REPORT. Survey Asset Management Activities Hawkes Bay Region Local Authorities 20 JANUARY 2015 FINAL

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1 REPORT Survey Asset Management Activities Hawkes Region Local Authorities 2 JANUARY 215 FINAL

2 This document has been prepared for the benefit of The Local Government Commission. No liability is accepted by MWH or any employee or sub-consultant of MWH with respect to its use by any other person. This disclaimer shall apply notwithstanding that the report may be made available to other persons. Prepared by MWH New Zealand Ltd Level 3, MWH House, 111 Carlton Gore Road PO Box 9179 Newmarket, Auckland 1149 Tel QUALITY STATEMENT PROJECT MANAGER Andrew Maughan PREPARED BY Brian Sharplin CHECKED BY Andrew Maughan REVIEWED BY. 2/1/ /1/215 APPROVED FOR ISSUE BY Andrew Maughan... / /... 2/1/215 2

3 FOREWORD The Local Government Commission is considering the options relating to local government reorganisation in Hawkes. MWH (NZ) Ltd was tasked to carry out a survey of the four territorial authorities and the Regional Authority to:- provide a summary of the current state of the key infrastructure assets each local authority manages; identify the proposed expenditure on the key assets, and renewals and replacements identified in Long Term Plans; provide a summary of the activities each local council plans to undertake in relation to its key assets in its Long Term Plan; identify possible, asset related, issues not reflected in the current Long Term Plans; (and) provide an opinion on the reliability of the current Asset Management Plans. This report summarises the written responses received in answer to five questionnaires (some general questions and one for each of the roads, water supply, wastewater (sewage), and stormwater/flood control activities). Brian Smith Advisory Services has prepared a report looking at the debt and investments side of the equation. This report looks at the assets side and the ten year and annual funding aspects. MWH thanks the five councils for their ready co-operation. (Signature) Brian Sharplin Senior Consultant MWH New Zealand Ltd PO Box 9176, Newmarket 1149 Auckland Tel: Mobile: Brian.Sharplin@mwhglobal.com 2 January 215 3

4 Contents FOREWORD... 3 SECTION EXECUTIVE SUMMARY EXECUTIVE SUMMARY INTRODUCTION FUTURE NEW CAPITAL EXPENDITURE REFUSE DISPOSAL ASSET INFORMATION ASBESTOS CEMENT PIPES INTERGENERATIONAL EQUITY AND FINANCIAL SUSTAINABILITY FUNDING RENEWALS V FUNDING DEPRECIATION FUNDING RENEWALS BY HAWKES BAY DISTRICT COUNCIL DIFFERENT THE OPERATING EXPENDITURE PLUS RENEWALS EXPENDITURE/THE DEPRECIATION PROVISION BURDEN VARIES GREATLY BETWEEN COUNCILS PLANNED NEW CAPITAL EXPENDITURE COMPARISON CONCLUDING REMARKS SECTION BASE STATISTICS THE LOCAL AUTHORITIES CONCERNED AREA POPULATION RATEABLE PROPERTIES AND LAND USE TERRITORIAL AUTHORITIES KEY FINANCIAL STATISTICS SECTION ASSET KNOWLEDGE ASSET TYPE ASSET DATA COMPLETENESS & ACCURACY ASSET CONDITION, AGE & REMAINING LIFE SECTION DEFERRED MAINTENANCE, DEPRECIATION, RENEWALS AND REPLACEMENT LEGISLATIVE REQUIREMENT DEFERRED MAINTENANCE AND DEFERRED RENEWALS... 23

5 4.3. PLANNED RENEWALS AND REPLACEMENT AND EXPENDITURE PLANNED RENEWALS AND REPLACEMENT EXPENDITURE SUFFICIENCY ASSET CONDITION, AGE AND REMAINING LIFE ASSET CONDITION OTHER THAN ASBESTOS CEMENT PIPES ASBESTOS CEMENT PIPES SECTION NEW CAPITAL EXPENDITURE SECTION TOTAL INFRASTRUCTURE COSTS SECTION COMPARATIVE COSTS PER PROPERTY AND PER CONNECTION PLANNED TOTAL OPERATING EXPENDITURE PLUS RENEWALS EXPENDITURE 214/ PLANNED TOTAL OPERATING EXPENDITURE PLUS THE PLANNED DEPRECIATION PROVISION 214/ PLANNED NEW CAPITAL EXPENDITURE SECTION OTHER OBSERVATIONS RISK MANAGEMENT AND FINANCIAL CHALLENGES WEATHER TIGHTNESS EARTHQUAKE STRENGTHENING COUNCIL OWNED REAL PROPERTIES (LAND AND BUILDINGS) SECTION GENERAL SUPPORTING INFORMATION TERRITORIAL AUTHORITIES ASSET DATA CONFIDENCE GENERAL DISTRICT WIDE STATISTICAL INFORMATION RISK MANAGEMENT TOTAL DISTRICT RESPONSES TO OTHER QUESTIONS SECTION ROADS ROADS GENERAL INFORMATION DEPRECIATION V RENEWALS - ROADS ASSET CONFIDENCE ROADS RISK MANAGEMENT - ROADS FINANCIAL/FUNDING CHALLENGES - ROADS

6 1.6 SERVICE DELIVERY - ROADS RESPONSES TO OTHER QUESTIONS... 7 SECTION WATER SUPPLY WATER SUPPLY GENERAL INFORMATION DEPRECIATION V RENEWALS WATER SUPPLY ASSET CONFIDENCE WATER SUPPLY RISK MANAGEMENT WATER SUPPLY FINANCIAL/FUNDING CHALLENGES WATER SUPPLY SERVICE DELIVERY WATER SUPPLY RESPONSES TO OTHER QUESTIONS SECTION WASTEWATER (SEWERAGE) WASTEWATER (SEWERAGE) GENERAL INFORMATION DEPRECIATION V RENEWALS WASTEWATER (SEWERAGE) ASSET CONFIDENCE WASTEWATER (SEWERAGE) RISK MANAGEMENT WASTEWATER (SEWERAGE) FINANCIAL/FUNDING CHALLENGES WASTEWATER (SEWERAGE) SERVICE DELIVERY WASTEWATER (SEWERAGE) RESPONSES TO OTHER QUESTIONS SECTION STORMWATER & FLOOD CONTROL STORMWATER & FLOOD CONTROL GENERAL INFORMATION DEPRECIATION V RENEWALS STORMWATER (FLOOD CONTROL) ASSET CONFIDENCE STORMWATER & FLOOD CONTROL RISK MANAGEMENT STORMWATER AND FLOOD CONTROL FINANCIAL/FUNDING CHALLENGES STORMWATER AND FLOOD CONTROL SERVICE DELIVERY STORMWATER AND FLOOD CONTROL RESPONSES TO OTHER QUESTIONS REFERENCES

7 SECTION 1 EXECUTIVE SUMMARY 7 Section 1: Executive Summary

8 1. EXECUTIVE SUMMARY 1.1 INTRODUCTION This report has been compiled primarily from the five Councils answers to a questionnaire and from a study of the information in their published long-term plans and in their respective 214/15 Annual Plans. Some quite significant inconsistencies between these two (and other) sources were identified during the study. A more comprehensive exercise may change the degree of some of the conclusions reached but not the overall picture, The traditional practice of preparing (in most cases) asset management and longterm plans for only ten years is too short a period for determining precise infrastructure requirements and although this will be remedied by the new requirement to prepare 3 year infrastructure strategies in future, none of the Hawkes Councils yet have such plans. Had there been more time the opportunity would also have been taken to question and test the completeness and correctness of some of the answers provided to the questionnaires. 1.2 FUTURE NEW CAPITAL EXPENDITURE Apart from the possible new Ruataniwha Dam a proposed 96 million cubic meter storage reservoir which if it proceeds will be built as a BOOT Project and towards the cost of which the Regional Council has agreed to contribute up to $8 million - the region doesn t have any significant extraordinary future new capital needs. Excluding this dam, new capital expenditure during (for roads, water supply, wastewater and stormwater) is forecasted to be $32.7m per year half of which is for roads, (See Section 5). Some of this will be funded by NZTA subsidies and some by Development or Lump Sum Contributions. 1.3 REFUSE DISPOSAL The jointly owned / and the and landfills all have substantial capacity for the foreseeable future. 1.4 ASSET INFORMATION The local authorities believe they have quite good information about all of their assets but they have better and more reliable information about their road assets than they do about their water supply, wastewater and (especially) their stormwater assets (Figures 2.2 & Table 9.1). Also a number of questions raised by the analysis of the answers to the questionnaires, and a study of the 214/15 Annual Plans, of the Waugh report that was done for City, and of the report entitled Exploring the Issues Facing the New Zealand Water, Wastewater and Stormwater Sector published by Local Government New Zealand (LGNZ) October 214, indicates that the Councils knowledge of their assets or the way the data is being interpreted and managed (or both) may not be as good as is claimed. Weaknesses identified during the study included: Annual depreciation under or over stated because not properly representative of remaining life; 8 Section 1: Executive Summary

9 As mentioned above) apparent inconsistencies between the four information sources (i.e. The answers to the questionnaires, The Annual Plans, The Waugh Report, and the LGNZ Report); including inconsistent valuation information. Asset condition not fully understood causing inaccurate forecasts of future renewals/replacement needs; Forecasts being prepared based on asset age rather than asset condition (when the true situation may be that the assets are still in good condition and won t need renewal or replacement for some time); A plethora of seemingly unduly complicated policies for the sustainable funding of renewals; and VERY POOR understanding and transparency about what each council s long-term funding approach for the renewals/replacement of its water supply, wastewater and stormwater systems, and the degree to which it is being adhered to, actually is; It will be interesting to see how the newly required 3year Infrastructure Strategies compare. There is the potential for them to be quite different to the information in the current long-term plans and/or to what some of the councils say their present approaches are. The mandatory performance measure that requires Councils to report the ratio of depreciation to capital expenditure, rather than to renewals capital expenditure, also doesn t promote resolution of these sorts of problems. 1.5 ASBESTOS CEMENT PIPES Asbestos cement pipes have shorter lives than most pipes made of other materials and it is reasonable to assume that all of them will need to be replaced in the next 1-3 years. The proportion of such water supply and wastewater pipes is relatively uniform across all councils (water supply average = 12%, wastewater average = 34%) (Figures 4.7A and 4.7B) 1.6 INTERGENERATIONAL EQUITY AND FINANCIAL SUSTAINABILITY While there is little evidence that renewals work is not currently being undertaken when it is due longer term management of the water supply, wastewater and stormwater systems by all of the councils does raise come concerns; Seemingly, none of the councils fully fund depreciation each year (and where they do at least partially so, some of them use the funds for purposes other than the direct funding of renewals). The planned ten-year average renewals expenditure to depreciation for all asset classes is significantly below the average for all councils nationally. Table Average Renewals Expenditure to Depreciation Asset Class Nationally Hawkes Roading 91% 8% Water Supply 72% 47% Wastewater 58% 48% Stormwater 32% 22% (See Table 4.4A and Figure 1 in Water and Roads Funding and Management Challenges by the Office of the Controller and Auditor General November 214) 9 Section 1: Executive Summary

10 By 222, based on the forecasts in the long-term plans, half the water supply, wastewater and stormwater systems will have depreciated values as a percentage of their estimated replacement cost ratios of less than 5%. (See Table 4.5B) Notwithstanding that all but one of the councils have some renewals reserves, to varying degrees the way in which all of them are annually funding renewals (especially of their water supply, wastewater and stormwater systems) is contrary to intergenerational equity and isn t sustainable. At some future time: rates will need to increase substantially to meet the renewals needs (or loans will have to be raised); or current levels of service will have to be reduced; or both meaning that the cost of replacing the assets or the necessity to accept lower levels of service) or both, will fall disproportionately on the then ratepayers/users rather than being spread more evenly across generations as the lives of the assets are consumed. 1.7 FUNDING RENEWALS V FUNDING DEPRECIATION The renewals funding situation in Hawkes mirrors a problem the Auckland Council faced when reorganisation occurred there in 21. This, and what that Council chose to do about it, is described in the following extract from its 212/22 long-term plan While depreciation is a non-cash item, Auckland Council considers that It would be prudent for tis operating revenue to be sufficient to cover all cash and non-cash operating expenses including depreciation. The cash raised to cover depreciation would then be available to fund asset replacement. The council considers this approach to be preferable to the alternative approach of raising operating revenue to cover the cash cost of asset replacements as they fall due, because asset renewal costs tend to spike in certain years while depreciation is smooth over time. In addition, funding depreciation is considered to better promote intergenerational equity as ratepayers pay for the cost of assets as they consume them. However, the net financial position inherited from the former councils only funded around 63 percent of depreciation expense. While the council believes funding 1per cent of depreciation would make its financial position more prudent and sustainable, this would be neither fair nor affordable for current ratepayers. To manage affordability for ratepayers, the council has decided to maintain funding of depreciation at this level for the first three years of this plan then move progressively to fully fund depreciation over the following 1 years. In the first two years of the plan, the council s projected cost of replacing assets is higher than the cash deficits which require borrowing to fund. This gives rise to a short-term rates funding gap and means that subsequent ratepayers will be paying more than their fair share for the replacement of assets. 1 Section 1: Executive Summary

11 While this means current ratepayers are not paying enough in those two years, the council believes this temporary situation represents a prudent balance between affordability, progress, intergenerational equity and financial sustainability. Source: - Volume one: Overview of the next 1 years Auckland Council Long-term Plan Chapter 2 Page 35 Note: It isn t possible to say at this point without an additional detailed study, what the current percentage of the depreciation expense funding in Hawkes is. 1.8 FUNDING RENEWALS BY HAWKES BAY DISTRICT COUNCIL DIFFERENT Although it doesn t fully fund depreciation (and has no reserves for future renewals) the Central Hawkes District Council stands out as spending proportionately more on renewals annually on the Three Waters systems than the other councils do. (See Figure 4.4A and also the depreciation v renewals situation in sections 11.1, 12.1 & 13.1). On the other hand also says it has more water supply and wastewater pipes (other than asbestos cement pipes) currently in a poor or very poor condition than the other councils do (Figures 4.6A & 4.6B) but it also has less asbestos cement pipes (Figures 4.7A & 4.7B). 1.9 THE OPERATING EXPENDITURE PLUS RENEWALS EXPENDITURE/THE DEPRECIATION PROVISION BURDEN VARIES GREATLY BETWEEN COUNCILS The annual total operating expenditure plus renewals (or operating expenditure plus the depreciation provision) per connection for water supply and wastewater, per urban property for stormwater and per rateable property for roading varies greatly between the councils. (One year snapshot only) Figure 1.9 OPEX plus Renewals V OPEX plus the Depreciation Provision - Planned ($ ) - Cost Per Property/Per Connection ($) Three Waters Roading Note: First line = OPEX plus renewals Second Line = OPEX plus depreciation For further details see Figures 7.1 & 7.2 The reasons for the differences between the Councils include: The different size of the road networks that have to be maintained and renewed, the type of country through which the roads pass and the number of properties that there are in each district to share the annual cost. 11 Section 1: Executive Summary

12 Table 1.9B Length of Roads per Rateable Property (Ms) The different types of land use amongst which to spread the roading costs (e.g. A rural property can expect to have to pay more for roading than a residential section). (In the case of directly funding annual renewals rather than depreciation) the age (i.e. time in the asset lifecycle) and condition of the various water supply, wastewater and stormwater systems. Note:- Not an issue if depreciation is being funded In the case of the water supply and wastewater systems the fact that it always costs considerably more per connection to provide small local systems because of the cost of providing and maintaining them and the small number of users/consumers to share the cost. The extent of each Council s debt (i.e. annual financing costs) Table 1.9C - Financing Costs included in Operating Expenditure 214/15 ($ ) Activity Finance Cost Unit Cost Finance Cost Unit Cost Finance Cost Unit Cost Finance Cost Unit Cost ($ ) ($ ) ($ ) ($ ) ($ ) ($ ) ($ ) ($ ) Roading Wastewater Water Supply Stormwater Total Note: Unit Cost = Per connection for water supply and wastewater Per urban property for stormwater Per rateable property for roading In addition to the above:- has borrowed internally for roading ($1.57m, Wastewater $67,247 and water supply ($32,17) but does not charge any interest to the activities. In 214/15 is budgeting to pay interest on internal loans totalling $1.16m $651, for roading, $235,1 for wastewater, $1, for water supply, and $176,9 for stormwater. These sums are included in the OPEX calculations in Figures7.1 & Section 1: Executive Summary

13 1.1 PLANNED NEW CAPITAL EXPENDITURE COMPARISON Figure 1.1 compares planned new capital expenditure per connection for water supply and wastewater, per urban property for stormwater and per rateable property for roading during the period of the Long-Term Plan ( ). Figure Planned New Capital Expenditure 212/222 - Cost Per Property / Per Connection ($) Three Waters Roading Note: includes a new wastewater scheme for Mahia Beach For Further details see Figure 7.3 The comments coloured red in Sections 1.4 & 1.5 (Roading), 11.4 & 11.5 (Water Supply), 12.4 & 12.5 (Wastewater) and 13.4 & 13.5 (Stormwater) explain the Councils future renewals requirements CONCLUDING REMARKS More detailed studies like the Asset Management Lifecycle Review Report prepared by Waugh Infrastructure Management Ltd would have to be carried out for all Councils before a more complete and accurate comparison of the infrastructure asset management situation in Hawkes could be made. Amongst other things that report identified:- Under s current renewal funding methodologies, rates will need to increase substantially in the future to meet renewal needs alternatively debt funding will have to be used. In either case it is possible that the cost of replacing existing assets will fall disproportionately on future ratepayers; (page 22) The 211 valuation for water supply, wastewater and stormwater assets shows a substantial number of pipes with only 3 years of remaining useful life. After additional analysis it was agreed that the cast iron water pipes in this category in fact have a substantial remaining useful life. A second theoretical renewal programme was generated for water supply with these cast iron pipes lives extended by 1 years. (page26) The graphic shows 15.9km (of stormwater) main that has reached the end of its expected life, this is purely based on the expected lives and does not include any condition based assessments which may indicate the expected asset like may be expected. _ There was no supporting data 13 Section 1: Executive Summary

14 regarding condition of the pipe. The reviewers opinion, based on discussion and operational record review is that this pipe represents a data cleansing issue. (page 45) The graphic shows that 46km of EW (wastewater) main has reached the end of its expected life. This is purely based on the expected lives and does not include any condition based assessments, which may indicate that the expected asset life may be extended _ To better understand the condition _ condition records for this pipe were examined. That data _ showed that only 4.9 km (1.6%) of the 46 km within the window had CCTV records _ NCC requires more information to better understand pipe renewals requirements and develop renewal programmes.(pages 39 & 4) The theoretical renewals programme shows an inadequate requirement (in 214) to replace the wastewater and stormwater assets. The expenditure requirement is in the order of $21m for wastewater and $12m for stormwater which is not currently reflected in City Council s long-term plan. (page 26) The Waugh Infrastructure Report determined that the road lives were significantly longer than the budget assumptions. (Questionnaire response) The foregoing comments are included here simply as an example not as a criticism of City. It is highly probable that similar studies of the other councils would identify the same sort of weaknesses. Nor are the weaknesses any different to what happens nationally. They are entirely consistent with comments by the Controller and Auditor General in Water and Roads: Funding and Management Challenges November 214: viz Our own observations and advice from experts is that other countries (such as the United States of America, The United Kingdom and Canada) have better quality data and collection practices than those our local authorities use to manage water and roading assets (page 5) Although local authorities tend to have a lot of data, they do not necessarily use it well, or use the best data, to support decision-making (page 9) _We have found that the information to enable understanding and choices is not consistently available _this must change (Page 1) To these comments by the Auditor General, based on this study and what we have repeatedly seen in local authorities elsewhere in New Zealand, we would add: Councils also need to be much more upfront and transparent about their approaches to the funding of renewals and replacements and how they are doing that in ways that are consistent with the principles of intergenerational equity and financial sustainability. Hopefully the 3year infrastructure strategies that are currently being prepared will address these matters. The questionnaire responses are summarised in Sections Section 1: Executive Summary

15 SECTION 2 BASE STATISTICS 15 Section 2: Base Statistics

16 2.1 THE LOCAL AUTHORITIES CONCERNED These are five local authorities in Hawkes : The Hawkes Regional Council; City; City; District; (and) District This section provides a general overview of each district s (size), of the regional population and land use types (which together determine the type and extent of the infrastructural services required), and of the Councils annual funding comparability. 2.2 AREA Table 2.2A Territorial Authorities Area AUTHORITY Area (km 2 ) Hawkes Region 14, ,226 3,332 4,77 12,74 Note 1 : The area of the region includes parts of Taupo and Rangitikei Districts Table 2.2B - Territorial Authorities by Area (12,74km2) 477 km 2 15 km km 2 Central Hawkes 3332 km 2 16 Section 2: Base Statistics

17 2.3 POPULATION The Hawkes regional population is currently estimated to be 158,95. It increased by 8,268 (or 6%) over the twelve year period It is forecasted to increase by another 12,49 (or 8%) over the next 12 years. Table 2.3A - Population Forecasts (No) Population Forecasted Population Census Increase AUTHORITY (Decrease ) % Hawkes Region 159, 175,88 16,88 1.6% 53,661 55,359 57,24 6,1 63,9 65,5 5,4 9% 67,425 7,839 73,245 77,4 86,8 9,2 12,8 16.5% 12,825 12,954 12,717 13,25 13,45 13,25 % 8,913 8,481 7,89 8,2 7,29 6, % 142, , ,92 TOTAL 158,95 171,44 175,83 16,88 1.6% Note: Population Projections and High, and Medium Figure 2.3B - Current Population Spread, 8,2 Central Hawkes, 13,25, 6,1, 77,4 Note: The reason for the difference between the total population of the area covered by the Regional Council and that covered by the four Districts is because the Regional Council area includes a part of the Rangitikei and Taupo Districts. 17 Section 2: Base Statistics

18 2.4 RATEABLE PROPERTIES AND LAND USE 75% of the rateable properties in Hawkes are used for residential purposes.18% are rural. Half the rural properties in the region are in District Table 2.4A - Rateable Properties and Land Use AUTHORITY Residential Rateable Properties Industrial and Rural Other TOTAL % Commercial Hawkes Regional Council 21,77 1,644 1, , % 22,883 1,561 6,28-3, % 11.% 4, , ,66 3, , , % TOTAL 52,532 3,828 12, ,851 1% Figure 2.4B - Rateable Properties Spread (Total 69,851) Central Hawkes, 7,66, 6,776, 24,763, 3,652 Figure 2.4C - Land Use Type Mix - Rateable Properties(%) Central Hawkes Total KEY: Residential Industrial/Commercial Rural Other 18 Section 2: Base Statistics

19 2.5 TERRITORIAL AUTHORITIES KEY FINANCIAL STATISTICS Table 2.5 Territorial Authorities - Key Financial Statistics AUTHORITY Rate Levy 213/14 ($mil)² Capital Value of Average Residential Property ($) Rates & Charges Payable by an Average Residential Property 213/14 ($¹) , 1, , 1, , 2, , From all rates and charges including all water supply and wastewater charges (including water by meter and wastewater by water volume etc.) 2. For all activities not only roads, water supply, wastewater and stormwater. 3. The lower the average residential property value the higher the rates! 19 Section 2: Base Statistics

20 SECTION 3 3. ASSET KNOWLEDGE 3.1. ASSET TYPE The replacement value of infrastructure assets (other than buildings) managed by the five Hawkes local authorities is $4.26b. The first fundamental for responsible asset management is that each Council knows exactly what assets it owns and the location, material type, condition, capacity, criticality, performance, age and remaining life of each. Figure 3.1 shows the assets type mix and Figure 3.2 gives a snap shot of the councils assessment of the completeness and accuracy of the asset data. Figure 3.1 Assets Type Mix Replacement Value ($m) HAWKE'S BAY REGIONAL COUNCIL ($162 mil) NAPIER ($861 mil) HASTINGS ($1,969 mil) WAIROA ($332 mil) CENTRAL HAWKE'S BAY ($939 mil) Total -All Territorials ($4,263 mil) Key: - Roads Water Supply Wastewater Stormwater/Flood Control 2 Section 3: Asset Knowledge

21 3.2. ASSET DATA COMPLETENESS & ACCURACY Figure 3.2 Territorial Authorities - Asset Knowledge Confidence (No) Roads Water Supply Wastewater Stormwater/Flood Control Data Highly Reliable (± 2%) Data Reliable (± 1%) Data Uncertain (± 25%) Source: Responses from the four territorial authorities regarding the reliability of the asset description, quantity, age, condition and performance data. A more detailed analysis is in Table: Section 3: Asset Knowledge

22 3.3. ASSET CONDITION, AGE & REMAINING LIFE A good indication of the present general condition, age and remaining life of the assets is to compare their current value (depreciated replacement value) with their estimated replacement value. The situation (for all of the assets roads, water supply, wastewater, and storm-water, and flood control) is as follows: AUTHORITY Table Asset Values REPLACEMENT VALUE DEPRECIATED REPLACEMENT PERCENT VALUE ($m) ($m) (%) Hawkes Regional Council % % % % % Sub-totals Territorials % TOTAL % Note: - 1. The depreciated replacement value is the replacement cost of the assets less accumulated depreciation. This reflects their current condition and the already consumed economic benefits to date. 2. Figures showing the depreciated replacement value: replacement cost for each activity are in the respective activity section and there is also a more detailed view in Table 4.5A. The percentages shown here are deceiving because (as Table 4.5A shows) they are consistently much higher for roads than they are for the other assets. 22 Section 3: Asset Knowledge

23 4. DEFERRED MAINTENANCE, DEPRECIATION, RENEWALS AND REPLACEMENT 4.1. LEGISLATIVE REQUIREMENT Section 1 of the Local Government Act 22 says: SECTION 4 1. A local authority must ensure that each year s projected operating revenues are set at a level sufficient to meet that year s projected operating expenses. 2. Despite subsection (1), a local authority may set projected operating revenues at a different level from that required by that subsection if the local authority resolves that it is financially prudent to do so, having regard to: (i) (ii) (iii) the estimated expenses of achieving and maintaining the predicted levels of service provision set out in the long-term plan, including the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; (and) the projected revenue available to fund the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; and The equitable allocation of responsibility for funding the provision and maintenance of assets and facilities during their useful lifetime 4.2. DEFERRED MAINTENANCE AND DEFERRED RENEWALS Perhaps the most important question relating to infrastructure management is whether or not there has been any maintenance, repair, restoration/rehabilitation or replacement work that has not been carried out when it should have been (or when it was scheduled to be) and which has been put off or delayed for a future period. The councils say that the only deferred maintenance or deferred renewals work is as shown below total $1.1m Authority Table 4.2 Deferred Maintenance and Deferred Renewals ($ mil) Water Roads Supply Wastewater Stormwater total Total Key: - Roads Water Supply Wastewater Stormwater Note: Wastewater $7.3m Work now underway 23 Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

24 4.3. PLANNED RENEWALS AND REPLACEMENT AND EXPENDITURE Tables 4.3A & Figures 4.3B-4.3C show the proposed renewals and replacement expenditure during the ten year period of the long-term plans (212-22) Table 4.3A - Proposed Renewals & Replacement Expenditure ($ ) Authority Roads Water Supply Waste -water Hawkes Regional Council Storm water / Flood Control 4,357 4,357 Total 42,594 7,3 23,961 1,186 84,41 131,348 7,771 28, ,559 Subtotal- Territorials 88,357 6,16 6,748 2,198 13,49 38,339 3,56 1, ,777 3,638 24,683 6,211 13, ,786 TOTAL 3,638 24,683 6,211 17,611 43,143 Figure 4.3B Renewals Expenditure by Local Authority ($43 mil) $13 $44 Regional Council $4 $168 $84 Figure 4.3C Renewals Expenditure By Type ($43 mil) Stormwater/ Flood Control Wastewater $17.5 $6 Water Supply $25 Roads $ Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

25 4.4. PLANNED RENEWALS AND REPLACEMENT EXPENDITURE SUFFICIENCY One indicator of the sufficiency of the extent to which the assets are being preserved in order to sustainably deliver the prescribed levels of service is comparison of the renewals expenditure with the depreciation provision. Depreciation is the degree to which the assets are being consumed each year. Renewals is the work carried out to restore or rehabilitate the assets to their original capacity or performance capability. OVER TIME the totals of the two should be roughly about the same. In the words of the New Zealand Controller and Auditor General: When we compare renewals expenditure to depreciation, we assume total depreciation is a reasonable estimate of the capital expenditure needed to replace the existing asset base. A result where renewals expenditure is equal to depreciation (1%) over time usually indicates that an asset (and therefore service) is sustainable Source Water and Roads: Funding and Management Challenges. November 214 A common way to ensure intergenerational equity (fairness of the distribution of costs and benefits across generations) is to fund the depreciation provision and use the proceeds only to fund renewals retaining any balance in a renewals reserve account until required. This also smooths- out the funding burden. When councils don t do this (and instead fund the renewals directly from rates or loans - when they deem the work to be required) there can be a tendency to defer it (in order to keep the total rate or loan requirement down) and not intervene at the most optimum time in the asset lifecycle. This happens more frequently relating to the underground assets like water supplies, wastewater and stormwater (whose current condition isn t always as obvious as for the above-ground assets like structures and roads). According to the questionnaire responses the Hawkes local authorities fund their renewals in a variety of ways. The Regional Council only funds depreciation up to a cap but uses the funds solely for funding renewals. The City Council says that it funds all depreciation (after making an allowance for subsidy received from the NZTA) and uses the funds solely for funding renewals. However this is contrary to what is said in a report prepared by Waugh Infrastructure Management Ltd in February 214. In that report (page22) Waugh says : Rather than explicitly funding depreciation City Council uses rates to fund assets replacement based on the renewals projections in the assets management plans. Because the estimates contain some uncertainty, any funds collected for renewals that are not expended in a given year accumulate into a renewals reserve. Funds in the reserve are invested and any interest accrued on the investment is added to the fund to protect against inflation Source: City Council Asset Management Lifestyle Review Final Report February 214 by Waugh Infrastructure Management Ltd The Council s 214/15 Annual Plan also says the fund is titled Infrastructure Asset Renewal and Upgrade Fund : doesn t fund depreciation for roads. Renewals funding is based on the renewals needs as identified in the Asset Management Plan and agreed as a part of the long-term planning process; 25 Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

26 doesn t fully fund depreciation for wastewater (and the situation is unclear for water supply). All renewals expenditure is then loan funded and the funded depreciation is used to finance that debt. doesn t fund depreciation for stormwater at all because the network is relatively new and has high debt levels (but this policy is being reviewed).the Council s Statement that the network is relatively new also isn t consistent with the fact that its depreciated replacement value : replacement cost ratio is the same as for the councils water supply system 61%, nor with the fact that it says that the age condition and performance of the stormwater systems are uncertain.(see section 13.3), Funds depreciation for roads after making an allowance for subsidy received from the NZTA. Only funds depreciation for water supply, wastewater and stormwater up to a level that can be afforded based on the amount of funds available from a limited rating base. Uses all depreciation funds only for funding renewals. With a minor exception relating to roading, funds depreciation and uses the proceeds solely to fund renewals. Note: The above information needs to be interpreted with care. The work that was done for the preparation of this report raised a number of consequential questions that indicate some of the answers provided may be incomplete or not strictly correct Table 4.4A shows the forecast renewals expenditure v depreciation comparison. Table 4.4A Forecasted Renewals Expenditure As a Proportion of the Depreciation Provision - 212/222 (%) Authority Roads Water Supply Wastewater Stormwater/ Flood Control Hawkes Regional Council 74% 74% Total 42% 43% 5% 44% 44% 92% 36% 47% % 65% 84% 88% 78% 9% 84% 139% 5% 13% 4% 97% TOTAL 8% 47% 48% 22% 65% National Comparison 91% 72% 58% 32% Key: %-5% 51%-6% 61%-7% over 7% Note: See Sections 1.2 (Roads), 11.2 (Water Supply), 12.2 (Wastewater) and 13.2 (Stormwater/Flood Control) for details. During the period the four territorial authorities are intending to depreciate their assets by $617m but only spend $398m on renewals :viz 26 Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

27 Table 4.4B - Planned Renewal Expenditure Vs Depreciation 212/22 Activity Depreciation Renewals $m $ m % Roads % Water Supply % Wastewater % Stormwater % Total % The National Comparison figures are the 1year averages identified in Funding Management Water and Roads- Funding and Management Challenges November 214 a report by the Office of the Controller and Auditor General about New Zealand local authorities asset management practices (page 32). road lives are to be extended based on a report by Waugh Infrastructure Ltd. The effect of this will be to reduce the annual depreciation requirement and therefore produce a higher percentage. As at 3 th June 214 the councils had the following amounts in reserve funds for renewals. In their replies to the questionnaire the Councils indicated that these funds are set aside for renewals (or for the servicing of loans to fund renewals) but a study of their 214/215 Annual Plans indicates that may not always be so. In some cases a part of these funds are (or seem to be) used for other purposes including new or upgrade capital expenditure or for the servicing of loans raised to fund new capital work. Activity Table 4.4C - Renewal Reserves as at 3 June 214 ($ mil) Regional Council Central Hawkes Total Roading Water Supply Wastewater Stormwater Flood Control TOTAL Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

28 4.5. ASSET CONDITION, AGE AND REMAINING LIFE Table 4.5A gives a more detailed view of the depreciated replacement value : replacement cost picture mentioned earlier (in Table 3.3) Table 4.5A - Current Infrastructure Age and General Condition (Depreciated Replacement Value as a Percentage of the Replacement Value-214) AUTHORITY Roads Water Supply Wastewater Stormwater / Flood Control Hawkes Regional Council 9% 57% 63% 53% 64% 9% 61% 54% 61% 76% 52% 56% 65% 66% 59% 35% 33% Total - Territorials 79% 6% 53% 61% Key: %-5% 51%-6% 61%-7% over 7% Table 4.5B shows how the 214 depreciated value expressed as a percentage of the replacement cost (Table 4.5A) will in all cases, except for roads in, further reduce based on the forecasts in the long-term plans. 28 Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

29 Table 4.5B Depreciated Replacement Value As A Percentage of the Replacement Cost (%) Comparison 214 V 222 Regional Council Service Roads 57% 39% 9% 89% 76% 74% 66% 71% Water Supply 63% 55% 61% 52% 52% 5% 59% 49% Wastewater 53% 43% 54% 44% 56% 54% 35% -14% Stormwater /Flood Control 9% 89% 64% 56% 61% 48% 65% 64% 33% 26% Key: %-5% 51%-6% 61%-7% over 7% Note: The 222 percentages have been calculated using The Councils planned provision for depreciation and their proposed expenditure on renewals during the ten-year period For the detailed figures see sections 1.2, 11.2, 12.2 and The depreciation and renewals forecasts include inflation. The replacement cost is the forecasted current (most recent valuation) replacement cost. If inflation was added to it the 222 percentages would be lower/worse. Regarding the City Council s significant deterioration for roading between 214 and 222 the Council says the depreciation figures have since been reviewed based on a report by Waugh Infrastructure Management that determined the road lives are significantly longer than the budget assumptions and that this matter will be reflected in its long-term Plan. 29 Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

30 4.6. ASSET CONDITION OTHER THAN ASBESTOS CEMENT PIPES Tables 3.6A and 3.6B show the extent of pipes, other than asbestos cement pipes, that are currently in poor or very poor condition. 1% Figure 4.6A - Water Supply Pipes other than Asbestos Cement Pipes Currently in 'Poor or Very Poor' Condition as % of The Overall Network 8% 6% 4% 27% 2% % 8% 11% % 1% Figure 4.6B - Wastewater Pipes other than Asbestos Cement Pipes Currently in 'Poor or Very Poor' Condition as % of The Overall Network 8% 6% 4% 2% % 7% % 2% % 3 Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

31 4.7. ASBESTOS CEMENT PIPES Pre the late 197 s there was widespread use of asbestos cement pipes. These have shorter lives than most pipes made of other materials and it is reasonable to assume that all of them will need to be replaced in the next 1-3 years. The 3 year infrastructure strategy plans that are now required to be prepared by all councils within the next few months can be expected to identify the implications for each district. Figures 4.7A and 4.7B show the extent of asbestos cement use in the Hawkes Region. 1% Figure 4.7A - Water Supply Asbestos Cement Pipework as a % of The Overall Network 8% 6% 4% 2% 1% 8% 1% 2% % 1% Figure 4.7B - Wastewater Asbestos Cement Pipework as a % of The Overall Network 8% 6% 4% 2% 39% 37% 2% 39% % Note: The above tables are not to be interpreted to imply that all asbestos cement pipes are currently in a poor condition 31 Section 4: Deferred Maintenance, Depreciation, Renewals and Replacement

32 SECTION 5 5. NEW CAPITAL EXPENDITURE Forecasted new capital expenditure for roads, water supply, wastewater, stormwater and flood control over the next ten years totals $327.2m, half of which ($161.4m) is for roads. Table 5A - Proposed New Capital Expenditure ($m) AUTHORITY Growth ILOS Total Hawkes Regional Council Flood Control Roads 42.4 Water Supply Wastewater Stormwater Roads Water Supply Wastewater Stormwater Roads Water Supply.7 Wastewater Stormwater.1.2 Roads 1 Water Supply 1.7 Wastewater 12.6 Stormwater Total Note: ILOS = Increased Levels Of Service. Figure 5B - Proposed New Capital Expenditure by Type ($327.2m) Flood Control, $21.5 Stormwater, $58.9 Wastewater, $45.7 Water Supply, $39.7 Roads, $161.4 Figure 5C - Proposed New Capital Expenditure by Growth Vs ILOS ($327.2m) Growth, $19. ILOS, $ Section 5: New Capital Expenditure

33 Figure 5D Growth Vs ILOS 212/22 ($ mil) By Local Authority Hawkes Regional Council ILOS, $21.5 ILOS, $62 Growth, $61 ILOS, $115 Growth, $34 Growth, $ ILOS, $5 ILOS, $15 Growth, $14 (includes a new wastewater scheme for Mahia Beach) Note 1 :-The Figures in this section do not include a possible capital investment by the Regional Council relating to a new Ruataniwha Dam a long term sustainable water supply option for Central Hawkes. The Scheme will consist of a 96million cubic storage reservoir, storing water during periods of high flow and over winter and releasing water to achieve improved river flows through summer for river life and other river users and providing secure water for irrigators. 33 Section 5: New Capital Expenditure

34 The proposed capital structure anticipates a mix of public and private sector capital from : Hawkes Regional Investment Co Ltd; Crown Irrigation Investments; Institutional Investors; IWI; (and) Hawkes Public (predominantly farmers) The Regional Council has agreed to vest up to $8million in the scheme providing it meets its uptake threshold and has workable consents by financial close (which is targeted to be the end of March 215). The scheme will be built as a Build Own Operate and Transfer (BOOT) project. The capital structure is predicated on a limited partnership model, which will enable investors to take profits and losses on their own balance sheets while retaining a limited liability. It will transfer to public ownership at the end of the 7 year concession perion, with some intergenerational ownership rights potentially to be retained by IWI and some private investors. 2 :-Proposed new capital roading projects in in the 212/22 period include : Whakatu Arterial Link; Irongate Industrial Development; Arataki Development; Lyndhurst Development; (and) Medium Density Improvements Other Projects scheduled for later include: North Eastern Connection; Tomoana Industrial Development; (and) Kaiapo Development 3 :- has what it refers to as $41m of deferred capital roading works (see City Council Annual Plan 214/15 Page 84). These are largely roads that do not meet the current standards as required by the Code of Practice for Subdivision and Land Development. There is also $12.4m worth of transportation and environmental projects in the CBD area that are to be done over time funded principally by financial contributions. 34 Section 5: New Capital Expenditure

35 SECTION 6 6. TOTAL INFRASTRUCTURE COSTS Table 6A summarises the councils forecasted total infrastructure costs over the 1 year period of the long-term plan. Table 6A - Forecasted Total Infrastructure Costs 212/22 - ($ mil) Roads Water Supply Wastewater Stormwater/ Flood Control Total Hawkes Regional Council Maintenance Renewals Sub-Total New Capital Total Maintenance Renewals Sub-Total New Capital Total Maintenance Renewals Sub-Total New Capital Total Maintenance Renewals Sub-Total New Capital Total Maintenance Renewals Sub-Total New Capital Total Total Maintenance Renewals Sub-Total New Capital Total Section 6: Total Infrastructure Costs

36 Figure 6B - Total Infrastructure Expenditure by Local Authority ($1.15bil) $118.5 $188.9 Regional Council $83.3 $269.9 $488.3 Figure 6C - Total Infrastructure Expenditure by Type ($1.15bil) New Capital $327.6 Maintenance $418.4 Renewals $42.9 Figure 6D - Total Infrastructure Expenditure by Activity ($1.15bil) Stormwater $172.5 Wastewater $168.5 Water Supply $127. Roads $ Section 6: Total Infrastructure Costs

37 Figure 6E - Total Infrastructure Expenditure By Activity by Local Authority ($ mil) Stormwater $52 Wastewater $7 Stormwater $29 Wastewater $47 Roads $142 Watersupply $6 Roads $329 Watersupply $29 Stormwater $5 Wastewater $28 Stormwater $3 Wastewater $23 Watersupply $24 Roads $132 Watersupply $15 Roads $78 37 Section 6: Total Infrastructure Costs

38 7. COMPARATIVE COSTS PER PROPERTY AND PER CONNECTION SECTION PLANNED TOTAL OPERATING EXPENDITURE PLUS RENEWALS EXPENDITURE 214/15 Every Council s annual revenue should at the very least, be sufficient to maintain service capacity and the integrity of the assets for their useful lives. (Section 1 Local Government Act 22). An attempt was made to compare the total cost to each council of maintaining and renewing the assets. The result indicated however that the answers to the cost of maintenance question may not have been compiled on the same basis so the Councils Annual Plans for 214/15 were studied. Figure 7.1 gives a one year snapshot. It shows the planned total operating expenditure plus renewals expenditure cost per rateable property for roading, per connection for water supply and wastewater, and per urban rateable property for stormwater for 214/ Figure Proposed Total Operating Expenditure plus Renewals Expenditure 214/15 - Per Property and Per Connection ($) $1,772 $1, $449 $ ($ 941) ($1535) ($334) Water Supply cost per connection Stormwater cost per Urban Property Source 214/15 Annual Plans $ ( $332) Average ($1528) Wastewater cost per connection Roading cost per Rateable Property Note: Operating Expenditure includes: Payments to staff and suppliers Finance costs Internal charges and overheads(net) Other operating funding applications 38 Section 7: Comparative Costs Per Property And Per Connection

39 7.2. PLANNED TOTAL OPERATING EXPENDITURE PLUS THE PLANNED DEPRECIATION PROVISION 214/15 Figure 6.2 shows the comparative situation if (rather than rating just to fund the renewal costs) every Council was fully funding the depreciation provision in 214/15, and using the depreciation proceeds to fund the renewals. 25 Figure Proposed Total Operating Expenditure plus the Depreciation Provision 214/15 - Per Property and Per Connection ($) $2,1 2 $1, $1,2 $ $ ($ 126) ($192) ($3445) ( $3441) Average ($1954) Water Supply cost per connection Stormwater cost per Urban Property Source 214/15 Annual Plans Wastewater cost per connection Roading cost per Rateable Property Note: Operating Expenditure includes: Payments to staff and suppliers Finance costs Internal charges and overheads(net) Other operating funding applications 39 Section 7: Comparative Costs Per Property And Per Connection

40 7.3. PLANNED NEW CAPITAL EXPENDITURE Figure 6.3 shows the comparative situation relating to the councils planned new capital expenditure during the 1 year period of the long-term plan Figure Proposed New Capital Expenditure 212/22 - Per Property and Per Connection ($) $6, $2,739 $2,7 $2,692 $2, ($ 531) ($5541) ($3522) ( $722) Average ($52 Water Supply cost per connection Wastewater cost per connection Stormwater cost per Urban Property Roading cost per Rateable Property NOTE:- The abnormally high wastewater expenditure by relates to a proposed new wastewater scheme for Mahia 4 Section 7: Comparative Costs Per Property And Per Connection

41 SECTION 8 8. OTHER OBSERVATIONS 8.1 RISK MANAGEMENT AND FINANCIAL CHALLENGES When asked to identify their top five risks (for the Authority as a whole and for each activity separately) - and any significant financial/funding challenges the answers varied quite widely. In addition to a long list of operational type risks for each activity the main issues raised were: Inadequate funding (especially from the New Zealand Transport Agency for roading) (In the case of the and Councils especially) insufficiently skilled human resources and works contracting weaknesses; The impacts of Central Government decision-making including changes to the Local Government Act, Health and Safety legislative changes, the requirement for small water supply schemes to comply with the Drinking Water Standards and the potential effects of the proposed local government re-organisation; The likely impacts on the local infrastructure of the Ruataniwha Water Storage Scheme, if it proceeds ( ); The potentially adverse effects of forestry and heavier vehicles on the local roads; and An increasing renewals requirement - (Water Supply, Wastewater & Stormwater) not immediately but in the next 1/4 years. 8.2 WEATHER TIGHTNESS The following councils have the following weather tightness claims relating to their responsibilities as building consent authorities, some of the costs of which can be expected to be paid by their insurers: Table 8.2 Weather Tightness Total $8.5m $1.62m $.1m $.5m $1.18m 8.3 EARTHQUAKE STRENGTHENING The estimated cost of the councils earthquake obligations relating to Council buildings is:- Table 8.3 Earthquake Strengthening Obligations $1.5m $1.6m $.6m $.5m Total $13.2m 41 Section 8: Other Observations

42 8.4 COUNCIL OWNED REAL PROPERTIES (LAND AND BUILDINGS) The value of real properties owned by the councils is: Table 8.4 Council Owned Properties - Value ($ mil) Regional Council Total Section 8: Other Observations

43 SECTION 9 GENERAL SUPPORTING INFORMATION 43 Section 9: General Supporting Information Total District

44 9.1. TERRITORIAL AUTHORITIES ASSET DATA CONFIDENCE Information Table 9.1 Territorial Authorities Asset Data Confidence (Assessed Reliability of Data Completeness & Accuracy) Roads Water Supply Wastewater Storm water/flood Control HR R UN HR R UN HR R UN HR R UN HR R UN Total Asset Description Asset Quantity Asset Age Condition Performance TOTAL Key: - Confidence Grade Description HR Highly reliable Data based on sound records, procedure, investigations and analysis, documented properly and recognised as the best method of assessment. Dataset is complete and estimated to be accurate + 2% R Reliable Data based on sound records, procedures, investigations and analysis, documented properly but has minor shortcomings, for example some data is old, some documentation is missing and/or reliance is placed on unconfirmed reports or some extrapolation. Dataset is complete and estimated to be accurate + 1% UN Uncertain Data based on sound records, procedures, investigations and analysis which is incomplete or unsupported, or extrapolated from a limited sample for which grade A or B data are available. Dataset is substantially complete but up to 5% is extrapolated data and accuracy estimated + 25% Note: As assessed by the local councils themselves. 44 Section 9: General Supporting Information Total District

45 Central Hawkes 13,25 8,2 6,1 77,4 Central Hawkes 15 3,332 4,77 5, GENERAL DISTRICT WIDE STATISTICAL INFORMATION Area (km 2 ) 6, 5, 4, 3, 2, 1, 214 Population (No.) 9, 8, 7, 6, 5, 4, 3, 2, 1, Future Projected Population (No.) Section 9: General Supporting Information Total District

46 Regional Council Central Hawkes 213 1,559 1,883 2,188 2,328 Regional Council 14,92 46,632 17,836 1,6 67,84 Regional Council 24,762 3,652 7,66 6,776 69,994 Rateable Properties (No.) 8, 7, 6, 5, 4, 3, 2, 1, - Total number of rateable properties = Total Rate Levy 213/14 ($) GST Exclusive 8, 7, 6, 5, 4, 3, 2, 1, - *All rates and charges including water by meter. Total Rate Levy per Rateable Property 213/14 ($) GST Exclusive Average = $ 46 Section 9: General Supporting Information Total District

47 Total-TLAs Percent 58% 63% 77% 73% 71% , ,969 2,5 2, 1,5 1, 5 - Replacement Value of Roads, Water Supply, Wastewater (Sewerage) & Stormwater Assets 213/14 - ($m) 1,6 1,4 1,2 1, Depreciated Replacement Value of Roads, Water Supply, Wastewater (Sewerage) & Stormwater Assets 213/14 ($m) Depreciated Replacement Value of Roads, Water Supply, Wastewater (Sewerage) & Stormwater Assets as a percentage of their Replacement Value 213/14 (%) 9% 8% 7% 6% 5% 4% 3% 2% 1% % 47 Section 9: General Supporting Information Total District

48 1, ,5 Regional Council 1, ,6 Regional Council Central awkes Capital Value of 'Council Owned' Properties - 213/14 ($Mil) Note: Includes Restricted Assets $11m Estimated Cost of Earthquake Obligations ($) 12, 1, 8, 6, 4, 2, 9,. 8,. 7,. 6,. 5,. 4,. 3,. 2,. 1,.. Estimated Cost of Weather Tightness Issues - As the Building Consent Authority ($ ) 48 Section 9: General Supporting Information Total District

49 Central Hawkes 1,187 1,658 2,538 3,2 Central Hawkes 1,753 1,934 2,45 2, Capital Value of An Average Residental Property ($ ) 3, 2,5 2, 1,5 1, 5 Total Sum Payable For All Rates & Charges By An Average Residential Property - 213/14 ($) GST Inclusive 3,5 3, 2,5 Total Amount Received From Rates & Charges for Refuse Collections and Disposal - Including Recycling in 213/214 ($ ) 2, 1,5 1, 5 49 Section 9: General Supporting Information Total District

50 Total Amount Received From Rates & Charges for Refuse Collections and Disposal (including Recycling) Per Urban Rateable Property 213/14 ($) Comparison - Operating Costs plus Renewals Central Hawkes Total/ Average Water Supply Operating costs $2,724 $3,963 $1,751 $1,53 $9,941 Wastewater Stormwater Roading Renewals $712 $35 $551 $46 $2,19 $3,436 $4,313 $2,32 $1,99 $11,96 Connections (No) 25,5 24,222 3,926 1,85 55,498 Cost per Connection $135 $178 $586 $1,31 $216 Operating costs $3,281 $5,461 $1,937 $93 $11,69 Renewals $2,76 $3,79 $69 $625 $6,389 $5,357 $8,54 $2,546 $1,555 $17,998 Connections (No) 24,814 18,76 3,349 2,286 49,155 Cost per Connection $216 $457 $76 $86 $366 Operating costs $1,847 $2,193 $24 $24 $4,52 Renewals $458 $2 $199 $677 $2,35 $2,213 $439 $24 $5,197 Urban Properties (No) 23,413 24,444 4,582 3,92 56,359 Cost per Urban Property $98 $91 $96 $61 $92 Operating costs $8,9 $13,983 $5,25 $6,744 $33,76 Renewals $4,19 $1,813 $7,171 $3,747 $25,921 $12,198 $24,796 $12,196 $1,491 $59,681 Rateable Properties (No) 24,962 3,652 7,66 6,776 69,85 Cost per Rateable Property $492 $89 $1,592 $1,548 $854 5 Section 9: General Supporting Information Total District

51 Comparison - Operating Costs plus Depreciation Central Hawkes Total/ Average Water Supply Operating costs $2,724 $3,963 $1,751 $1,53 $9,941 Wastewater Stormwater Roading Depreciation $1,579 $1,731 $627 $584 $4,521 $4,33 $5,694 $2,37 $2,87 $14,462 Connections (No) 25,5 24,222 3,926 1,85 55,498 Cost per Connection $169 $235 $65 $1,128 $261 Operating costs $3,281 $5,461 $1,937 $93 $11,69 Depreciation $4,181 $5,596 $849 $789 $11,415 $7,462 $11,57 $2,786 $1,719 $23,24 Connections (No) 24,814 18,76 3,349 2,286 49,155 Cost per Connection $31 $59 $832 $752 $468 Operating costs $1,847 $2,193 $24 $24 $4,52 Depreciation $2,6 $2,544 $233 $234 $5,71 $3,97 $4,767 $473 $474 $9,591 Urban Properties (No) 23,413 24,444 4,582 3,92 56,359 Cost per Urban Property $167 $194 $13 $121 $17 Operating costs $8,8 $13,983 $5,25 $6,744 $33,76 Depreciation $7,433 $13,64 $9,569 $3,17 $33,623 $15,441 $27,587 $14,594 $9,761 $67,383 Rateable Properties (No) 24,762 3,652 7,66 6,776 69,85 Cost per Rateable Property $623 $9 $1,95 $1,44 $ Section 9: General Supporting Information Total District

52 Comparison - Capital Expenditure Central Hawkes Total/ Average Water Supply $1.2 $27. $.7 $1.7 $39.6 Wastewater Stormwater Roading Connections (No) 25,5 24,222 3,926 1,85 55,498 Cost per Connection $4 $1,115 $178 $919 $713 $12 $13 $8 $13 $46 Connections (No) 24,814 18,76 3,349 2, Cost per Connection $483 $695 $2,478 $5,512 $934 $35 $23 $ $1 $59 Urban Properties (No) 23,413 24,444 4,582 3,92 56,359 Cost per Urban Property $1,495 $929 $44 $255 $1,45 $66 $86 $6 $4 $161 Rateable Properties (No) 24,762 3,652 7,66 6,776 69,85 Cost per Rateable Property $2,653 $2,82 $822 $516 $2,31 52 Section 9: General Supporting Information Total District

53 9.3. RISK MANAGEMENT TOTAL DISTRICT The Councils top five risks of any type. AUTHORITY RISK Hawkes Regional Council The potential for water quality in the region to decline without proactive management by HBRC Potential adverse effects on economic growth caused by HBRC failure to balance environmental protection and adequate supply for irrigation in its water allocation regime The potential for inappropriate land use to adversely impact on water quality in the region s rivers and reduce the land s productive capacity. Local government reform could result in significantly reduced commitment to regional council functions. If effective working relationships are not developed and maintained with Hawkes Treaty of Waitangi settlement groups or with other iwi organisations this could potentially lead to fragmentation of governance of natural resources regionally Natural Hazards/Disasters including an abnormal flood event, earthquake, tsunami etc. In the case of abnormal flooding, Council s Stormwater Asset Management Plan and works Program reflect this risk Compliance/Litigation risk where not covered by insurance. Council has identified potential contingent liabilities in its annual report. It would however be unlikely that the consequences of litigation would be such that it would affect Council s ability to deliver services. Health and Safety As common to most organisations. Council however has robust Health and Safety practices in place Amalgamation of local Council s and the potential adverse effect of this on services. Loss of organisation knowledge critical to maintaining current service levels due to loss of staff Changes to Local Government Act, including a rate cap, introducing new compliance requirements which could result in adverse impact on reputation id not met A change to NZTA funding policies reduces the money available to undertake transportation maintenance and renewal programmes resulting in a general deterioration on roading network. Business interruption caused by some event (e.g. power failure, fire) that compromises our ability to deliver our services Fluctuations in interest rate affect the Council s ability to maintain financial capabilities and capacity. Central Hawkes Changes to NZTA funding policies and road network classifications that reduces the money available to undertake roading maintenance and renewal programmes that may result in a general deterioration on roading network Health and Safety legislation changes Ruataniwha Water Storage Scheme not going ahead Changes if Local Government Act. Including a rate cap, introduction new compliance requirements which could result in adverse impact on reputation if not met 53 Section 9: General Supporting Information Total District

54 Amalgamation of the five Hawkes Councils Major industry closing (AFCO) Prolonged extreme weather event Severe earthquake Extreme Volcanic ash event Extreme East Coast tsunami Note: Red highlighting denotes comments re matters caused by Central Government decisionmaking (including local government reorganisation) Blue highlighting denotes comments re: natural hazards. Green highlighting denotes comments re: funding issues Yellow highlighting denotes comments re: human resources matters 54 Section 9: General Supporting Information Total District

55 Hawkes Regional council Hawkes Regional council Hawkes bay Regional council 9.4 RESPONSES TO OTHER QUESTIONS General Total Districts Ref Question 11 Has the Council addressed its potential earthquake obligations relating to Council assets? Yes No 2 4 Don t Know Ref Question 8 Does the Council have any weather tightness issues relating to Council buildings? Yes 5 No Don t Know $5, Ref Question Does the Council have any weather tightness issues in its capacity as the building consent agency? Yes No 2 Don t Know 55 Section 9: General Supporting Information Total District

56 Hawkes Regional council Hawkes Regional council General Total Districts Ref Question If the answer to the previous question was yes what is the contingent liability ($ ) Ref Question 19 Are there any identifiable extraordinary cost issues relating to refuse collection and disposal within the next 3 years? Yes 2 3 No 4 5 Don t Know 1 - :- $12.5m landfill development next 3 years share $22.m landfill development next 3 years share 5 - Landfill has the capacity in excess of 25, tonnes. Current residual waste values are less than 2 tonnes per annum 56 Section 9: General Supporting Information Total District

57 SECTION 1 ROADS 57 Section 1: Roads

58 , ,265 1,635 7,66 6,776 24,762 3, ROADS GENERAL INFORMATION Rateable Properties (No.) 35, 3, 25, 2, 15, 1, 5, 1,8 1,6 1,4 1,2 1, Road Length - (Kms) Sealed Unsealed Note: Of the 87km of unsealed roads in the region 78km (or 88%) are in the Wairarapa districts. Road Assets Replacement Value 213/214 ($ mil) 1,4 1,2 1, Section 1: Roads

59 Central Hawkes Total -TLAs 57% 66% 77% 79% 9% ,79 Road Assets Depreciated Replacement Value 213/14 ($ mil) 1,2 1, % 8% Road Assets Depreciated Replacement Value as a Percentage of their Replacement Value (%) 6% 4% 2% % Forecasted Maintenance & Operating Costs Total ($ mil) Note ¹: Some doubts about whether the figures from each Council include (or don t include) management costs & overheads. 59 Section 1: Roads

60 Central Hawkes 1,328 3,66 4,938 5,29 Forecasted Maintenance & Operating Costs Per 213/14 Rateable Property ($) 6, 5, 4, 3, 2, 1, Forecasted Renewals Costs Total ($ mil) Forecasted Depreciation Costs Total ($ mil) Section 1: Roads

61 Central Hawkes Total - TLAs 4,89 1,72 4,665 4,285 4,71 5,658 5,392 4,34 13,676 11,534 Forecasted Depreciation/Renewals Costs Per 213/14 Rateable Property ($) 16, 14, 12, 1, 8, 6, 4, 2, - Depreciation Renewals Forecasted New Capital Costs Total ($ mil) includes:- Whakatu Arterial Link Irongate Industrial Development Omahi Road Development Arataki Development Lyndhurst Development Medium Density includes:- $41m deferred capital roading work - largely Taradale $12.4m worth of transportation and environmental projects in the CBD 61 Section 1: Roads

62 Central Hawkes ,653 2,82 Forecasted New Capital Costs Per 213/14 Rateable Property ($) 3, 2,5 2, 1,5 1, 5 Renewals Depreciation $ $ Central Hawkes Actual Depreciation Provision v Actual Renewals Expenditure 213/14 - ($ ) Renewals Depreciation Estimated Value of Deferred Maintenance and Deferred Renewals 213/14 ($ ) Section 1: Roads

63 Central Hawkes Reserve Funds Held for Roads' Renewals ($ mil) Section 1: Roads

64 1.2 DEPRECIATION v RENEWALS - ROADS Depreciation Renewals $ $ Total , 1, 5, Renewals Depreciation Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals $ $ Total Renewals Depreciation 64 Section 1: Roads

65 Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals $ $ Central Hawkes Total , 14, 12, 1, 8, 6, 4, 2, - Total - Territorials Renewals Depreciation 42% 92% 84% 139% 16% 14% 12% 1% 8% 6% 4% 2% % Renewals Expenditure As A Proportion of the Depreciation Provision (%) 42% 92% 84% 139% 65 Section 1: Roads

66 1.3 ASSET CONFIDENCE ROADS ASSET CONFIDENCE - ROADS (Assessed Reliability of Data Completeness and Accuracy) AUTHORITY Data Attribute Very Uncertain Uncertain Reliable Highly Reliable Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Confidence Grade Highly reliable Reliable Uncertain Very uncertain Description Data based on sound records, procedure, investigations and analysis, documented properly and recognised as the best method of assessment. Dataset is complete and estimated to be accurate + 2% Data based on sound records, procedures, investigations and analysis, documented properly but has minor shortcomings, for example some data is old, some documentation is missing and/or reliance is placed on unconfirmed reports or some extrapolation. Dataset is complete and estimated to be accurate + 1% Data based on sound records, procedures, investigations and analysis which is incomplete or unsupported, or extrapolated from a limited sample for which grade A or B data are available. Dataset is substantially complete but up to 5% is extrapolated data and accuracy estimated + 25% Data based on unconfirmed verbal reports and/or cursory inspection and analysis. Dataset may not be fully complete and most data is estimated or extrapolated. Accuracy + 4% 66 Section 1: Roads

67 1.4 RISK MANAGEMENT - ROADS The Councils top five risks relating to the roads activity. AUTHORITY RISK Central Hawkes Structural failure of bridges and other structure Inadequate funding to maintain the network in a cost effective manner Lack of internal resources/retention of knowledge Poor quality/below standard workmanship Failing to meet legislative requirements NZTA underfunding of network needs Higher community expectations leading to escalating budget requirements Future increase in renewals of roads (resulting from historic seal extensions) and bridges Attracting and retaining suitably qualified staff Political, legislative, economic and technological changes leading to uncertainty Lack of Human Resources Shrinking contracting market Government Funding Price of bitumen Catastrophic event Insufficient knowledge of communities desires resulting in inappropriate targets Lack of technical expertise to provide planning/design Insufficient resources to hook in to funding mechanisms (time, cost, expertise etc.) Inadequate maintenance and renewals fails to address deterioration of infrastructure Insufficient knowledge of legislation (outside of consent conditions) Note: Red highlighting denotes comments re: renewals. Blue highlighting denotes comments re: natural hazards. Green highlighting denotes comments re: NZTA subsidies/funding issues Yellow highlighting denotes comments re human resources matters/contractors performance issues 67 Section 1: Roads

68 1.5 FINANCIAL/FUNDING CHALLENGES - ROADS AUTHORITY FINANCIAL/FUNDING CHALLENGES NZTA subsidy levels may vary in the future, which could lead to a reduction in the current level of service Assuming an appropriate renewal reserve is built up as per NCC s current methodology, sufficient funding should be available to invest in the renewal of roading assets well into the future (i.e. over the lifecycle of NCC s roading asset base (Waugh Page 67) NZTA funding constraints resulting in sub optimal renewal programs and potential for higher whole of life costs Council s ability to carry out transport activities without NZTA subsidy Central Hawkes Uncertainty about NZTA s funding priorities Major investments such as seal extensions in mid 19s and bridges in early-mid 19s leading to higher pavement and bridge renewals and strengthening, To get a better understanding of this we have completed 6yr performance/deterioration analysis of the major assets Upgrade of sub-standard streetlight systems to LED High Productivity Motor Vehicle (HPMV) impacts Increasing and maximising capacity in key transport corridors (e.g. Havelock Road/Pakowhai Road) to meet multi-modal future demands If the Ruataniwha Storage Scheme proceeds then there will be an increased demand on the network spread throughout the western portions of the district rather than evenly. There may be also an increased usage in the urban area. Ernslaw has a large forest located in the Tararua District which will begin to be harvested at 2, tonnes per year for the next 15 years at least. This will involve a substantial increase in the amount of logging trucks using at least 3 of the district s roads. The bridge stock on average is in the second half of its service life requiring the commencement of a renewals programme over the next 3 years Note: Red highlighting denotes comments re: renewals Blue highlighting denotes comments re: natural hazards. Green highlighting denotes comments re: NZTA subsidies/funding issues Yellow highlighting denotes road use issues 68 Section 1: Roads

69 1.6 SERVICE DELIVERY - ROADS AUTHORITY In-house Outsourced Partly In-house and partly Outsourced As a Council Controlled Organisation Other X X Central Hawkes X X 69 Section 1: Roads

70 Hawkes Regional Council Hawkes Regional Council 1.7 RESPONSES TO OTHER QUESTIONS Roads Ref Question 2 Climate Change: Does your Council Have A Climate Change Management Policy? Yes No Don t Know Roading has assessed the impacts of climate change NWA 28 report No specific policy. But climate change impacts are comprehensively managed and taken into account in growth planning and for projects proposed in the long-term plan. Ref Question 6 Future Demand: Are there any identifiable extraordinary future demand issues or changes within the next 3 years relating to this activity? Yes 4 5 No 2 3 Don t Know HPUDS growth study has not identified any significant growth issues over the next 3 years If the Ruataniwha Storage Scheme proceeds then there will be an increased demand on the network spread throughout the western portions of the district rather than evenly. There may be also an increased usage in the urban areas. Ernslaw has a large forest located in the Tararua District which will begin to be harvested at 2, tonnes per year for the next 15 years at least. This will involve a substantial increase in the amount of logging trucks using at least 3 of the district s roads Increasing logging to a sustainable peak in 225 with increasing HPHV and VDAM 7 Section 1: Roads

71 Hawkes Regional Council Hawkes Regional Council Roads Ref Question 1 Deferred Maintenance & Renewals: Is there any deferred maintenance and/or deferred renewals (backlog) relating to this activity? Yes 3 5 No 2 4 Don t Know $1m resulting from NZTA funding shortfall $2, deferred reseals and $35, deferred rehabilitations Ref Question 14 Depreciation: Are all of the infrastructure assets relating to this activity subject to the assessment of depreciation each year? Yes No Don t Know 71 Section 1: Roads

72 Hawkes Regional Council Hawkes Regional Council Roads Ref Question 16 Is all depreciation relating to this activity fully funded each year? (Note:- Excludes formation which as a matter of industry practice isn t depreciated) Yes No Don t Know 2 & 4 - & Only partially funded because subsidy received from NZTA 3 - funds the transport network based on the longer term renewal need as identified in the Asset Management Plan and agreed as a part of the long-tern Plan process 5 - Culverts < 6mm diameter considered to be maintained in perpetuity Ref Question 18 Are depreciation funds used solely for funding renewals? Yes No Don t Know 72 Section 1: Roads

73 Hawkes Regional Council Hawkes Regional Council Hawkes Regional Council Roads Ref Question 23 Maintenance & Operations: Can you foresee any significant extraordinary maintenance and operations costs relating to this activity in the next 3 years? Yes 5 No Don t Know 6 - Increased logging to a sustainable peak in 225 while increasing HPMV and VDAM impacting road pavements and bridge structures Ref Question 29 Renewals: Can you foresee any significant extraordinary renewals cost impacts relating to this activity in the next 3 years? Yes 5 No Don t Know 5 - See the answer to maintenance and operations above Ref Question 36 New Capital: Can you foresee any significant extraordinary new capital costs in the next 3 years? Yes No Don t Know 73 Section 1: Roads

74 Hawkes Regional Council Hawkes Regional Council Hawkes Regional Council Roads Ref Question 4 Development Contributions: Does the Council charge development contributions or financial contributions for this activity? Yes No 5 Don t Know Ref Question 42 Other Matters: Are you aware of any other significant matters that may arise in the next 3 years relating to this activity that hasn t been addressed by the above questions? Yes 3 No Don t Know NZTA funding cuts and uncertainty about the NZTA s funding priorities Ref Question 45 Has the Asset Management Plan for this activity been independently reviewed? Yes No Don t Know 74 Section 1: Roads

75 Hawkes Regional Council Roads Ref Question 47 Does your Council yet have an adopted 3 year infrastructure strategy for this activity? Yes No Don t Know 75 Section 1: Roads

76 SECTION 11 WATER SUPPLY 76 Section 11: Water Supply

77 ,24 13, 471, 484,9 Total - TLAs 25,5 24,222 3,926 1,85 55, WATER SUPPLY GENERAL INFORMATION Water Supply Connections (No.) 6, 5, 4, 3, 2, 1, Water Supply Pipes - Length (Ms) 6, 5, 4, 3, 2, 1, Water Supply Assets' Replacement Value 213/14 ($Mil) Section 11: Water Supply

78 Total-TLAs Water Supply Assets' Depreciated Replacement Value 213/14 ($ mil) Water Supply Assets' Depreciated Replacement Value as a Percentage of their Replacement Value 1% 8% 6% 63% 61% 52% 59% 6% 4% 2% % Forecasted Maintenance & Operating Costs Total ($ mil) Section 11: Water Supply

79 ,29 4,259 5,281 Forecasted Maintenance & Operating Costs Per 213/14 Connection ($) 6, 5, 4, 3, 2, 1, Forecasted Renewals Costs Total ($ mil) Forecasted Renewals Costs Total ($ mil) Section 11: Water Supply

80 Total-TLAs , , ,553 1,895 2, 1,8 1,6 1,4 1,2 1, Forecasted Renewals Costs Per 213/14 Connection ($) Renewals Depreciation $ $ Central Hawkes , 1,5 1, 5 Actual Depreciation Provision v Actual Renewals Expenditure 213/14 - ($) Renewals Depreciation Forecasted Renewals Costs Per 213/14 Connection ($) 4, 3,5 3, 2,5 2, 1,5 1, 5 Depreciations Renewals 8 Section 11: Water Supply

81 Central Hawkes ,117 Central.7 Hawkes Forecasted New Capital Costs Total ($ mil) ,2 1, Forecasted New Capital Costs Per 213/14 Connection ($ ) Estimated Value of Deferred Maintenance and Deferred Renewals 213/14 ($) Section 11: Water Supply

82 Reserve Funds Held for Water Supply Renewals ($ mil) Percentage of Water Supply Pipes in Asbestos Cement Or in Poor or Very Poor Condition 5% 4% 3% 39% 36% 39% 2% 1% % 2% 2% 7% % % Asbestos Cement Poor-Very Poor Condition 82 Section 11: Water Supply

83 11.2 DEPRECIATION v RENEWALS WATER SUPPLY Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals $ $ Total Renewals Depreciation 83 Section 11: Water Supply

84 Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals 16,788 7,3 21,672 7,771 Central Hawkes 6,96 6,16 6,991 3,56 Total , 2, 15, 1, 5, - Total - Territorial Local Authorities Central Hawkes Renewals Depreciation 43% 36% 88% 5% 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Renewals Expenditure As A Proportion of the Depreciation Provision (%) 43% 36% 88% 5% 84 Section 11: Water Supply

85 11.3 ASSET CONFIDENCE WATER SUPPLY ASSET CONFIDENCE WATER SUPPLY (Assessed Reliability of Data Completeness and Accuracy) AUTHORITY Data Attribute Very Uncertain Uncertain Reliable Highly Reliable Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Confidence Grade Highly reliable Reliable Uncertain Very uncertain Description Data based on sound records, procedure, investigations and analysis, documented properly and recognised as the best method of assessment. Dataset is complete and estimated to be accurate + 2% Data based on sound records, procedures, investigations and analysis, documented properly but has minor shortcomings, for example some data is old, some documentation is missing and/or reliance is placed on unconfirmed reports or some extrapolation. Dataset is complete and estimated to be accurate + 1% Data based on sound records, procedures, investigations and analysis which is incomplete or unsupported, or extrapolated from a limited sample for which grade A or B data are available. Dataset is substantially complete but up to 5% is extrapolated data and accuracy estimated + 25% Data based on unconfirmed verbal reports and/or cursory inspection and analysis. Dataset may not be fully complete and most data is estimated or extrapolated. Accuracy + 4% 85 Section 11: Water Supply

86 11.4 RISK MANAGEMENT WATER SUPPLY The Councils top five risks relating to the water supply activity. AUTHORITY RISK Central Hawkes Contamination in the water reticulation Power Failure Critical Main Failure Natural Hazards Loss of Aquifier Contamination outbreak non chlorinated supply Power Supply loss heavy reliance on pumping\ 39% brittle assets resilience Growth over and above forecasted in the regional strategy Capacity if the Ruataniwha Water Storage Scheme proceeds Contractor not being available or not fulfilling his duties Funding not meeting needs of network Contractor not passing on Info about our networks Lack of skill base to meet the needs of the systems Failure to meet the Water Supply standard requirements Insufficient funding available to ensure that activity meets standards Insufficient knowledge of what services are currently being delivered to that community Insufficient funding available to enforce compliance Inadequate planning for the implementation of the annual program Note: Red highlighting denotes comments re: renewals. Blue highlighting denotes comments re: natural hazards. Green highlighting denotes comments re: funding issues Yellow highlighting denotes comments re: planning/human resources/ contractors performance issues 86 Section 11: Water Supply

87 11.5 FINANCIAL/FUNDING CHALLENGES WATER SUPPLY AUTHORITY FINANCIAL/FUNDING CHALLENGES All major projects have been funded in the 1 year period. No significant renewal or growth issues during this period NCC is predicting to have a water pipe renewal peak during the period This is absolutely typical of New Zealand cities and represents the end of asset life of the post WW2 development of New Zealand cities (Waugh Page 56) Central Hawkes Starting around the year 236 a number of different pipe materials are all falling due at the same time. i.e. good quality Cast Iron from the early 19 s and moderate quality Fibro Cement (AC) piped are reaching the end of their life at the same time. This raises the required level of renewals investments between the period 23 and 25. HDC continues to analyse and enhance knowledge on AC watermain materials in advance of age based renewals predictions. Pressure reduction strategies are also helping to improve pipe longevity Cast Iron mains are predicted to fail within the same period as the AC mains based on age. Conditions assessments on a small proportion on CI pipes indicate that they are in very good condition but joint integrity is a concern. City Council have recently added an additional 1 years to their existing CI mains based on some condition assessments and HDCs assets are similar in age and condition. Further Analysis on condition and performance will assist in confirming whether CI watermain pipes can be extended beyond currently adopted guidelines. However in context of the whole network this gap in knowledge is not currently significant. Council s Heretaunga Plains Urban Development Strategy (HPUDS) leads the planning for the next 3 years of growth. Growth is monitored against this strategy. Without a dam there will be limited growth. With the dam there is the potential for reasonable Industrial growth. An aging infrastructure. Limited rating based to fund to major projects etc. Work to meet the drinking water standards The requirement for small rural water supplies to have to comply with new legislation. Note: Red highlighting denotes comments re: renewals. Blue highlighting denotes comments re: natural hazards. Green highlighting denotes comments re: funding issues Yellow highlighting denotes comments re: planning/human resources/ contractors performance issues 87 Section 11: Water Supply

88 11.6 SERVICE DELIVERY WATER SUPPLY AUTHORITY In-house Out-sourced Partly In-house and partly Outsourced As a Council Controlled Organisation Other X Central Hawkes X Reticulation maintenance and capital outsourced. Operators and maintenance of pumpstations of treatment plants managed in house X 88 Section 11: Water Supply

89 Hawkes Regional Council Hawkes Regional Council 11.7 RESPONSES TO OTHER QUESTIONS Water Supply Ref Question 2 Climate Change: Does your Council Have A Climate Change Management Policy? Yes No Don t Know 2 - Water supply has been assessed against the Climate Change NIWA 28 report No specific policy as such but climate change impacts are comprehensively considered via growth planning etc. Ref Question 6 Future Demand: Are there any identifiable extraordinary future demand issues or changes within the next 3 years relating to this activity? Yes 4 5 No 2 3 Don t Know -The impact of the Ruataniwha Water Storage Scheme on Council infrastructure should it go ahead. Council is currently working on two potential development scenarios. One with the scheme and the other without. A new water supply for Mahia Beach (Apparently not reflected in the capital programme for 212/22 see the answer to question 34) 89 Section 11: Water Supply

90 Hawkes Regional Council Hawkes Regional Council Water Supply Ref Question 1 Deferred Maintenance & Renewals: Is there any deferred maintenance and/or deferred renewals (backlog) relating to this activity? Yes No Don t Know Ref Question 14 Depreciation: Are all of the infrastructure assets relating to this activity subject to the assessment of depreciation each year? Yes No Don t Know 9 Section 11: Water Supply

91 Hawkes Regional Council Hawkes Regional Council Water Supply Ref Question 16 Is all depreciation relating to this activity fully funded each year? Yes No Don t Know - The amount funded is limited by the rate funding available Ref Question 18 Are depreciation funds used solely for funding renewals? Yes No 3 Don t Know 3 - Renewals loan funded and depreciation funds used to pay interest and loan repayments in relation to water supply debt. 91 Section 11: Water Supply

92 Hawkes Regional Council Hawkes Regional Council Water Supply Ref Question 23 Maintenance & Operations: Can you foresee any significant extraordinary maintenance and operations costs relating to this activity in the next 3 years? Yes No Don t Know Ref Question 29 Renewals: Can you foresee any significant extraordinary renewals cost impacts relating to this activity in the next 3 years? Yes 4 No Don t Know - Treatment upgrades to meet the New Zealand Drinking Water standards and a second pumping supply for Waipukurau Water 92 Section 11: Water Supply

93 Hawkes Regional Council Water Supply Ref Question 36 New Capital: Can you foresee any significant extraordinary new capital costs in the next 3 years? Yes No 3 Don t Know 2 - New reservoir, land and trunk mains -226/ Council is currently in the planning stage to resolve the Ruataniwha dam no dam issue referred to earlier 5 - new water supply for Mahia Beach Ref Question 4 Development Contributions: Does the Council charge development contributions or financial contributions for this activity? Yes No 5 Don t Know 93 Section 11: Water Supply

94 Hawkes Regional Council Hawkes Regional Council Water Supply Ref 42 Question Other Matters: Are you aware of any other significant matters that may arise in the next 3 years relating to this activity that hasn t been addressed by the above questions? Yes 4 No 3 5 Don t Know 2 - Resources consent renewal which depending on any changes to legislation or local impacts may result in a change to the consent conditions Council is currently working on a 3 year Infrastructure Plan that is expected to highlight additional issues Ref Question 45 Has the Asset Management Plan for this activity been independently reviewed? Yes No Don t Know 94 Section 11: Water Supply

95 SECTION 12 WASTEWATER (SEWERAGE) 95 Section 12: Wastewater (Sewerage)

96 ,733 5, 38, 396,7 Total - TLAs 24,814 18,76 3,349 2,286 49, WASTEWATER (SEWERAGE) GENERAL INFORMATION Wastewater Connections (No.) 6, 5, 4, 3, 2, 1, Hutt - Number of connections not available. Number of water supply connections used. Wastewater Pipes - Length (Ms) 45, 4, 35, 3, 25, 2, 15, 1, 5, Wastewater Assets' Replacement Value 213/14 ($Mil) Section 12: Wastewater (Sewerage)

97 Total - TLAs Wastewater Depreciated Replacement Value 213/14 ($ mil) Wastewater Depreciated Replacement Value as a Percentage of their Replacement Value (%) 1% 8% 6% 4% 53% 54% 56% 35% 53% 2% % Forecasted Maintenance & Operating Costs Total ($Mil) 97 Section 12: Wastewater (Sewerage)

98 ,574 3,99 3,983 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Forecasted Maintenance & Operating Costs Per 213/14 Connection ($) Forecasted Renewals Costs Total ($ mil) Forecasted Depreciation Costs Total ($ mil) 98 Section 12: Wastewater (Sewerage)

99 Total - TLAs 1, ,52 2,566 2, ,565 1,224 3,263 3,655 Forecasted Depreciation/Renewals Costs Per 213/14 Connection ($) 4, 3,5 3, 2,5 2, 1,5 1, 5 - Depreciation Renewals Renewals Depreciation $ $ Central Hawkes , 5, 4, 3, 2, 1, Actual Depreciation Provision v Actual Renewals Expenditure 213/14 - ($) Renewals Depreciation Forecasted New Capital Costs Total ($ mil) Note: New wastewater scheme at Mahia Beach 99 Section 12: Wastewater (Sewerage)

100 ,468 5,511 Forecasted New Capital Costs Per 213/14 Connection ($) 6, 5, 4, 3, 2, 1, Note: New wastewater scheme at Mahia Beach Estimated Value of Deferred Maintenance and Deferred Renewals 213/14 ($ mil) Reserve Funds Held for Wastewater Renewals ($ mil) Section 12: Wastewater (Sewerage)

101 Percentage of Water Supply Pipes in Asbestos Cement Or in Poor or Very Poor Condition 3% 25% 2% 15% 27% 2% 1% 5% % 1% 11% 1% 8% 8% % Asbestos Cement Poor-Very Poor Condition 11 Section 12: Wastewater (Sewerage)

102 12.2 DEPRECIATION v RENEWALS WASTEWATER (SEWERAGE) Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals $ $ Total Renewals Depreciation 12 Section 12: Wastewater (Sewerage)

103 Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals Central Hawkes Total Total Territorial Local Authorities Central Hawkes Renewals Depreciation 5% 47% 78% 13% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Renewal Expenditure As A Proportion of the Depreciation Provision (%) 5% 47% 78% 13% 13 Section 12: Wastewater (Sewerage)

104 12.3 ASSET CONFIDENCE WASTEWATER (SEWERAGE) ASSET CONFIDENCE - WASTEWATER (Assessed Reliability of Data Completeness and Accuracy) AUTHORITY Data Attribute Very Uncertain Uncertain Reliable Highly Reliable Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Asset Description Asset Quantity Asset Age Condition Performance Confidence Grade Highly reliable Reliable Uncertain Very uncertain Description Data based on sound records, procedure, investigations and analysis, documented properly and recognised as the best method of assessment. Dataset is complete and estimated to be accurate + 2% Data based on sound records, procedures, investigations and analysis, documented properly but has minor shortcomings, for example some data is old, some documentation is missing and/or reliance is placed on unconfirmed reports or some extrapolation. Dataset is complete and estimated to be accurate + 1% Data based on sound records, procedures, investigations and analysis which is incomplete or unsupported, or extrapolated from a limited sample for which grade A or B data are available. Dataset is substantially complete but up to 5% is extrapolated data and accuracy estimated + 25% Data based on unconfirmed verbal reports and/or cursory inspection and analysis. Dataset may not be fully complete and most data is estimated or extrapolated. Accuracy + 4% 14 Section 12: Wastewater (Sewerage)

105 12.4 RISK MANAGEMENT WASTEWATER (SEWERAGE) The Councils top five risks relating to the wastewater activity. AUTHORITY RISK Natural Hazards Power failure (long term) Awatoto marine outfall failure Outfall pump station failure Resource Consent compliance Outfall diffuser pipe at end of life (now being replaced in 15/16) Trunk sewer replacements (mitigation programmed now and next 1 years) Central Hawkes Havelock North trunk sewer capacity upgrade AC mains Inflow and infiltration Capacity if the Ruataniwha Water Storage Scheme proceeds Contractor not being available or not fulfilling his duties Funding not meeting needs of network Contractor not passing on Info about our networks Lack of skill base to meet the needs of the systems Insufficient enforcement of third parties in relation to inflow Inadequate maintenance and renewals fails to address deterioration of infrastructure Insufficient knowledge of legislation (outside of consent conditions) Absence of, or inaccurate, asset condition information resulting in inappropriate renewals Absence of or inaccurate asset valuation information resulting in inappropriate depreciation provision Note: Red highlighting denotes comments re: renewals. Blue highlighting denotes comments re: natural hazards. Green highlighting denotes comments re: funding issues Yellow highlighting denotes comments re: planning/human resources/ contractors performance issues 15 Section 12: Wastewater (Sewerage)

106 12.5 FINANCIAL/FUNDING CHALLENGES WASTEWATER (SEWERAGE) AUTHORITY FINANCIAL/FUNDING CHALLENGES Central Hawkes All major projects have been funded in the 1 year period. No significant renewal or growth issues during this period NCC is predicted to have a wastewater pipe renewal peak during the period This is absolutely typical of New Zealand cities and represents the end of asset life of the post WW2 development of New Zealand cities. (Waugh Page 41) Replacement of the Awatoto Marine Outfall ($9.2m allocated 214/15) There are no immediate major financial challenges for the wastewater activity. There are some major projects to be implemented in the next 1 years (trunk sewer renewals, outfall diffuser renewal, Rd Trunk Main Duplication which is included in the LTP. Further out (3+) the renewal of the outlet pipeline and potential consenting environment requirements will be worked through. Planning for this is allowed for in the LTP Without a dam there will be limited growth With the dam there is the potential for reasonable industrial growth. An aging infrastructure Limited rating base to fund major projects etc. Inflow and infiltration mitigation Renewing resource consent 219 Note: Red highlighting denotes comments re: renewals. Blue highlighting denotes comments re: natural hazards. Green highlighting denotes comments re: funding issues Yellow highlighting denotes comments re: planning/human resources/ contractors performance issues 16 Section 12: Wastewater (Sewerage)

107 12.6 SERVICE DELIVERY WASTEWATER (SEWERAGE) AUTHORITY In-house Out-sourced Partly In-house and partly Outsourced As a Council Controlled Organisation Other X X 1 Central Hawkes X X 1 : Maintenance outsourced, Project Delivery Alliance, Asset management In house 17 Section 12: Wastewater (Sewerage)

108 Hawkes Regional Council Hawkes Regional Council 12.7 RESPONSES TO OTHER QUESTIONS Wastewater (Sewerage) Ref Question 2 Climate Change: Does your Council Have A Climate Change Management Policy? Yes No Don t Know No specific policy However climate change impacts comprehensively addressed via growth planning and long-term plan projects Ref Question 6 Future Demand: Are there any identifiable extraordinary future demand issues or changes within the next 3 years relating to this activity? Yes 2 4 No 3 5 Don t Know (Severe corrosion of the Awatoto Marine Outfall replacement necessary. Provisionally $9.2m provided and additional funding requirements will be determined after the detailed costs have been prepared (214/15 Annual Plan page 93) - The impact of the proposed Ruataniwha Water Storage Scheme on Council Infrastructure - should it go ahead. 18 Section 12: Wastewater (Sewerage)

109 Hawkes Regional Council Hawkes Regional Council Hawkes Regional Council Wastewater (Sewerage) Ref Question 1 Deferred Maintenance & Renewals: Is there any deferred maintenance and/or deferred renewals (backlog) relating to this activity? Yes 2 3 No 4 5 Don t Know 2 - $1.14m relating to the Riverbend Road gravity trunk main $7.3m of sewer assessed at the end of their economic lives. Work underway Ref Question 14 Depreciation: Are all of the infrastructure assets relating to this activity subject to the assessment of depreciation each year? Yes No Don t Know Ref Question 16 Is all depreciation relating to this activity fully funded each year? 5 - Yes No 4 Don t Know - The amount funded is limited by the rate funding available 19 Section 12: Wastewater (Sewerage)

110 Hawkes Regional Council Hawkes Regional Council Wastewater (Sewerage) Ref Question 18 Are depreciation funds used solely for funding renewals? Yes No 3 Don t Know 3 - Renewals loan funded and depreciation funds used to pay interest and capital on wastewater debt Ref Question 23 Maintenance & Operations: Can you foresee any significant extraordinary maintenance and operations costs relating to this activity in the next 3 years? Yes No Don t Know 11 Section 12: Wastewater (Sewerage)

111 Hawkes Regional Council Hawkes Regional Council Hawkes Regional Council Wastewater (Sewerage) Ref Question 29 Renewals: Can you foresee any significant extraordinary renewals cost impacts relating to this activity in the next 3 years? Yes No 3 Don t Know 2 - Sewerage main renewal (See the answer to question 6) New main sewage pumping station, major gravity main and several small networks pond upgrades 5 - Infiltration and inflow mitigation. Reconsenting modification Ref Question 36 New Capital: Can you foresee any significant extraordinary new capital costs in the next 3 years? Yes 4 5 No 2 3 Don t Know Council is currently in the planning stage to resolve the Ruataniwha dam no dam issue referred to earlier. 5 - $5, upgrade of the Opoutama sewerage scheme Ref Question 4 Development Contributions: Does the Council charge development contributions or financial contributions for this activity? Yes Section 12: Wastewater (Sewerage)

112 Hawkes Regional Council Hawkes Regional Council Hawkes Regional Council Ref Question No 5 Don t Know Wastewater (Sewerage) Ref Question 42 Other Matters: Are you aware of any other significant matters that may arise in the next 3 years relating to this activity that hasn t been addressed by the above questions? Yes 2 No Don t Know 2 - Resource consent renewal depending on any changes and legislation or local inspection may result in a change to the consent conditions Ref Question 45 Has the Asset Management Plan for this activity been independently reviewed? Yes No Don t Know 112 Section 12: Wastewater (Sewerage)

113 SECTION 13 STORMWATER & FLOOD CONTROL 113 Section 13: Stormwater and Flood Control

114 226, 39,344 39, ,7 Total 23,413 24,444 7,66 3,92 59, STORMWATER & FLOOD CONTROL GENERAL INFORMATION Urban Rateable Properties (No.) 7, 6, 5, 4, 3, 2, 1, Stormwater Pipes - Length (Ms) 35, 3, 25, 2, 15, 1, 5, The Regional Council s assets comprise Stopbanks (km) 235 Deflection banks (No) 32 Drains (Km) 715 Other structures (floodgates, weirs, control gates etc.) (No) 195 Edge protection planting (km) 413 Bank Protection, rope & rail, akmons(no) 6,39 Flood detention dams(no) 12 Pump stations (No) Section 13: Stormwater and Flood Control

115 Regional Council Toal - TLAs Regional Council Regional Council Stormwater/Flood Control Assets Replacement Value 213/14 ($Mil) Stormwater/Flood Control Assets Depreciated Replacement Value 213/14 ($Mil) % 8% 6% 4% 2% % Stormwater Assets Depreciated Replacement Value as a Percentage of their Replacement Value (%) 9% 64% 61% 65% 33% 61% 115 Section 13: Stormwater and Flood Control

116 Forecasted Maintenance & Operating Costs Total ($Mil) Note: Regional Council Flood Control - $57.5m Forecasted Maintenance & Operating Costs Per 213/14 Urban Rateable Property ($) Forecasted Renewals Costs Total ($ mil) Note: - No funding provision for renewals over the 1 year period 116 Section 13: Stormwater and Flood Control

117 Total - TLAs ,32 1, Forecasted Depreciation Costs Total ($ mil) Forecasted Depreciation/Renewals Costs Per 213/14 Rateable Property ($) 1,6 1,4 1,2 1, Depreciation Renewals Note: No funding provisions for renewals over the 1- year period Renewals Depreciation $ $ Hawkes Regional Council Central Hawkes , 2,5 2, 1,5 1, 5 Actual Depreciation Provision v Actual Renewals Expenditure 213/14 - ($) Renewals 117 Section 13: Stormwater and Flood Control

118 , Forecasted New Capital Costs Total ($ mil) 1,6 1,4 1,2 1, Forecasted New Capital Costs Per 213/14 Urban Rateable Property ($) Estimated Value of Deferred Maintenance and Deferred Renewals 213/14 ($) Note: Regional Council Don t Know 118 Section 13: Stormwater and Flood Control

119 Regional Council Reserve Funds Held for Stormwater Renewals ($ mil) Percentage of Water Supply Pipes in Asbestos Cement Or in Poor or Very Poor Condition 12% 1% 8% 6% 1% 1% 4% 2% % 4% 1% 2% 1% % % Asbestos Cement Poor-Very Poor Condition 119 Section 13: Stormwater and Flood Control

120 13.2 DEPRECIATION v RENEWALS STORMWATER (FLOOD CONTROL) Depreciation Renewals $ $ Total Hawkes Regional Council Note: Hawkes Regional Council does not separately identify renewals for floodplain management Depreciation Renewals $ $ Total Renewals Depreciation Depreciation Renewals $ $ Total Renewals Depreciation 12 Section 13: Stormwater and Flood Control