Asset Management Plans and Strategy Methodology

The Asset Management Strategy and Asset Management Plans have been developed in line with Council’s 2022/23 to 2031/32 Long-Term Financial Plan. The Long-Term Financial Plan has been prepared based on a set of assumptions and the Fit for the Future key performance indicator benchmarks. There are four key indicators for asset management and sustainability utilised in the Asset Management Plans and Strategy:

1. Asset Sustainability Ratio Estimated Capital Renewal LTFP / Projected capital renewal Exp. AMP

2. Long Term – Life Cycle Indicator Life cycle expenditure / life cycle cost 3. Medium Term – 10 Year Financing Indicator LTFP Budget Exp. / 10 yr. Projected Exp. 4. Short Term – 5 Year Financing Indicator LTFP Budget Exp. / 5 yr. Projected Exp.

Life cycle costs (or whole of life costs) are the average costs that are required to sustain the service levels over the longest asset life. Life cycle costs include operating and maintenance expenditure and asset consumption (depreciation expense). Life cycle costs can be compared to life cycle expenditure to give an indicator of sustainability in service provision. Life cycle expenditure includes operating and maintenance expenditures plus capital renewal expenditure. Life cycle expenditure will vary depending on the timing of asset renewals. The life cycle costs and life cycle expenditure comparison highlights any difference between present outlays and the average cost of providing the service over the long term, If the life cycle expenditure is less than the life cycle cost there is a ‘life cycle gap’ and it is most likely that outlays will need to be increased or cuts in services made in the future.

The Asset Sustainability Ratio is the most important indicator and reveals whether projected capital renewal and replacement expenditure can be financed in the long-term financial plan. Council’s Financial Planning Policy outlines a target range of between 90% - 110%.

The 4 key indicators are detailed in the following table for the General Fund assets only:

Long Term Financial Plan

SUSTAINABILITY INDICATORS

Asset Sustainability Ratio

Asset Sustainability Ratio

Long Term - Life Cycle Costs

Life Cycle Cost [average 10 years projected ops, maint exp and deprn.] Life Cycle Exp [average 10 years LTFP budget ops, maint & capital renewal exp] Life Cycle Gap [life cycle expenditure – life cycle cost (-ve = gap)] Life Cycle Indicator [life cycle expenditure / life cycle cost]

Medium Term - 10 year financial planning period

10 yr Ops, Maint & Renewal Projected Expenditure 10 yr Ops, Maint & Renewal LTFP Budget Exp 10 year financing shortfall [10 yr proj exp - LTFP Budget exp] 10 year financing indicator [LTFP Budget exp / 10 yr proj exp]

Short Term – 5 year financial planning period

5 yr Ops, Maint & Renewal Projected Expenditure 5 yr Ops, Maint & Renewal LTFP Budget Exp 5 year financing shortfall [10 yr proj exp - LTFP Budget exp] 5 year financing indicator [LTFP Budget exp / 5 yr proj exp]

100%

$71.2m $77.6 ($6.3)

108.97%

$83 $77.6 ($5.4) 93.48%

$81 $79.9 ($1.4) 98.31%

The medium-term projected expenditure is financially sustainable in the long term. Council will be able to maintain the condition of infrastructure assets in a sustainable fashion. Performing renewals as they are required will stop the deterioration and failure of assets reducing the levels of risk. Levels of service can be maintained at current levels.

The Asset Sustainability Ratio indicates Council will have 100% of the funds required for the optimal renewal and replacement of its assets, which is within Council’s target range of 90% to 110%. The ratio indicates optimised budgeted capital expenditure assisting in minimising the life cycle costs of the assets.