Infrastructure and Financial Strategies Jim Palmer Chief Executive Waimakariri District Council

Hurunui District Waimakariri District Christchurch City Selwyn District

Principles & Three Ideas Risk Assessment and Financing Strategy Risk–based Reticulation Renewals Depreciation Funding – an alternative approach

Principles -the strategic fit

Infrastructure Strategies – must address Anticipated Changes in Levels of Service Forecasted Growth Risk management, particularly natural hazards Renewal & its funding – a whole of life view Financial implications Should consider all assets

Principles underpinning Infrastructure and Financial Strategies Inter-generational equity – relative prosperity and demographics Affordability – Council and the community Prudent financial management – debt and whole of life funding Risk mitigation

Risk Assessment & Financing Strategy Hurunui District Waimakariri District Christchurch City Selwyn District

Risk Assessment & Financing Strategy

Our Challenge We’ve withstood one major event and it cost $127M – can we withstand another one? We are a net-debt, high-growth Council with few realisable assets The Alpine Fault failure is ‘overdue’ with a 30% chance within 50 years…. and we have other natural hazard risks

Our Response Developed a Risk Assessment and Financing Strategy Considered largest natural risks - earthquake, flood, tsunami

Our Biggest Risk

Our Response Guestimated what the damage might be Ground-truth it against the 2010 event Considered funding strategy, both with and without insurance being available Assessed impact on net debt & affordability Developed as policy: Limits for debt Priority list for asset replacement

Council Funding Position with Crown Support and Insurance   Estimated Reinstatement Cost $M Crown/NZTA funding Insurance funding Council Share Above-ground Infrastructure and Buildings 30 Below-ground Infrastructure 67 40 27 Roading 28 12 Reserves 10 Emergency Response/repairs 20 15 5 Community Support Total 172 83 57 32

Debt Limits with Headroom

Debt Limits - borrowing as % of operating revenue

Outcomes Gives confidence the consequences of major events can be accommodated Demonstrates prudent management in terms of debt levels and affordability Provides priority for asset reinstatement

Risk-based Reticulation Renewals Reticulation renewals were based on age, condition, and performance. Now, we use a risk-based approach

Waimakariri DC – Renewals Profile

VULNERABILITY … TO LIQUEFACTION Location relative to hazard is critical.

IT’S NOT JUST EARTHQUAKES

Risk-based Reticulation Renewals Considered The burst history of the Water mains & CCTV footage The remaining useful life The vulnerability, made up of: Location Material ductility Jointing method Criticality

Waimakariri DC – Renewals Approach Wastewater: CCTV inspection of ~2% network per annum based on risk profile Risk score (renewals priority score) to schedule preliminary renewal programme Renewal method determined from criteria Water: Burst history and pipe condition recorded CCTV score Blockage history Vulnerability Likelihood Score Consequence Score x Risk Score = Remaining useful life Burst history Vulnerability Likelihood Score Consequence Score x Risk Score =

Risk-Based Reticulation Renewals Location Diameter (mm) Material Criticality Vulnerability Remaining Useful Life Risk Score Sewell St, Kaiapoi 375 Asbestos Cement AA Extreme 27 6500 Holland Dr, Kaiapoi 100 Polyethylene C Medium 15 248

Outcomes Renewal strategy reflects risk Mains have lower chance of failure More resilient in future disasters Quicker return of services for the majority of people

Funding Depreciation and the Capital Programme Changed our approach to funding depreciation have considered the 100 year renewal profile. Previously ‘fully funded’ depreciation. We can invest ‘renewal’ funds at rates better than CPI or CCI. Over time growth in those funds means we don’t need to fully fund depreciation each year - saved 10% in the first year. Extensive financial modelling demonstrated we can revised our financial policies.

Waimakariri DC – Funding & Renewals Profile

Funding Depreciation and the Capital Programme Changed our capital funding policy Funding used to come from one ‘bucket’ Now Renewals – separately tracked and funded Level of service changes – loan funded Growth projects – loan funded Warning: this approach only works if you infrastructure peak is well into the future.

THANK YOU So… three ideas Risk Assessment and Financing Strategy Risk–based Reticulation Renewals Depreciation Funding - an alternative approach THANK YOU