Focus on Finance - Spring 2016 - Valuing & Depreciation of Road Assets

Page 4 of 9: Valuing & Depreciation of Road Assets

Valuing & Depreciation of Road Assets

Infrastructure is high cost and high risk. The gross replacement value of local government infrastructure for all Australian councils is estimated at $438 billion. 11% or $47 billion of assets are in poor or very poor condition with some geographic concentration of risk such as timber bridges in steep high rainfall areas. Infrastructure costs in these areas are also much higher. 7% or $31 billion of the asset stock has poor function requiring upgrading to meet current or emerging local and regional service level targets for safety, compliance, social, environmental and economic performance.

All levels of government need to act now to ensure our future is internationally competitive, locally equitable and just. They need to address issues with existing infrastructure, and plan wisely to ensure we are not still struggling years from now. Government leaders need to prepare for this important shift our society is going to experience by partnering with industry experts and by leveraging the latest technology.

Collaboration between governments can close socioeconomic disparities and meet environmental and economic goals.

Australia’s population is very unevenly spread with a sparsely populated rural fringe, vast outback core and densely populated cities with ecological footprints two to three times the global average.

With collaboration between local, state and federal governments on infrastructure projects, we can have smarter planning for our future infrastructure needs and develop innovative methods to plan build and operate a fairer, cleaner and more competitive Australia.

There’s never been a better time to engage in constructive discussion on the future of Australia’s infrastructure needs, and the local, state and federal governments should be at the heart of these discussions to ensure all potential opportunities and challenges are taken into consideration.

Technology can be a powerful tool to plan and manage population growth

With the right technology tools, governments can understand which infrastructure failures have created expensive and resource-consuming challenges, and how to prevent reoccurrences.

By monitoring the schedules, trends and locations of public transport vehicles, for example, analysis of this data can allow government organisations to effectively plan nation-wide strategies with accurate and data-driven foresight. Asset analytics could highlight the areas where infrastructure won’t meet the growing population demands, provide reasoning behind the issue, and also indicate how to solve the problem and prevent similar areas in other cities from experiencing the same challenges.

Reporting on Infrastructure

The Annual Report is one of the key accountability mechanisms between a council and its community. As such, it should be written and presented in a way that is appropriate for each council’s community.

The Asset Management Strategy must identify assets that are critical to the council’s operations and outline the risk management strategies for these assets.

A Council’s Asset Management Plan should incorporate an assessment of the risks associated with the assets involved and the identification of strategies for the management of those risks. The strategies should be consistent with the overall risk policy of Council. A key element is the reporting of the life cycle cost of the service provided by the asset. Determination of optimum asset modern equivalent renewal cost and lives are essential inputs into the lifecycle cost that inform government decision making. The future for Australian infrastructure relies on Governments being able to plan future services and make wise decisions that balance the tradeoff between life cycle cost and economic, environmental and social risk.

Jeff Roorda General Manager,
Strategic Asset Management
Technologyone.

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