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. CEO Perspective 2. Financial management journey since Asset management journey since Community survey results 5. Capex prioritisation 6. Council roles 7. Integrating Financial and Asset Management 8. Next Financial and Asset management journey 9. CEO’s challenges 10. 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 March 2008 July 2009 July 2010 July 2011 Consolidate revenue and finance systems Align rating policy Align accounting policies 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 Revise regulatory pricing of water, sewerage and waste Enhance modelling of general rates Enhance budget reporting and presentation to council (business-as-usual v projects, risks; opportunities; level of service impacts) Capex prioritisation – Integrated with asset management Expenditure Review Committee – 130+ initiatives, > 10M actioned Reconciliation of Financial Asset Register with Equipment Register 2012

Financial & Asset Management Results Long Term Financial Forecast

Asset Management Journey Since March 2008 March 2008 July 2009 July 2010 July 2011 Asset Management Strategy Plan Year Capex Consolidation (AiCE) System | Prioritisation Asset Management Plans: >ROADS > STORMWATER > WATER > 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 Asset Management Organisational Structure | Roles & Responsibilities Optimise Asset Management Systems Asset Management Policy | Leadership | Communication Structure Asset Management Strategy Plan Long Term CapEx Prioritisation System Summary Asset Management Plan Community Attitude Survey (Engagement) 2011 Operation & Maintenance Management Strategy Plan 2011 – 2015 Asset Management Performance Management Plan

Financial & Asset Management Results Asset and Population Growth

Townsville City Council (TCC) Queensland ›Total Assets Repl. Cost: $ 5.1B ›Total Assets Repl. Cost: $ 5.1B ›Annual average CapEx: $187M ›Annual average OpEx: $360M Replacement Cost: $1.5B Pipes: 2646km Dams: 2 Replacement Cost: $1B Pipes: 1377km Replacement Cost: $200M Replacement Cost: $459M Pipes: 574km Replacement Cost: $ 270M Area : ha Replacement Cost: $20M Replacement Cost: $1.2B Length : 1614km Replacement Cost: $80M

Financial & Asset Management Results Operating Result

Financial & Asset Management Results Debt and Capex

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

Financial & Asset Management Results Community Engagement  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.  Total of 1003 interviews were conducted  52 services and facilities measured in this survey Further analysis of the survey data was conducted

Community Attitude Survey 2011 Results e.g.: Public Toilets Service Levels Index Suburbs within 15 km from Flinders Square 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 > 15km and < 30km 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 > 30km 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

Capital Investment Prioritisation Results Quadruple Bottom Line (QBL) Risk Appraisal The Average Priority Score system is used as an aid in the decision-making process to identify imperative projects that should be completed. 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. Teams of experts assess the Council’s CapEx 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.

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

Councils’ Roles Integrated Financial & Asset Management Long Term Financial Management Plan (LTFMP) Budget Operations and Maintenance Operational CostMaintenance Cost Capital Investment New | Upgrade CapitalRenewal Capital Service Delivery Community Engagement Cost of ServicesLevel of Services Integrating Financial & Asset Management 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 COUNCIL

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

Integrating Financial & Asset Management

What Next? Financial & Asset Management Journey From 2012 Upgraded Systems Standardise charts of accounts and costing for work orders and projects WBS 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) Develop enhanced workflow and process automation Enhance LTFMP for Commercialised business units, target return on capital Agree Level of Services Review Operation & Maintenance Management Strategy 2011 – 2015 Asset Management Performance Management Plan Asset Management Systems Review Critical Assets Management Plan Councillors Asset Management Workshop ISO Awareness Plan Financially | Carbon Tax Informed Asset Management Plans FM AM

CEO’s Roles & Challenges Integrating Financial & Asset Management

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

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