Asset Management Plan

Transcription

1 LATROBE COUNCIL BUILDING SERVICES Asset Management Plan Version 3 June 2015 Asset Management for Small, Rural or Remote Communities

2 Document Control Asset Management for Small, Rural or Remote Communities Document ID: building amp - v3 Rev No Date Revision Details Author Reviewer Approver 1 28/11/2012 First Draft EWC AMSG 2 15/12/2014 Amendments EWC AMSG 3 25/06/2015 For Council Adoption EWC AMSG Council AMSG Asset Management Steering Group EWC Engineering Works Coordinator NOTE: This is a working document which represents a snapshot in time of Council s position in regards to existing and future assets and projections of the foreseeable impacts. Asset Management for Small, Rural or Remote Communities Practice Note The Institute of Public Works Engineering Australia. Copyright 2011 All rights reserved.

3 TABLE OF CONTENTS 1. EXECUTIVE SUMMARY INTRODUCTION Background Building Asset Categories Building Components Key Stakeholders Goals and Objectives of Asset Management Plan Framework Core and Advanced Asset Management Community Consultation LEVELS OF SERVICE Customer Research and Expectations Legislative Requirements Current Levels of Service Desired Levels of Service FUTURE DEMAND Demand Forecast Changes in Technology Demand Management Plan New Assets for Growth LIFECYCLE MANAGEMENT PLAN Background Data Physical parameters Asset capacity and performance Asset condition Asset Replacement Unit Rates & Useful Lives Asset valuations Risk Management Plan Routine Maintenance Plan Maintenance plan Standards and specifications Summary of future operations and maintenance expenditures Renewal/Replacement Plan Renewal plan Renewal standards Summary of projected renewal expenditure Creation/Acquisition/Upgrade Plan Selection criteria Standards and specifications Summary of projected upgrade/new assets expenditure Disposal Plan FINANCIAL SUMMARY Financial Statements and Projections Financial sustainability in service delivery Expenditure projections for long term financial plan Funding Strategy Valuation Forecasts... 25

4 6.4 Key Assumptions made in Financial Forecasts ASSET MANAGEMENT PRACTICES Accounting/Financial Systems Asset Management Systems Information Flow Requirements and Processes Standards and Guidelines PLAN IMPROVEMENT AND MONITORING Performance Measures Improvement Plan Monitoring and Review Procedures REFERENCES APPENDICES Appendix A Maintenance Response Levels of Service Appendix B Building Componentisation and Useful Life Assessment Appendix C Council Owned Buildings Township Plans Appendix D Abbreviations Appendix E Glossary... 40

5 EXECUTIVE SUMMARY Context Council provides a range of community and Council purpose buildings, with a number of major facilities jointly managed with community user committees. The buildings asset register comprises of all building related assets situated on Council owned property, including: Amenities/ public toilets Shed/garage/carports Community facilities Depot/workshop Hall/civic centre Office building Recreation facility Park shelters These infrastructure assets have a total replacement value of $33.6M. What does it Cost? The projected cost to provide the services covered by this Asset Management Plan includes operations, maintenance, renewal and upgrade of existing assets over the 10 year planning period is $1.98M per year. Council s estimated available funding for this period is $1.71M per year which is 86% of the cost to provide the service. This is a funding shortfall of $275,000 per year. Funding allocated in Council s draft long term financial plan (completed before this asset management plan) for this period is $1.71M per year which is 86% of the cost to provide the service. This is a funding shortfall of $275,000 per year. Council s draft long term financial plan will be revised to eliminate this shortfall. Once additional information is available the Councils long term financial plan will be revised to eliminate this renewal gap. Strategic Objectives Council plans to operate and maintain the building services portfolio to achieve the following strategic objectives. Ensure the building services portfolio is maintained at a safe and functional standard as set out in this asset management plan. Continue development of systems for improved building management. Provide direction and guidance for managing growth and change over next 5 years. Identify specific actions that the Council, community and support services should utilise to address the objectives and realise the vision. Measuring our Performance Council will endeavour to ensure that key functional objectives are met for: Quality Function Safety Impact on the environment Meeting user needs While keeping within Council s funding resources. The Next Steps Actions resulting from this asset management plan are: 1. Review & develop maintenance inspection procedures, 2. Develop condition assessment procedure & prioritised replacement program, 3. Develop risk management plan, 4. Develop service levels and performance indicators, 5. Improved process for project feasibility and scope of works assessments, 6. New & upgrade projects to include lifecycle cost analysis, 7. Improved procedure for Council building compliance and risk management, 8. Develop a demand management plan in regards to growth, 9. Develop & maintain Council owned building floor plans. The Council has recently taken ownership of the Australian Axemans Hall of Fame facility and during 2015/2016 will take on ownership of the Camp Banksia Centre. These assets are each worth several million dollars and will potentially impact on future funding costs.

6 - 2 - The Council will employ an Asset and Facilities Management Officer in the 2015/16 year who will review, in conjunction with Councillors, Council Management and Council Committees of Management, the operation and funding costs of all assets within the Building Services Asset Management Plan.

7 INTRODUCTION 2.1 Background This asset management plan is to demonstrate responsive management of assets (and services provided from assets), compliance with regulatory requirements, and to communicate funding needed to provide the required levels of service. The asset management plan is to be read with Council s Asset Management Policy, Asset Management Strategy and the following associated planning documents: Asset Management Policy & Strategy Service Level Agreements Building Services Latrobe Council Strategic Plan Our Place, Our Plan Latrobe Township & Environs Strategic Plan 2009 Port Sorell Township & Environs Strategic Plan 2008 This infrastructure assets covered by this asset management plan are shown in Table 2.1. Table 2.1: Assets covered by this Plan Asset category Number of Buildings Floor Area (m²) Replacement Value Amenities/Public Toilets $ 1,706,880 Carports $ 497,178 Community Facilities 16 2,053 $ 4,902,652 Depot/Workshop 5 1,095 $ 852,200 Hall/Civic Centre 4 3,290 $ 3,549,294 House/Unit 62 5,575 $ 7,351,500 Office Building 2 1,260 $ 2,350,000 Recreational Facility 8 4,140 $ 6,608,848 Shed/Garage 42 1,383 $ 785,810 Shelter $ 441,610 TOTAL ,231 $29,160, Building Asset Categories The following provides a details on the breakdown of Council s building asset, the categories have been adopted based on those in the Rawlinsons Construction Cost Guide For Housing, Small Commercial and Industrial Buildings. The reference number in brackets can be used to find the building category in the Rawlinsons Construction Cost Guide, which identifies typical construction materials and techniques for calculating standard building construction costs. These are briefly detailed below. Amenities/ Public Toilets (1.2.9) Single storey, standard construction and basic finishes, male, female and handicapped areas Carports (13.7.3) Concrete floor, metal deck roof on steel framing Community Facilities (11.5.2) Medium standard with moderate amenities.

8 - 4 - Depot/ Workshops ( ) Single storey framed and metal clad external walls, metal roof, roller shutters, electrical service to board, plumbing service. No ventilation, sprinklers or fit out. Hall/ Civic Centres (1.2.3) capacity, main hall suitable for cabarets, conventions, etc. ante-rooms, small kitchen, standard finishes, no air-conditioning. House/ Units ( ) Individual brick veneer houses/units with medium standard finishes. Office Buildings (1.1.1) Single storey, standard finishes, subdivisional partitioning to offices, reception, amenities area, airconditioning. Recreational Facilities (7.1.2) Social/ sporting club, single or two storey, standard construction and finishes, large bar, lounge, dining, recreation facilities, squash courts, club offices, air-conditioning. Shed/ Garage (13.7.1) Concrete floor, metal clad walls and roof on steel framing, roller shutter door. Shelters (13.7.3) Concrete floor, metal clad roof on steel frame.

9 Building Components The building components have been determined based on the typical useful lives, the function and type of renewals/refurbishments that generally occur in buildings. The component breakdown is detailed further in Appendix B. Building Structure Slab/Footing/Piers Floor framing External wall (load bearing) Internal wall (non-load bearing) External Wall cladding Windows Doors Internal Wall Cladding/ finishes Partitions/ screens Doors Windows Floor finishes Building Services Plumbing Mechanical Electrical Fire Protection Columns Stairs Upper floor framing Roof Framing Gutters & downpipes Fascia & flashing Roof cladding Ceiling cladding/ finishes Fixtures & fittings Built-in cupboards/cabinets Kitchen fit-out Security systems Ventilation Heating Gas services Site Services & Infrastructure (Refer to Parks & Reserves AMP) Driveway/carpark Stormwater pits & drains Footpath/paved areas Signage Steps/ramps Landscaped areas Handrail/balustrade Irrigation systems Fences & gates Other land improvements Retaining walls Structural components have the same life as the entire building and are generally designed to be protected against environmental conditions causing deterioration. Maintenance activities should be prioritised to minimise the risk of expensive structural component replacements.

10 Key Stakeholders There are a number of key stakeholders involved with the management and operation of the building services detailed within this asset management plan. Key Stakeholders Councillors Council Staff General Public Users Community Clubs & Associations Facility User Committees Role of stakeholder As custodians of the municipality s infrastructure assets, to represent and protect the long-term needs of ratepayers and the community in general. To maintain a proactive approach to customer requests and to holistic asset management systems and procedures which can better inform decisions by Councillors. Reporting perceived shortcomings, damage, safety concerns etc. with the current infrastructure in relation to their needs. Providing input with regard to overall infrastructure performance in conjunction with infrastructure under their jurisdiction. Providing input with regard to the management of the facility 2.5 Goals and Objectives of Asset Management The Council exists to provide services to its community. Some of these services are provided by infrastructure assets. Council has acquired infrastructure assets by purchase, by contract, construction by council staff and by donation of assets constructed by developers and others to meet increased levels of service. Council s goal in managing infrastructure assets is to meet the required level of service in the most cost effective manner for present and future consumers. The key elements of 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 demand management and infrastructure investment, Managing risks associated with asset failures, Sustainable use of physical resources, Continuous improvement in asset management practices. 1 The goal of this asset management plan is to: Document the services/service levels to be provided and the costs of providing the service, Communicate the consequences for service levels and risk, where desired funding is not available, and 1 IPWEA, 2006, IIMM Sec 1.1.3, p 1.3.

11 - 7 - Provide information to assist decision makers in trading off service levels, costs and risks to provide services in a financially sustainable manner. This asset management plan is prepared under the direction of Council s vision, mission, goals and objectives. Council s vision is: Our vision is for the Latrobe Council area to be known as a friendly and welcoming which is recognised for: Council s mission is: The high quality of life that is enjoyed by our residents and visitors within an attractive built environment including the historic town of Latrobe. The preservation of the rural character and rich soils of the area which have secured the rural economy as an essential part of the wider economic base. The uniquely beautiful natural environment including the serene and picturesque seaside settlement areas of Port Sorell which are responsibly managed and safeguarded for future generations. The well-managed, responsive and adaptive local government which provides strong, visionary and consultative leadership. Asset Management - Council is committed to the effective and efficient management of its physical assets Relevant goals and objectives and how these are addressed in this asset management plan are shown in Table 2.2. Table 2.5: Organisation Goals and how these are addressed in this Plan Goal Objective How Goal and Objectives are addressed in AMP Improved governance and accountability Enhanced service management and community satisfaction Improved risk management Improved financial efficiency To demonstrate to the community and stakeholders that services are being managed sustainably and delivered effectively and efficiently To identify current service levels and target levels to work towards To identify and address all known significant risks to the Building Services assets To model and identify financial efficiencies within the asset category This will be addressed with the successful completion and adoption of the AMP by Council This will be an ongoing task which is to be monitored and improved upon with future revisions of this AMP The Risk Management Plan will document a structured approach to the identification and management of significant risks This will be an ongoing task to be monitored and improved upon with future revisions of this AMP Sustainability Improved decision making To consider all viable options (including demand management) and all aspects of decisions

12 Plan Framework Key elements of the plan are Levels of service specifies the services and levels of service to be provided by council. Future demand how this will impact on future service delivery and how this is to be met. Life cycle management how the organisation 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 Monitoring how the plan will be monitored to ensure it is meeting the organisation s objectives. Asset management improvement plan 2.7 Core and Advanced Asset Management This asset management plan is prepared as a first cut core asset management plan in accordance with the International Infrastructure Management Manual 2. 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. 2.8 Community Consultation Future revisions of the asset management plan will incorporate community consultation on service levels and costs of providing the service. This will assist Council and the community in matching the level of service needed by the community, service risks and consequences with the community s ability to pay for the service. 2 IPWEA, 2006.

13 LEVELS OF SERVICE 3.1 Customer Research and Expectations Council often receives verbal/written feedback with regard to completed capital/maintenance projects and invites budget submissions from community clubs and groups for Council consideration. The Council s customer request system is also used to determine trends in community expectations (achieved by annually assessing the total number of actioned customer requests per asset category). 3.2 Legislative Requirements Council has to meet many legislative requirements including Australian and State legislation and State regulations. Relevant legislation is shown in Table 3.2. Table 3.2: Legislative Requirements Legislation Local Government Act Building Code of Australia (BCA) Building Act 2000 & Regulations 2004 Director s Specified List Work Health & Safety Act 2012 Disability Services Act 1992 Civil Liability Act 2002 Requirement Sets out role, purpose, responsibilities and powers of local governments including the preparation of a long term financial plan supported by asset management plans for sustainable service delivery. All new building works is to comply with the BCA. The BCA defines the standards for particular building types. Legislates the process and requirements for building works The Building Act requires a number of matters to be specified by the Director of Building Control, this document contains a full list of building requirements. Legislates the requirements for design and building works Legislates the requirements in regards to provisions for people with disabilities in public buildings Legislates duty of care responsibilities 3.3 Current Levels of Service Council has defined service levels in two terms. Community Levels of Service relate to the service outcomes that the community wants in terms of safety, quality, quantity, reliability, responsiveness, cost effectiveness and legislative compliance. Community levels of service measures used in the asset management plan are: Quality Function Safety How good is the service? Does it meet users needs? Is the service safe? Technical Levels of Service - Supporting the community service levels are operational or technical measures of performance. These technical measures relate to the allocation of resources to service activities that the council undertakes to best achieve the desired community outcomes.

14 Technical service measures shall be developed in future revisions of this asset management plan. 3.4 Desired Levels of Service At present, indications of desired levels of service are obtained from various sources including residents feedback to Councillors and staff, service requests and correspondence. Council has yet to quantify desired levels of service. This will be done in future revisions of this asset management plan. Table 3.3: Current Service Levels Key Performance Measure Level of Service Objective Performance Measure Process Desired Level of Service Current Level of Service Community Levels of Service Quality Facilities are clean and in good order Valid customer service requests which merit corrective action 156 (2013) 116 (2012) 107 (2011) 74 (2010) 82 (2009) Function The facilities provided are suitable for the intended use Valid customer service requests which merit corrective action 6 (2013) 8 (2012) 1 (2011) 3 (2010) 3 (2009) Safety Facilities are free from hazards Valid customer service requests which merit corrective action 5 (2013) 2 (2012) 1 (2011) 2 (2010) 0 (2009) Technical Levels of Service Technical levels of service shall be developed in future revisions of this asset management plan. Increasing customer service requests may be due to improved data capture and heightened user expectations for their facilities and of Local Government in general.

15 FUTURE DEMAND 4.1 Demand Forecast Factors affecting demand include population change, changes in demographics, seasonal factors, vehicle ownership, consumer preferences and expectations, economic factors, agricultural practices, environmental awareness, etc. Demand factor trends and impacts on service delivery are summarised in Table 4.1. Table 4.1: Demand Factors, Projections and Impact on Services Demand factor Present position Projection Impact on services Population 10,239 (June 2012) 16,778 (June 2032) 2.0% annual growth Demographics Climate change/ environment Fashion trends & High percentage of population nearing or at retirement age Consecutive years below average rainfall Traditional outdoor sports and recreation Continued increase in aged population Trending towards drier winters & more damaging storm events Indoor sport trends such as basketball, indoor cricket & soccer, squash, badminton & volleyball Higher demand on the size and number of building services to cater for increased population This will impact the type of building facilities are provided. Demand for facilities to cater for social activities appealing to certain age groups This may impact the demand and types of facilities provided to suit the changing environments Provision of new sporting facilities, or endorsing of Multi-Use facilities 4.2 Changes in Technology Technology changes forecast to affect the delivery of services covered by this plan are detailed in Table 4.2.

16 Table 4.2: Changes in Technology and Forecast effect on Service Delivery Technology Change Changes in building techniques and materials/products available Building asset inspections Building energy efficiency Effect on Service Delivery The introduction of new building techniques, materials or products can have a significant effect on the service delivery Introduction of hand held PC devices to improve efficiency of asset management and reducing the need for double handling of paper based recording of information Energy efficient building elements and construction techniques will have significant effects on building operational costs. 4.3 Demand Management Plan Demand for new services will be managed through a combination of managing existing assets, upgrading of existing assets and providing new assets to meet demand. Demand management practices include nonasset solutions, insuring against risks and management failures. Demand management will be developed in future revisions of this asset management plan. 4.4 New Assets for Growth The new assets required to meet growth will be generally constructed by Council. The new contributed and constructed asset values are summarised in Figure 1. 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 operations and maintenance costs. Further investigation is required to determine what new building assets and services shall be needed in the next years due to growth of the Latrobe and Port Sorell townships.

17 Figure 1: New Assets for Growth

18 LIFECYCLE MANAGEMENT PLAN The lifecycle management plan details how Council plans to manage and operate the assets at the agreed levels of service (defined in Section 3) while optimising life cycle costs. 5.1 Background Data Physical parameters The assets covered by this asset management plan are shown below in Table Table 5.1.1: Building Assets The age profile of the assets include in this AM Plan is shown in Figure 2. Figure 2: Asset Age Profile

19 Asset capacity and performance Council s services are generally provided to meet design standards where these are available. Deficiencies in service performance are to be investigated in future revisions of this asset management Asset condition Council currently undertakes annual building maintenance inspections and risk assessments for all Council owned building structures. The purpose of these visual inspections is to identify defects and risk issues which are included into the annual maintenance program. Programmed maintenance is vital for extending the useful life of building components and elements to the full potential. A formal condition assessment procedure is currently being investigated. This shall be incorporated into future revisions of this asset management plan Asset Replacement Unit Rates & Useful Lives The replacement rates for each building component have been determined using Rawlinsons Construction Cost Guide 2013 Edition 21. By applying Rawlinsons model construction guide has improved the reliability of planning for future renewals/ replacements. The useful lives adopted have been sourced from the IPWEA Buildings Toolkit provided as part of the Practice Note 3 Building Condition & Performance Assessment Guidelines by IPWEA Asset valuations The value of assets recorded in the asset register as at June 2014 covered by this asset management plan is shown below. Assets were last revalued at June Current Replacement Cost $33,649,000 Depreciable Amount $33,649,000 Depreciated Replacement Cost $19,167,000 Annual Depreciation Expense $343,000 Council s sustainability reporting reports the rate of annual asset consumption and compares this to asset renewal and asset upgrade and expansion. Asset Consumption 1% Asset renewal 0% Annual Upgrade/New 0% Annual Upgrade/New 2% Council is currently renewing assets at 0% of the rate they are being consumed and increasing its asset stock by 2% each year.

20 To provide services in a financially sustainable manner, Council will need to ensure that it is renewing assets at the rate they are being consumed over the medium-long term and funding the life cycle costs for all new assets and services in its long term financial plan. 5.2 Risk Management Plan A risk management plan 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. Future revisions of this asset management plans will include an assessment of risks 3 associated with service delivery from infrastructure assets has identified critical risks that will result in loss or reduction in service from infrastructure assets or a financial shock to the organisation. Refer to the Improvement Plan (section 8.2). 5.3 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 plan Maintenance includes reactive, planned and specific maintenance work activities. Reactive maintenance is unplanned repair work carried out in response to service requests and management/supervisory directions. Planned maintenance is repair work that is 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. Specific maintenance is replacement of higher value components/sub-components of assets that is undertaken on a regular cycle including repainting, building roof replacement, etc. This work generally falls below the capital/maintenance threshold but may require a specific budget allocation. Future revision of this asset management plan will include linking required maintenance expenditures with required service levels. Reactive maintenance is carried out in accordance with response levels of service detailed in Appendix A Standards and specifications Maintenance work is carried out in accordance with the BCA (Building Code of Australia) and Council standard operating procedures Summary of future operations and maintenance expenditures Future operations and maintenance expenditure is forecast to trend in line with the value of the asset stock as shown in Figure 4. Note that all costs are shown in 2015 dollar values.

21 Figure 4: Projected Operations and Maintenance Expenditure Maintenance is funded from the operating budget and grants where available. This is further discussed in Section Renewal/Replacement Plan Renewal expenditure is major work which does not increase the asset s design capacity but restores, rehabilitates, replaces or renews an existing asset to its original service potential. Work over and above restoring an asset to original service potential is upgrade/expansion or new works expenditure Renewal plan Assets requiring renewal are identified from one of three methods provided in the Expenditure Template. Method 1 uses Asset Register data to project the renewal costs for renewal years using acquisition year and useful life, or Method 2 uses capital renewal expenditure projections from external condition modelling systems (such as Pavement Management Systems), or Method 3 uses a combination of average network renewals plus defect repairs in the Renewal Plan and Defect Repair Plan worksheets on the Expenditure template. Method 3 was used for this asset management plan. 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 assets at a cost less than replacement cost.

22 Renewal standards Renewal work is carried out in accordance with the following Standards and Specifications. BCA (Building Code of Australia) Relevant Australian Standards Council s Standard Operating Procedures Summary of projected renewal expenditure Projected future renewal expenditures are forecast to increase over time as the asset stock ages. The costs are summarised in Figure 5. Note that all costs are shown in 2015 dollar values. The projected capital renewal program is shown in Appendix B. Deferred renewal, ie those assets identified for renewal and not scheduled for renewal in capital works programs are to be included in the risk assessment process in the risk management plan. Renewals are to be funded from capital works programs and grants where available. This is further discussed in Section 6.2. Figure 5: Projected Capital Renewal Expenditure 5.5 Creation/Acquisition/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 little to no cost to the Council from government grants. These assets from growth are considered in Section 4.4.

23 Selection criteria New assets and upgrade/expansion of existing assets are identified from various sources such as councillor or community requests, proposals identified by strategic plans or partnerships with other organisations. Candidate proposals are inspected to verify need and to develop a preliminary estimate. Verified proposals are ranked by priority and available funds and scheduled in future works programmes. The priority ranking criteria is detailed in Table Table 5.5.1: Upgrade/New Assets Priority Ranking Criteria Criteria Weighting Risk/ Safety 25% Technical 20% Corporate 20% Building Usage 15% Social/ Community Impact 10% Environment 10% Total 100% Standards and specifications Standards and specifications for new assets and for upgrade/expansion of existing assets are the same as those for renewal shown in Section Summary of projected upgrade/new assets expenditure Projected upgrade/new asset expenditures are summarised in Figure 6. The projected upgrade/new capital works program is shown in Appendix C. All costs are shown in current 2015 dollar values.

24 Figure 6: Projected Capital Upgrade/New Asset Expenditure New assets and services are to be funded from capital works program and grants where available. This is further discussed in Section Disposal Plan Disposal includes any activity associated with disposal of a decommissioned asset including sale, demolition or relocation. At this stage there are no assets identified for disposal, this will be investigated in future revisions of this asset management plan.

25 FINANCIAL SUMMARY This section contains the financial requirements resulting from all the information presented in the previous sections of this 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. 6.1 Financial Statements and Projections The financial projections are shown in Figure 7 for projected operating (operations and maintenance) and capital expenditure (renewal and upgrade/expansion/new assets), net disposal expenditure and estimated budget funding. Note that all costs are shown in 2015 dollar values. Figure 7: Projected Operating and Capital Expenditure and Budget Financial sustainability in service delivery There are three key indicators for financial sustainability that have been considered in the analysis of the services provided by this asset category, these being long term life cycle costs/expenditures and medium term projected/budgeted expenditures over 5 and 10 years of the planning period. Long term - Life Cycle Cost Life cycle costs (or whole of life costs) are the average costs that are required to sustain the service levels over the longest asset life. Life cycle costs include operations and maintenance expenditure and asset

26 consumption (depreciation expense). The life cycle cost for the services covered in this asset management plan is $2,223,000 per year (operations and maintenance expenditure plus depreciation expense in year 1). Life cycle costs can be compared to life cycle expenditure to give an indicator of sustainability in service provision. Life cycle expenditure includes operations, maintenance and capital renewal expenditure in year 1. Life cycle expenditure will vary depending on the timing of asset renewals. The life cycle expenditure at the start of the plan is $1,709,000 (operations and maintenance expenditure plus budgeted capital renewal expenditure in year 1). A shortfall between life cycle cost and life cycle expenditure is the life cycle gap. The life cycle gap for services covered by this asset management plan is $514,000 per year. The life cycle sustainability index is 77%. The life cycle costs and life cycle expenditure comparison highlights any difference between present outlays and the average cost of providing the service over the long term. If the life cycle expenditure is less than that life cycle cost, it is most likely that outlays will need to be increased or cuts in services made in the future. Knowing the extent and timing of any required increase in outlays and the service consequences if funding is not available will assist organisations in providing services to their communities in a financially sustainable manner. This is the purpose of the asset management plans and long term financial plan. Medium term 10 year financial planning period This asset management plan identifies the projected operations, maintenance and capital renewal expenditures required to provide an agreed level of service to the community over a 10 year period. This provides input into 10 year financial and funding plans aimed at providing the required services in a sustainable manner. These projected expenditures may be compared to budgeted expenditures in the 10 year period to identify any funding shortfall. In a core asset management plan, a gap is generally due to increasing asset renewals for ageing assets. The projected operations, maintenance and capital renewal expenditure required over the 10 year planning period is $1,957,000 per year. Estimated (budget) operations, maintenance and capital renewal funding is $1,709,000 per year giving a 10 year funding shortfall of $248,000 per year and a 10 year sustainability indicator of 87%. Short Term 5 year financial planning period The projected operations, maintenance and capital renewal expenditure required over the first 5 years of the planning period is $1,957,000 per year. Estimated (budget) operations, maintenance and capital renewal funding is $1,709,000 per year giving a 5 year funding shortfall of $219,000. This is 89% of projected expenditures giving a 5 year sustainability indicator of 0.89.

27 Financial Sustainability Indicators Figure 7A shows the financial sustainability indicators over the 10 year planning period and for the long term life cycle. Figure 7A: Financial Sustainability Indicators Providing services from infrastructure in a sustainable manner requires the matching and managing of service levels, risks, projected expenditures and funding to achieve a financial sustainability indicator of 1.0 for the first years of the asset management plan and ideally over the 10 year life of the AM Plan. Figure 8 shows the projected asset renewals in the 10 year planning period from Appendix B. The projected asset renewals are compared to budgeted renewal expenditure in the capital works program and capital renewal expenditure in year 1 of the planning period in Figure 8.

28 Figure 8: Projected and Budgeted Renewal Expenditure Table shows the shortfall between projected and budgeted renewals Table 6.1.1: Projected and Budgeted Renewals and Expenditure Shortfall Year Projected Renewals ($'000) Planned Renewal Budget ($'000) Renewal Financing Shortfall ($'000) Cumulative Shortfall($'000) 2016 $352 $0 -$352 -$ $165 $0 -$165 -$ $85 $0 -$85 -$ $93 $0 -$93 -$ $33 $0 -$33 -$ $23 $0 -$23 -$ $0 $0 $0 -$ $0 $0 $0 -$ $0 $0 $0 -$ $20 $0 -$20 -$771 Note: An negative shortfall indicates a funding gap, a positive shortfall indicates a surplus for that year. Providing services in a sustainable manner will require matching of projected asset renewals to meet agreed service levels with planned capital works programs and available revenue. A gap between projected asset renewals, planned asset renewals and funding indicates that further work is required to manage required service levels and funding to eliminate any funding gap.

29 We will manage the gap by developing this asset management plan to provide guidance on future service levels and resources required to provide these services, and review future services, service levels and costs with the community Expenditure projections for long term financial plan Table shows the projected expenditures for the 10 year long term financial plan. Expenditure projections are in current (non-inflated) values. Disposals are shown as net expenditures (revenues are negative). Table 6.1.2: Expenditure Projections for Long Term Financial Plan ($000) Projected Capital Operations Maintenance Disposals Year ($000) ($000) Capital Renewal Upgrade/New ($000) ($000) ($000) 2016 $1, $ $ $6.00 $ $1, $ $ $25.00 $ $1, $ $85.00 $80.00 $ $1, $ $93.00 $80.00 $ $1, $ $33.00 $80.00 $ $1, $ $23.00 $0.00 $ $1, $ $0.00 $0.00 $ $1, $ $0.00 $0.00 $ $1, $ $0.00 $0.00 $ $1, $ $20.00 $0.00 $0.00 Note: All projected expenditures are in 2015 values 6.2 Funding Strategy Projected expenditure identified in Section 6.1 is to be funded from future operating and capital budgets. The funding strategy is detailed in the organisation s 10 year long term financial plan. 6.3 Valuation Forecasts Asset values are forecast to increase as additional assets are added to the asset stock from construction and acquisition by Council. Figure 9 shows the projected replacement cost asset values over the planning period in 2015 dollar values.

30 Figure 9: Projected Asset Values Depreciation expense values are forecast in line with asset values as shown in Figure 10. Figure 10: Projected Depreciation Expense

31 The depreciated replacement cost (current replacement cost less accumulated depreciation) will vary over the forecast period depending on the rates of addition of new assets, disposal of old assets and consumption and renewal of existing assets. Forecast of the assets depreciated replacement cost is shown in Figure 11. The effect of contributed and new assets on the depreciated replacement cost is shown in the darker colour. Figure 11: Projected Depreciated Replacement Cost 6.4 Key Assumptions made in Financial Forecasts This section details the key assumptions made in presenting the information contained in this 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. Key assumptions made in this asset management plan are: Average population growth over the planning period to be 2.0% Population density to remain reasonably stable (2.4 persons per dwelling in 2009, 2.1 in 2028) Asset construction costs to remain stable in real (current dollar) terms

32 ASSET MANAGEMENT PRACTICES 7.1 Accounting/Financial Systems The Accountant is responsible for the set up and operation of Council s financial systems. Council uses Civica Authority software to manage its accounting functions. The Authority system includes a fully integrated cash book and bank reconciliation module, general ledger, debtors and creditors modules. The system also has the capacity to incorporate a fully integrated asset management module although management has chosen to continue to use a separate asset management system (Conquest) at this stage. Council is required to prepare its annual financial report in accordance with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board and the Local Government Act 1993 (as amended). AASB 116 Property, plant and equipment, AASB 136 Impairment of Assets, AASB 140 Investment Property and AASB 5 Non-current Assets held for sale and Discontinued Operations are applied when preparing council s annual financial statements. AASB 13 Fair Value measurement was applied from 1 July The Fair Value method of accounting is used for the initial recording of all assets acquired. Fair Value Cost is determined as the cost of the assets plus cost incidental to the acquisition including architects fees, engineering design fees, consulting fees, administration charges and all other costs incurred in getting the assets ready for use. In addition the cost of non-current assets constructed by Council, cost includes all material used in construction, direct labour used on the project and an appropriate proportion of overheads. Non-monetary assets received in the form of grants and donations are recognised as assets and revenues at their fair value at the date of receipt. Fair value means the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm s length transaction. Generally maintenance, repair costs and minor renewals are charged as expenditure when incurred unless the total value exceeds 10% of the asset s written down value or increase the economic life by more than 10%. Expenditure is capitalised when it provides future economic benefits which extend beyond one year and can be measured reliably. 7.2 Asset Management Systems Council uses an asset management system called Conquest. The system holds information for identified assets in relation to date constructed/acquired, category of asset, location, inspection details, valuation, condition and attribute data. The AM system is not currently automatically linked to the accounting/financial system; however council is investigating future implementation of an AM system fully integrated with the current financial system. The new AM system is incorporated into the current accounting/financial software Civica Authority, though this software is still in relatively early stages of development. The responsibility of the AM system is primarily that of the Asset Management Officer, including the upkeep of the existing and new/acquired assets. The Accountant undertakes the annual valuation and depreciation of the assets.

33 Information Flow Requirements and Processes The key information flows into this asset management plan are: Council strategic and operational plans, Service requests from the community, Network assets information, The unit rates for categories of work/materials, Current levels of service, expenditures, service deficiencies and service risks, Projections of various factors affecting future demand for services and new assets acquired by Council, Future capital works programs, Financial asset values. The key information flows from this asset management plan are: The projected Works Program and trends, The resulting budget and long term financial plan expenditure projections, Financial sustainability indicators. These will impact the Long Term Financial Plan, Strategic Longer-Term Plan, annual budget and departmental business plans and budgets. 7.4 Standards and Guidelines Standards, guidelines and policy documents referenced in this asset management plan are: Latrobe Council Asset Management Policy October 2010 Latrobe Council Asset Management Strategy October 2011 International Infrastructure Management Manual, Association of Local Government Engineering New Zealand & Institute of Public Works Engineering Australia 2006 Australian Infrastructure Financial Management Guidelines, Institute of Public Works Engineering Australia 2009

34 PLAN IMPROVEMENT AND MONITORING 8.1 Performance Measures The effectiveness of the asset management plan can be measured in the following ways: The degree to which the required cashflows identified in this asset management plan are incorporated into the organisation s long term financial plan and Community/Strategic Planning processes and documents, 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 asset management plan; 8.2 Improvement Plan The asset management improvement plan generated from this asset management plan is shown in Table 8.2. Table 8.2: Improvement Plan Task No. Task Responsibility 1 Review & develop maintenance inspection Engineering procedures 2 Develop condition assessment procedure & Engineering prioritied replacement program 3 Develop risk management plan Engineering/ Risk Officer Resources Required Staff Time Staff Time Staff Time 4 Develop service levels and performance indicators Engineering Staff Time 5 Improved process for project feasibility and scope of works assessments 6 New & upgrade projects to include lifecycle cost analysis 7 Improved procedure for Council building compliance and risk management 8 Develop a demand management plan in regards to growth 9 Develop & maintain Council owned building floor plans Engineering Engineering Engineering Engineering Engineering Staff Time Staff Time Staff Time Staff Time Staff Time 8.3 Monitoring and Review Procedures This asset management plan will be reviewed during annual budget preparation and amended to recognise any material changes in service levels and/or resources available to provide those services as a result of the budget decision process. The Plan has a life of 4 years.

35 REFERENCES - Latrobe Council Annual Plan and Budget. - DVC, 2006, Asset Investment Guidelines, Glossary, Department for Victorian Communities, Local Government Victoria, Melbourne, - IPWEA, 2006, International Infrastructure Management Manual, Institute of Public Works Engineering Australia, Sydney, - IPWEA, 2008, NAMS.PLUS Asset Management Institute of Public Works Engineering Australia, Sydney, Hyperlink reference not valid.. - IPWEA, 2009, Australian Infrastructure Financial Management Guidelines, Institute of Public Works Engineering Australia, Sydney, - IPWEA, 2011, Asset Management for Small, Rural or Remote Communities Practice Note No. 4, Institute of Public Works Engineering Australia, Sydney, - IPWEA, 2011, International Infrastructure Management Manual, Institute of Public Works Engineering Australia, Sydney, - LGAT, 2014, practice summary 20 comp valuing buildings v8, Local Government Association Tasmania.

36 APPENDICES Appendix A Maintenance Response Levels of Service Appendix B Building Componentisation & Useful Life Assessment Appendix C Council Owned Buildings Township Plans Appendix D Abbreviations Appendix E Glossary