ASSET MANAGEMENT STRATEGY

Transcription

1 ASSET MANAGEMENT STRATEGY Version 3 - Final Adopted 19 February 2013 NAMS.PLUS Burnie City Council Asset Strategy

2 Document Control Document Control NAMS.PLUS Asset Document ID: 59_xx_ nams.plus am strategy template v1 Rev No Date Revision Details Author Reviewer Approver 1 July 2012 First Draft G Neil 2 August 2012 Second Draft Transferred to new Template 3 October 2012 Third Draft Added Plant, Equipment + Waste. 3 February 2013 Third Version Adopted by Council on 19 February 2013 E Cumming E Cumming G Neil G Neil G Neil Council NAMS.PLUS & NAMS lite Asset The Institute of Public Works Engineering Australia. Copyright 2012 All rights reserved. Burnie City Council Asset Strategy Adopted 19 February 2013

3 Contents Executive Summary Introduction Legislative reform Asset Planning Process What Assets do we have? Council s Assets and their management? State of the Assets Life Cycle Cost Asset Structure Corporate Asset Team Financial and Asset Core Competencies Strategy Outlook Where do we want to be? Council s Vision, Mission, Goals and Objectives Asset Policy Asset Vision How will we get there? Asset Improvement Plan Appendix A Asset Maturity Assessment Tables Table 1: Assets used for providing Services... 8 Table 2: Financial Status of the Assets... 9 Table 3: Life Cycle Cost for Council Services Table 4: Life Cycle Expenditure for Council Services Table 5: Life Cycle Sustainability Indicators Table 6: Goals and Objectives for Infrastructure Services Table 7: Asset Strategies Table 8: Asset Improvement Plan Figures Figure 1: Asset Replacement Values... 9 Figure 2: State of the Assets Figure 3: Core Asset Maturity Burnie City Council Asset Strategy Adopted 19 February 2013 Page iii

4 This page is left intentionally blank Burnie City Council Asset Strategy Adopted 19 February 2013 Page iv

5 Executive Summary This Asset Strategy is prepared to assist Council in improving the way it delivers services from infrastructure including transport, bridges and culverts, stormwater drainage, parks reserves and cemeteries, buildings and parking, waste management, vehicles plant and equipment. These infrastructure assets have an approximate replacement value of $430 Million. The Asset Strategy is to enable Council to show: how its asset portfolio will meet the service delivery needs of its community into the future, enable Council s asset management policies to be achieved, and ensure the integration of Council s asset management with its long term strategic plan. Adopting this Asset Strategy will assist Council in meeting the requirements of national sustainability frameworks. At present, there is no state legislation in Tasmania to mandate the development of asset management plans and long term financial planning by Councils. The Local Government Association of Tasmania has implemented a voluntary program to guide improved asset and financial management as a means to assist Council s to provide services needed by the community in a financially sustainable manner. This Asset Strategy has been prepared following a review of the Council s service delivery practices, financial sustainability indicators, asset management maturity and fit with Council s vision for the future outlined in the Burnie City Council s Corporate Plan. The Strategy outlines an asset management improvement plan detailing a program of actions to be completed and resources required to bring council to a minimum core level of asset maturity and competence. Strategy Outlook 1. Council has developed a range of Technical Levels of Service that reflect current practices in providing services and infrastructure to the community. The cost of meeting these levels of service has been built into Council s Financial Strategy and maintaining this level of service is achievable over the next 10 years. 2. Council s current asset management maturity is below core level; however the maturity gap is not significant. Council investment is needed to improve information management, governance arrangements, and a range of other actions to bridge this maturity gap. 3. Council has committed to ensuring that it focuses on asset renewals and will prioritise funding to address infrastructure that is not providing a suitable level of service. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 1

6 Asset Strategies High level Strategies to assist Council in progressing to core asset maturity are detailed in the table below. The Strategies will be delivered through the implementation of a range of improvement actions. Such actions have been identified in the Asset Maturity Audit Initial Assessment and within the Asset Plans. No Strategy Desired Outcome 1 Move from Annual Budgeting to Long Term Financial Planning. The long term implications of Council services are considered in annual budget deliberations. 2 Develop and annually review Asset Plans covering at least 10 years for all major asset classes (80% of asset value). 3 Develop Long Term Financial Plan covering 10 years incorporating Asset Plan expenditure projections with a sustainable funding position outcome. 4 Incorporate Year 1 of Long Term Financial Plan revenue and expenditure projections into annual budgets. 5 Review and update Asset Plans and long term financial plans after adoption of annual budgets. Communicate any consequence of funding decisions on service levels and service risks. 6 Report Council s financial position at fair value in accordance with Australian Accounting Standards, financial sustainability and performance against strategic objectives in Annual Reports. 7 Ensure Council s decisions are made from accurate and current information in asset registers, on service level performance and costs and whole of life costs. 8 Report on Council s resources and operational capability to deliver the services needed by the community in the Annual Report. 9 Ensure responsibilities for asset management are identified and incorporated into staff position descriptions. 10 Implement an Improvement Plan to realise core maturity for the financial and asset management competencies within 2 years. 11 Report six monthly to Council by Audit Committee / General Manager on development and implementation of Asset Strategy, AM Plans and Long Term Financial Plans. Identification of services needed by the community and required funding to optimise whole of life costs. Sustainable funding model to provide Council services. Long term financial planning drives budget deliberations. Council and the community are aware of changes to service levels and costs arising from budget decisions. Financial sustainability information is available for Council and the community. Improved decision making and greater value for money. Services delivery is matched to available resources and operational capabilities. Responsibility for asset management is defined. Improved financial and asset management capacity within Council. Oversight of resource allocation and performance. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 2

7 Asset Improvement Plan The program of actions and resources required to achieve a minimum core asset management maturity were identified during the conduct of an asset management maturity assessment. The actions that need to be implemented to improve upon current asset management practices are documented in Table 8 of this Strategy. A more detailed implementation plan will be developed, once asset management plans have been reviewed, to support the achievement of the improvement plan. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 3

8 1. Introduction Assets deliver important services to communities. A key issue facing local governments throughout Australia is the management of ageing assets and meeting expectations in regard to renewal and replacement. Infrastructure assets such as roads, drains, bridges, and public buildings present particular challenges. Their condition and longevity can be difficult to determine. Financing needs can be large, requiring planning for large peaks and troughs in expenditure for renewing and replacing such assets. Demand for new and improved services adds to the planning and financing complexity. The creation of new assets also presents challenges in funding the ongoing operating and replacement costs necessary to provide the needed service over the assets full life cycle. The national frameworks on asset planning and management and financial planning and reporting endorsed by the Local Government and Planning Ministers Council (LGPMC) require Councils to adopt a longer-term approach to service delivery and funding comprising: A strategic longer-term plan covering, as a minimum, the term of office of the councillors and: o bringing together asset management and long term financial plans, o demonstrating how Council intends to resource the plan, and o consulting with communities on the plan. Annual budget showing the connection to the strategic objectives, and Annual report with: o explanation to the community on variations between the budget and actual results, o any impact of such variances on the strategic longer-term plan, o report of operations with review on the performance of the Council against strategic objectives. Framework 2 Asset Planning and has seven elements to assist in highlighting key management issues, promote prudent, transparent and accountable management of Local Government assets and introduce a strategic approach to meet current and emerging challenges. Asset Policy, Strategy and planning, Asset Strategy, Asset Plan, Governance and management arrangements, Defining levels of service, Data and systems, Burnie City Council Asset Strategy Adopted 19 February 2013 Page 4

9 Skills and processes, and Evaluation. The Asset Strategy is to enable Council to show: how its asset portfolio will meet the service delivery needs of its community into the future, to enable Council s Asset Policies to be achieved, and to ensure the integration of Council s asset management with its long term Strategic Plan. The goal of asset management is to ensure that services are provided: in the most cost effective manner, through the creation, acquisition, maintenance, operation, rehabilitation and disposal of assets, for present and future consumers. The objective of the Asset Strategy is to establish a framework to guide the planning, construction, maintenance and operation of the infrastructure essential for Council to provide services to the community. 1.1 Legislative Reform There is no legislative or regulatory framework in Tasmania that requires Council to develop Asset Plans or a long term Financial Plan. However, Local Government, as a body, has recognised the importance of such planning and implemented the Local Government Financial and Asset Reform Project to assist member Councils to progress to a core position in respect to asset management. As detailed in the Asset Maturity Assessment (Appendix A), Burnie City Council is well progressed upon the asset management path and has in place asset management plans for major asset classes and a Financial Strategy (adopted April 2012) covering the next 10 years. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 5

10 1.2 Asset Planning Process Asset management planning is a comprehensive process to ensure that assets are managed and maintained in a way that enables affordable services from infrastructure to be provided in an economically optimal way. In turn, affordable service levels can only be determined by assessing Council s financially sustainability under scenarios with different proposed service levels. Asset management planning commences with defining stakeholder and legal requirements and needs, incorporating these needs into the organisation s Strategic Plan, developing an Asset Policy, Strategy, Asset Plan and Operational Plans, linked to a long-term financial plan with a funding plan. Asset Planning Process Burnie City Council Asset Strategy Adopted 19 February 2013 Page 6

11 2. What assets do we have? Council uses infrastructure assets to provide services to the community. The range of infrastructure assets and the services provided by the assets is shown in Table 1. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 7

12 Table 1: Assets used for providing Services Asset Class Description Services Provided Transport Assets Assets included road pavement, road surface, kerb and channel, footpaths, cycle ways, driveways, retaining walls and street furniture Transportation of goods and services from production to market and to consumers. Movement of people around the Council area for business, education, recreation and leisure. Bridges and Culverts Bridges (pedestrian and vehicular), jetties, boardwalks, viewing platforms and major culverts (as per Grants Commission definition). Provides for the safe passage of vehicles and pedestrians. Designed to permit the safe passage of storm and flood flows Buildings and Parking Public buildings, operational installations, cultural, recreational facilities and leased buildings. Supports the delivery of a range of services and infrastructure to the community. Facilitates a large range of culture and community activities. Stormwater drainage Underground and natural systems that convey storm water arising from urban and developed catchments. Underground pipe and pit network, open channels, detention basins, stormwater quality improvement devices. Parks and Reserves and Cemeteries A range of parks, reserves, sporting facilities and cemeteries. Provide undeveloped and developed open spaces for the community to use for a range of purposes. Waste A range of infrastructure to support waste recovery, waste acceptance and waste transfer activities. Assets to support the ongoing management of the Mooreville Road closed landfill site. Enable the community to dispose of waste materials in an appropriate manner. Support the recovery and re use Vehicles Plant and Equipment Plant and equipment used to support the operational activities of Council. Support the provision of a range of services to the community. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 8

13 3. Council s assets and their management? 3.1 State of the Assets The financial status of Council s assets is shown in Table 2. Table 2: Financial Status of the Assets Asset Class Replacement Cost ($000) Residual Value ($000) Depreciable Amount ($000) Depreciated Replacement Cost ($000) Depreciation Expense ($000) Transport 241, , ,658 3,748 Bridges and Culverts 8,327 8,327 5, Buildings and Parking 67,024 67,024 60,501 1,136 Parks, Reserves and Cemeteries 29,526 29,526 19, Stormwater 69,664 69,664 40, Waste 4,276 4,276 1, Vehicles Plant and Equipment 9,943 9,943 5, Total 430, , ,850 7,259 Figure 1 shows the replacement values of Council s assets. Figure 1: Asset Replacement Values Replacement Cost ($000) Transport 2% 15% 7% Bridges and Culverts 16% Buildings 1% 3% Parks, Reserves and Cemeteries Stormwater 56% Waste Vehicles Plant and Equipment Burnie City Council Asset Strategy Adopted 19 February 2013 Page 9

14 Transport Bridges and Culverts Buildings & Parking Parks, Reserves and Cemeteries Stormwater Waste Vehicles Plant and Equipment Total The asset consumption ratios of Council s assets (average proportion of as new condition left in assets) are shown in Figure % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Asset Consumption Ratio Figure 2: State of the Assets At present, detailed condition information is only available for a number of asset classes. Work is ongoing to progressively capture relevant data to assist in forward work s programming and asset renewal. Below are comments on each of the asset classes. Transport Assets: In general, the transport asset base is in relatively good condition. Many concrete assets such as footpaths and kerb and channelling are relatively old and aesthetically may look poor to fair but from a functional perspective continue to provide a suitable level of service. A comprehensive assessment of retaining wall assets has recently been completed and the vast majority of assets are performing above expectation in terms of useful life, with limited replacement works identified. A back log in the renewal of road surfaces has been identified and progress is being made to address this backlog, generally though road surfaces are in fair to good condition. Road pavements comprise the majority of asset value and are long life assets. Renewal demand is manageable at this point in time. It is clear though that continued investment in transport assets is necessary to ensure service levels are maintained. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 10

15 Bridges and Culverts: Council s regular inspection regime has identified that the bridge stock is in relatively sound condition and a long term replacement program is in place. Buildings: With the exception of one facility (PCYC in Upper Burnie) there are no significant issues with Council buildings that are impacting on the intended use of the facility. A number of buildings / facilities have recently been released from long term leases and returned to Council control. There are backlog maintenance / renewal challenges that need to be addressed so that users needs can continue to be met in to the future. Stormwater: Some work has occurred to obtain objective condition information for storm water assets, mainly through the use of CCTV. This work is expensive and is used to resolve issues in the network as they arise. Over time a bank of condition information will be obtained. Generally these networks perform well and observations from field and technical staff would suggest that the current condition of the network and associated assets is fair to good, with limited current issues to address. As relatively passive assets, with a long useful life, renewal demands will not be significant for the foreseeable future. Parks, Reserves and Cemeteries: In first cut modelling for parks and reserves assets a renewal backlog was identified. Inspections of the assets found that the backlog was primarily related to the suitability of the useful life originally chosen for the various asset types. i.e. the life value chosen did not reflect in service life. As such the backlog has reduced considerably. However, it is noted that much of the asset stock is aging and appropriate funding of asset renewal will need to occur to maintain current levels of service. As asset condition information availability increases, modelling of condition profiles can occur. As with leased buildings, recreational facilities on Council land but managed by third parties, are ageing and increasingly Council is being requested to assist clubs in funding renewal works. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 11

16 Waste The vast majority of waste assets are located at the Mooreville Road Waste Centre and support the receival, processing and disposal / transfer of waste. In the main the assets are relatively recent in construction and present no significant issues for Council from an asset management perspective. Plant and Equipment Council has a 10 year plant replacement program and has established desirable replacement cycles for a range of plant. Due to recent budget pressure there has been a need to reduce funding for plant replacement. While this can be managed in the short term, operating outside the established replacement cycles in the longer term will lead to a replacement backlog. Resultant impacts can be reduced operating capacity, plant breakdown, production inefficiency and lower trade values for plant. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 12

17 3.2 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 operating and maintenance expenditure and asset consumption (depreciation expense). The life cycle cost for the services covered in this asset management plan is shown in Table 3. Table 3: Life Cycle Cost for Council Services Service Previous Year Expenditure Previous Year Life Cycle Cost Operations Maintenance Depreciation Exp ($/yr) Transport 301, ,777 3,748,000 4,806,930 Bridges and Culverts 4,959 23, , ,032 Buildings and Parking 89, ,588 1,136,000 1,886,897 Parks, Reserves and Cemeteries 131, , , ,521 Stormwater 49,931 67, , ,468 Waste 60,610 15,452 76, ,062 Vehicles Plant and Equipment 15, , ,585 1,474,585 TOTAL 652,077 2,406,833 7,258,585 10,317,495 Life cycle costs can be compared to life cycle expenditure to give an indicator of sustainability in service provision. Life cycle expenditure includes operating, maintenance and capital renewal expenditure in the previous year or preferably averaged over the past three years. Life cycle expenditure will vary depending on the timing of asset renewals. The life cycle expenditure at the start of the plan is shown in Table 4. Table 4: Life Cycle Expenditure for Council Services Service Previous Year Expenditure Cap Renewal Exp Life Cycle Exp Operations Maintenance ($/yr) ($/yr) Transport 301, ,777 1,894,339 2,953,269 Bridges and Culverts 4,959 23, , ,327 Buildings 89, , ,654 1,079,551 Parks, Reserves and Cemeteries 131, , , ,270 Stormwater 49,931 67, , ,818 Waste 60,610 15, , ,957 Vehicles Plant and Equipment 15, , ,028 1,308,028 All Services 652,077 2,406,833 3,556,310 6,615,220 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 the life cycle cost, it is most likely that outlays will need to be increased or cuts in services made in the future. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 13

18 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 service to their communities in a financially sustainable manner. This is the purpose of the AM Plans and long term financial plan. A shortfall between life cycle cost and life cycle expenditure gives an indication of the life cycle gap to be addressed in the asset management and long term financial plan. The life cycle gap and life cycle indicator for services covered by this Asset Plan is summarised in Table 5. Table 5: Life Cycle Indicators Service Life Cycle Cost ($/yr) Life Cycle Expenditure ($/yr) Life Cycle Gap * ($/yr) Life Cycle Indicator Transport 4,806,930 2,953,269-1,853, % Bridges and Culverts 140, ,327 4, % Buildings 1,886,897 1,079, , % Parks, Reserves and Cemeteries 944, , , % Stormwater 912, , , % Waste 152, ,957 68, % Vehicles Plant and Equipment 1,474,585 1,308, , % All Services 10,317,495 6,615,220-3,702, % Note: * A life cycle gap is reported as a negative value. A life cycle gap of $3.7M per annum has been identified, reflecting that current renewal investment is less than current annual asset depreciation. The current service standards for Council s assets are considered appropriate, so the challenge in bridging the life cycle gap is related to renewal spending. In conjunction with this challenge, are the acknowledged renewal backlogs in a number of asset classes. Annual asset renewal demand for a given time period may be less than or greater than the annual depreciation provision. This will depend upon the in service performance of the assets and the actual performance of the assets within the overall asset stock life cycle. The current five year forward capital works program currently suggests an average renewal spend of around $6.0 m per annum over the life of the current program. Using the identified needs as the basis for funding, the gap is bridged slightly and reduces to $2.45 M. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 14

19 Council s Financial Strategy notes that funding for the forecast capital works program will grow for $5.4 m in 12 / 13 to around $8.6 m in five years time. This growth in funding provides an opportunity to assist in bridging the life cycle gap. The above discussion highlights the current strategy in place to begin to address backlog needs and forward renewal needs. A further issue to consider in respect to life cycle costs is the depreciation provision made for asset replacement and the merits of adopting a residual Value approach to valuing assets. Briefly discussing the residual value concept, a range of assets have the potential to be incorporated in to replacement assets or have value at the end of the assigned useful life. Examples can include eg road pavements, plant and equipment, buildings and constituent components, drainage pipes ( as conduits for trenchless technology). Recognising this residual value has the potential to reduce the quantum of annual depreciation provision and reflect actual asset management practice. In addition the theoretical life cycle gap will be further managed. It is understood that a review of asset management practices is being carried out on a state wide basis and the use of residual values will be addressed as part of this review. The modelling carried out in the development of the next generation of Asset Plans will assist in further identifying the current actual renewal demand. This approach is consistent with the Council s Asset Policy. At this point in time a key expenditure focus for Council needs to be transport assets. This asset class includes the majority of backlog works. The expenditure gap for building assets is quite large, however current renewal demand (with the exception of the PCYC) does not reflect this gap at this point in time. There needs to be a focus though on improving inspection regimes and prioritising asset renewal and addressing building compliance issues. While investment in storm water assets is well below depreciation, the current condition of the assets does not warrant significant investment at this point in time. As such portion of the desirable renewal funding could be redirected to address more urgent demands in the asset network. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 15

20 Council needs to commit to funding the renewal demand of the asset base and to provide additional funding to address backlog work, to ensure that the various assets meet with the expectation of the community and comply with the standards of the day. However, should appropriate renewal funding not be made available over time asset condition will deteriorate, leading to more service requests and an increasingly risky operating environment within which to manage. 3.3 Asset Structure Position Aldermen Role Ensure Council s assets management policy and principles are applied to relevant decisions making. Provide appropriate resources to maintain and renew infrastructure assets. Ensure the Financial Strategy is implemented annually. General Manager To ensure the Council infrastructure is maintained and operated in accordance with Council s adopted policies and procedures and in accordance with relevant legislation. Director Works and Services Financial and information Services Manager and Director of Corporate Services Overall control of AM and operational objectives. Responsible for development, implementation and review of the Financial Strategy and Financial Services input into the AM process. Manager Engineering Services of asset systems and data, data collection, coordination of condition assessments, development of AM processes and the design and programming of Capital Works and over view of operational program. Works Manager Responsible for coordinating Works program, ensuring standards are complied with and forward programs. Implement and review Service Level Standards associated with operational works. Throughout the organisation a range of staff provide support to the appropriate management of assets and implementation of Council s Asset Policy and Strategy. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 16

21 3.4 Corporate Asset Team A whole of organisation approach to asset management can be developed with a Corporate Asset Team. The benefits of a Corporate Asset Team include: demonstrate corporate support for sustainable asset management, encourage corporate buy-in and responsibility, coordinate strategic planning, information technology and asset management activities, promote uniform asset management practices across the organisation, information sharing across IT hardware and software, pooling of corporate expertise, championing of asset management process, wider accountability for achieving and reviewing sustainable asset management practices. The role of the Asset Team will evolve as the organisation maturity increases over several phases. Phase 1 Strategy development and implementation of asset management improvement program. Phase 2 Asset Plan development and implementation. Reviews of data accuracy, levels of service and systems plan development. Burnie City Council Asset Strategy Adopted 19 February 2013 Page 17

22 Phase 3 Asset Plan operation. evaluation and monitoring of Asset Plan outputs. ongoing Asset Plans review and continuous improvement. The current positions on Council s Asset Team are: Director Works and Services Property Services Officer GIS / Asset Officer IT Systems Administrator Executive Manager Corporate Finance Financial Accountant Technical Administration Coordinator Works Manager Works Coordinator 3.5 Financial and Asset Core Competencies The National Frameworks on Asset Planning and and Financial Planning and Reporting define 10 elements. 11 core competencies have been developed from these elements to assess core competency under the National Frameworks. The core competencies are: Financial Planning and Reporting Strategic Longer Term Plan Annual Budget Annual Report Asset Planning and Asset Policy Asset Strategy Asset Plan Governance and Levels of Service Data and Systems Skills and processes Burnie City Council Asset Strategy Adopted 19 February 2013 Page 18

23 Evaluation Council s maturity assessment for the core competencies is detailed in Appendix A and summarised in Figure 4. The current maturity level is shown by the blue bars. The maturity gap to be overcome for Council to achieve a core financial and asset management competency is shown by the red bars. Figure 3: Core Asset Maturity Key: Y (Achieved), N (Not achieved), P (Partly Achieved) Burnie City Council Asset Strategy Adopted 19 February 2013 Page 19