Integrating Long Term Financial Planning and Asset Management

Integrating Long Term Financial Planning and Asset Management: A CEO’s Perspective International Local Government Infrastructure and Asset Management Conference Melbourne, Victoria 2 nd – 3 rd of May 2012 Ray Burton CEO, Townsville City Council Queensland Australia

Presentation Overview 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. CEO Perspective Financial management journey since 2008 Asset management journey since 2008 Community survey results Capex prioritisation Council roles Integrating Financial and Asset Management Next Financial and Asset management journey CEO’s challenges Key Messages

CEO’s Perspective • Reporting to Council – Clarity • Reporting to the Community • Accuracy, Simplicity, Compliance • Outcome important rather than process

Townsville City Council (TCC) Queensland › Population: 191, 119 › 13 th Largest City in Australia › Households: 74, 132 › Area: 3, 736 Sq. km › Staff: 1700 › Services include: ›Water Supply ›Sewerage ›Roads ›Stormwater ›Waste ›Recreational & Community Townsville

Leadership >> Who is Ray Burton? Ask Ray and staff forums are your chance to ask questions of the CEO and your fellow employees, or just have your say.

Financial Management Journey Since March 2008 July 2009 July 2010 July 2011 2012 Consolidate revenue and finance systems Revise regulatory pricing of water, sewerage and waste Align rating policy Enhance modelling of general rates Align accounting policies Enhance budget reporting and presentation to council (business-as-usual v projects, risks; opportunities; level of service impacts) Clarify roles and responsibilities: compliance V management accounting; asset accounting V asset management Develop long term financial management plan LTFMP link to asset base Implement budget target – top down Develop Strategies to deliver LTFMP; efficiencies targets Capex prioritisation – Integrated with asset management Expenditure Review Committee – 130+ initiatives, > 10 M actioned Reconciliation of Financial Asset Register with Equipment Register

Financial & Asset Management Results Long Term Financial Forecast

Asset Management Journey Since March 2008 July 2009 July 2010 Asset Management Organisational Structure | Roles & Responsibilities Asset Management Strategy Plan 2008 - 2011 Asset Management Policy | Leadership | Communication Structure 10 Year Capex Consolidation (Ai. CE) System | Prioritisation Optimise Asset Management Systems Asset Management Plans: >ROADS > STORMWATER > WASTEWATER > PARKS > FLEET > BULIDINGS > ICT Asset Owner (Custodianship)| Service Provider Profiling All Assets Portfolios Renewal Modelling: My-Predictor Current Level of Services Consolidation for Review July 2011 Asset Management Strategy Plan 2011 - 2015 Summary Asset Management Plan Long Term Cap. Ex Prioritisation System Community Attitude Survey (Engagement) 2011 Operation & Maintenance Management Strategy Plan 2011 – 2015 Asset Management Performance Management Plan 2011 - 2015

Financial & Asset Management Results Asset and Population Growth 9. 0% Forecast Growth in Assets & Population 8. 0% 7. 0% 6. 0% 5. 0% 4. 0% 3. 0% 2. 0% 1. 0% F /0 6 /2 02 1 F 30 /0 6 /2 02 0 F 30 /0 6 /2 01 9 F 30 /0 6 /2 01 8 F 30 Population % 30 /0 6 /2 01 7 F /0 6 /2 01 6 F 30 30 30 Assets (Annual Capex/Total PPE) % 30 /2 01 5 F /0 6 /2 01 4 F 3 /2 01 /0 6 /2 01 2 F 1 30 /0 6/ 20 1 30 30 /0 6/ 20 1 0 9 /0 6/ 20 0 30 8 /0 6/ 20 0 30 30 /0 6/ 20 0 7 0. 0%

Townsville City Council (TCC) Queensland ›Total Assets Repl. Cost: $ 5. 1 B ›Annual average Cap. Ex: $187 M Replacement Cost: $1. 5 B Pipes: 2646 km Dams: 2 Replacement Cost: $1 B Pipes: 1377 km Replacement Cost: $1. 2 B Length : 1614 km Replacement Cost: $ 270 M Area : ha ›Annual average Op. Ex: $360 M Replacement Cost: $459 M Pipes: 574 km Replacement Cost: $200 M Replacement Cost: $80 M Replacement Cost: $20 M

Financial & Asset Management Results Operating Result

Financial & Asset Management Results Debt and Capex

Financial & Asset Management Results Community Engagement | Capex Prioritisation TOWNSVILLE CITY HAS THE ASSET INFRASTRUCTURE IN PLACE TO DELIVER THE SERVICES AT PRESENT AND IN THE FUTURE SUSTAINABLY … Community Attitude Survey Long term Capital Investment Prioritisation Service Level 3 Years

Financial & Asset Management Results Community Engagement Ø Over half (55. 3%) of all Townsville residents were either satisfied or very satisfied with Council’s delivery of services and facilities in the past 12 months. Ø Total of 1003 interviews were conducted Ø 52 services and facilities measured in this survey Further analysis of the survey data was conducted

Importance Scale: Importance o. Crucial – Must Have o. Importance – Certainly Expect o. Nice to have – but not important o. Not Very Important o. Unnecessary Community Attitude Survey 2011 Results e. g. : Public Toilets Service Levels Index Suburbs within 15 km from Flinders Square

Importance Scale: o. Crucial – Must Have o. Importance – Certainly Expect o. Nice to have – but not important o. Not Very Important o. Unnecessary Community Attitude Survey 2011 Results e. g. : Public Toilets Service Levels Index Suburbs > 15 km and < 30 km from Flinders Square

Importance Scale: o. Crucial – Must Have o. Importance – Certainly Expect o. Nice to have – but not important o. Not Very Important o. Unnecessary Community Attitude Survey 2011 Results e. g. : Public Toilets Service Levels Index Suburbs > 30 km from Flinders Square

Capital Investment Prioritisation Results Quadruple Bottom Line (QBL) Risk Appraisal Teams of experts assess the Council’s Cap. Ex plan, focusing on four risk areas (Governance, Social, Environmental and Finance) at Program level and the scores are combined to give an overall “Average Priority Score” (APS), which ranks projects at program level by importance within all Departments. An additional area is assessed for Renewal Projects, and the scores give an overall “Average Priority Score” (APS), which ranks projects at program level by importance. The Average Priority Score system is used as an aid in the decision-making process to identify imperative projects that should be completed.

Low Scores Projects Cap. Ex Cost Running Total Medium Scores Projects High Scores Projects Capital Investment Prioritisation Results Quadruple Bottom Line (QBL) Risk Appraisal Financial Services Budgeting High Priority Projects Cap. Ex Performance Medium Priority Projects > Performance Indicators >Services distribution % > O&M Impact Council Affordability (LTFMP) Low Priority Projects Councillors Workshop EMT Approved Draft Cap. EX Executive Management Team Review Re-distribution of non-approved projects

Councils’ Roles Integrated Financial & Asset Management COUNCIL TO PROVIDE THE LEVEL OF SERVICES, THE CURRENT AND FUTURE COMMUNITY WANT AND AGREED TO PAY FOR… TO ENSURE TOWNSVILLE HAS THE INFRASTRUCTURE IN PLACE TO DELIVER THE SERVICES AT PRESENT AND IN THE FUTURE, SUSTAINABLY … TO OPERATE AND MAINTAIN ASSETS AND SERVICES AT LOWEST LIFECYCLE COST TO MAKE DECISIONS REGARDING LEVEL OF RATES, COST EFFECTIVENESS, LEVEL OF DEBT, TIMING AND LONG TERM SUSTAINABILITY Service Delivery Community Engagement Cost of Services Level of Services Capital Investment New | Upgrade Capital Renewal Capital Operations and Maintenance Operational Cost Maintenance Cost Long Term Financial Management Plan (LTFMP) Budget Integrating Financial & Asset Management

Integrating Financial & Asset Management Council Financial Performance Increasing Capital Demand FM AM Increasing Cost of Services Increasing Operational costs Optimum new/upgrade investment Quadruple Bottom-line Capex Risk assessment Capex Prioritisation Efficiency of Operational Costs Efficient Lifecycle cost Management Improve Pro-active Maintenance & Reduce Reactive Maintenance Optimum Cost of Services Community Survey 2011 Current , Agreed & Desired Level of Services Development Next Practice Financial & Asset Management

Integrating Financial & Asset Management

What Next? Financial & Asset Management Journey From 2012 FM AM Upgraded Systems Agree Level of Services Review Standardise charts of accounts and costing for work orders and projects WBS Operation & Maintenance Management Strategy 2011 – 2015 Develop Business Intelligence to enhance reporting Use of alerts and exception reporting; KPIs and lead indicators Consolidate Fixed Asset Register (FAR) and Equipment Register (ER) Asset Management Performance Management Plan 2011 - 2015 Councillors Asset Management Workshop Asset Management Systems Review Critical Assets Management Plan Develop enhanced workflow and process automation ISO 55000 Awareness Plan Enhance LTFMP for Commercialised business units, target return on capital Financially | Carbon Tax Informed Asset Management Plans

CEO’s Roles & Challenges Integrating Financial & Asset Management • Maintain integrity of process • Funding opportunities • Effective investment • Focus long term sustainable • Competing priorities (personalities) • Infrastructure liabilities • Ineffective reactive maintenance • Short term budget

Townsville City Council Integrating Financial & Asset Management Key Messages Engage Community Get the foundations right – Structure, Systems, Process, Policy Integrate Key Planning Process

Integrating Long Term Financial Planning and Asset Management: a CEO’s Perspective Questions… Ray Burton CEO , Townsville City Council