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

2. Presentation Overview
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

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

4. Townsville City Council (TCC) Queensland
Population: 191,119
13th 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
Townsville City Council: Integrating financial and asset management

5. 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.

6. 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
Enhance budget reporting and presentation to council (business-as-usual v projects, risks; opportunities; level of service impacts)
Align accounting policies
Clarify roles and responsibilities: compliance V management accounting; asset accounting V asset management
Capex prioritisation – Integrated with asset management
Financial Management Journey : Since March 2008
Amalgamation in March 2008 – three organisations into one necessitated consolidation or integration of systems, policies, reports and structures
Real opportunities to value add delayed with priority being to address structural and statutory reforms
Culture
Structure
Reporting Process
Develop long term financial management plan LTFMP link to asset base
Expenditure Review Committee – 130+ initiatives, > 10M actioned
Implement budget target – top down
Reconciliation of Financial Asset Register with Equipment Register
Develop Strategies to deliver LTFMP; efficiencies targets

7. Financial & Asset Management Results Long Term Financial Forecast
Financial & Asset Management: Results, Operating Result
While nearly all of the significant projects were jointly funded by State and/or Federal government, council was still required to double its debt to meet the capital demands from 2008 – 2011
This significant increase in debt was in part due to the pattern of operating deficits historically
While debt has increased significantly its serviceability has been independently verified in a credit review by QTC
Debt is seen as an effective means of investing in the infrastructure to support the growth in Townsville and it addresses the issues of generational equity if used properly
Debt is still not well understood in the eyes of politicians and the community

8. Asset Management Journey Since March 2008
July 2009
July 2010
July 2011
Asset Management Strategy Plan
Asset Management Organisational Structure | Roles & Responsibilities
Summary Asset Management Plan
Asset Management Strategy Plan
Long Term CapEx Prioritisation System
Asset Management Policy | Leadership | Communication Structure
Community Attitude Survey (Engagement) 2011
10 Year Capex Consolidation (AiCE) System | Prioritisation
Optimise Asset Management Systems
Operation & Maintenance Management Strategy Plan 2011 – 2015
Asset Management Plans:
>ROADS > STORMWATER > WATER > WASTEWATER
> PARKS > FLEET > BULIDINGS > ICT
Asset Management
Performance Management Plan
Asset Management Journey : Since March 2008
Amalgamation affected asset management in the same way it did finance. Immediate priorities (in 2008) were to establish common understanding, strategies and systems.
Asset Owner (Custodianship)| Service Provider Profiling
All Assets Portfolios Renewal Modelling: My-Predictor
Current Level of Services Consolidation for Review

9. Financial & Asset Management Results Asset and Population Growth
(PPE _ Property Plant and Equipment)
Financial & Asset Management: Results, Asset and Population Growth
Significant investment required in 2009 – 2011:
Water supply upgrade $120M
Wastewater upgrade $180M
Flinders Street upgrade $ 56M
Road (North shore) $ 40M
Water and Wastewater project designs benefitted from amalgamation with more efficient design and scale due to central management of these functions in the new council
One of the key challenges for Townsville is managing the balance between demand for infrastructure and services and the population growth.
The chart demonstrates that the growth in our assets exceeds the population growth for the forecast period.
Some of this can be attributed to some catch-up on the significant projects mentioned above.
However it is recognised that this is not sustainable – Clearly the integration of financial and asset management is key to addressing this and I will outline for you today some of the steps we have taken at Townsville to address this.

10. Townsville City Council (TCC) Queensland
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

11. Financial & Asset Management Results Operating Result
The Operating result and efficiency were key issues at amalgamation with a starting point of around $56M deficit
A focus on Long Term Financial Planning and enhanced integration of financial management with asset management has yielded strong results
Not without pain, with tight budgets and rate increases above inflation for four years to catch up.
It was quite an aggressive plan and was well supported by council, we are now seeing the benefits

12. Financial & Asset Management Results Debt and Capex
Financial & Asset Management: Results, Operating Result
While nearly all of the significant projects were jointly funded by State and/or Federal government, council was still required to double its debt to meet the capital demands from 2008 – 2011
This significant increase in debt was in part due to the pattern of operating deficits historically
While debt has increased significantly its serviceability has been independently verified in a credit review by QTC
Debt is seen as an effective means of investing in the infrastructure to support the growth in Townsville and it addresses the issues of generational equity if used properly
Debt is still not well understood in the eyes of politicians and the community

13. 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 …
3 Years
Long term Capital Investment Prioritisation
Community Attitude Survey
Service
Level
Long term Capital Investment Prioritisation
Two key processes at Townsville have made significant progress to improving financial and asset management:
1. Community Attitude Survey - assess and analyse service levels
2. Capex Prioritisation - risk assessment and capital rationing

14. 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
Community Engagement: Agreed & Desired Level of Services
Overall results – 55.3% of the community are satisfied or very satisfied with council’s service
52 council services listed for community engagement
Community engagement every 2 years
Last year survey was with enhanced questions
1003 surveys and statistically valid survey
Service delivery satisfaction scale: 1 – 5 , Importance scale: 1 – 5
Survey assessment areas:
Geographical area:
City suburbs (City Zone) service area: 15 km radius area from Flinders Square
City Fringe service area: 15km< radius < 30km
Remote area: radius > 30km
Further analysis of the survey data was conducted

15. Importance Scale: Importance
Community Attitude Survey Results e.g.: Public Toilets Service Levels Index
Importance Scale: Importance
Crucial – Must Have
Importance – Certainly Expect
Nice to have – but not important
Not Very Important
Unnecessary
Suburbs within 15 km from Flinders Square
Community Attitude Survey 2011 e.g.: Public Toilets Service Levels Index
one example that demonstrates how we are able to drill down on the community attitude survey data – public toilets
Eg.: Public Toilets service level index:
City area (Suburbs within 15 km from Flinders Square) :
4.0: Importance service
3.0: Improvements required for some suburbs

16. Community Attitude Survey 2011 Results
e.g.: Public Toilets Service Levels Index
Importance Scale:
Crucial – Must Have
Importance – Certainly Expect
Nice to have – but not important
Not Very Important
Unnecessary
Suburbs > 15km and < 30km from Flinders Square
Community Attitude Survey 2011 e.g.: Public Toilets Service Levels Index
Eg.: Public Toilets service level index:
City fringe area (Suburbs > 15km and < 30km from Flinders Square ):
4.0: Importance service
3.0: Improvements required for some suburbs

17. Community Attitude Survey 2011 Results
e.g.: Public Toilets Service Levels Index
Importance Scale:
Crucial – Must Have
Importance – Certainly Expect
Nice to have – but not important
Not Very Important
Unnecessary
Suburbs > 30km from Flinders Square
Community Attitude Survey 2011 e.g.: Public Toilets Service Levels Index
Eg.: Public Toilets service level index:
City fringe area (Suburbs > 30km from Flinders Square):
4.0: Importance service
3.0: Improvements required for some suburbs

18. 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.
Developed in-house with IPWEA National Asset Management Steering Group (NAMS Plus) support, with reference to extensive research of best practice
Better capital investment risk management
More effective and efficient capital works planning from a time and cost perspective
Councillors on board with the process
Objective process with great integrity due to use of QBL framework and involvement of independent experts (within council)

19. 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
Quadruple Bottom Line (QBL) Risk Appraisal
Council senior staff assess the risks of whole of council capital works program
Executive Management Team (EMT) assess the capex prioritised list with council affordability ( LTFMP)
Councillors are engaged through an interactive workshop to consider and understand the recommended Capex programme
The Councillors approved draft capex program will be used for Budgeting and Long Term Financial Management Plan review.

20. Long Term Financial Management Plan (LTFMP) Operations and Maintenance
Councils’ Roles
Integrated Financial & Asset Management
COUNCIL
to provide the level of services, the current and future community want and agreed to pay for…
Long Term Financial Management Plan (LTFMP)
Budget
Operations and Maintenance
Operational Cost
Maintenance Cost
Capital Investment
New | Upgrade Capital
Renewal Capital
Service Delivery
Community Engagement
Cost of Services
Level of Services
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
Council must make some important decisions to support integrated asset management and financial management
It is critical that they have a thorough understanding of the issues and have available to them good information and analysis to support the recommendations of staff
To this end reliable systems and accurate and timely data and reports are critical to support the decision making processes
CEO needs to establish the councillors’ trust and confidence in the systems
TO MAKE DECISIONS REGARDING LEVEL OF RATES, COST EFFECTIVENESS, LEVEL OF DEBT, TIMING AND LONG TERM SUSTAINABILITY
Integrating Financial & Asset Management

21. 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 Services
Increasing Operational costs FM AM FM AM
Mostly accountants and engineers talk a different language but are usually working towards the same outcome
This diagram shows the links between financial management and asset management.
You can see how specific asset management functions and activities contribute to key financial outcomes FM AM
Next Practice Financial & Asset Management

22. Financial & Asset Management
Integrating
Financial & Asset Management
Council has developed and documented an integrated strategic planning framework that clearly identifies the relationships between key statutory and strategic plans
Helps to emphasise key planning processes and documents as well as stakeholders
A copy of this framework is available on Townsville’s public website

23. Financial & Asset Management Journey
What Next?
Financial & Asset Management Journey
From 2012 AM FM
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
Asset Management Performance Management Plan
Develop Business Intelligence to enhance reporting
Councillors Asset Management Workshop
Use of alerts and exception reporting; KPIs and lead indicators
Asset Management Systems Review
Consolidate Fixed Asset Register (FAR) and Equipment Register (ER)
Much has been accomplished since amalgamation however, we are not there yet
Here is snapshot of the key initiatives planned for financial and asset management over the next couple of years
Foundations are set in place, its now about further enhancement and evaluating
Critical Assets Management Plan
Develop enhanced workflow and process automation
ISO Awareness Plan
Enhance LTFMP for Commercialised business units, target return on capital
Financially | Carbon Tax Informed Asset Management Plans

24. CEO’s Roles & Challenges Integrating Financial & Asset Management
Funding opportunities
Infrastructure liabilities
Maintain integrity of process
Competing priorities (personalities)
Effective investment
Ineffective reactive maintenance
Focus long term sustainable
Short term budget
The CEO’s role is a tough one
I need to manage the sometimes great divide between political wants and practical needs of the organisation and community
CEO is the referee, a juggling act to get the right outcomes.

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

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