using the Decision-making matrix and associated decision-making report templates. 8