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Reform Options

8.1 Standardise asset life ranges for major asset classes and increase transparency and oversight of changes to asset lives

The way councils put a financial value on their assets determines how much they budget for depreciation and maintenance costs. This in turn can determine how much they budget for asset replacement and influences a range of council financial and asset sustainability metrics.

The Board has found councils adopt a broad range of different asset lives for the same classes of assets. Often asset lives are reported as longer than what is recommended in guidance principles or by other jurisdictions. In some cases, they are extended without a justification being provided for changes.

  • There is general agreement that councils as a whole need to improve their asset costing, planning, and assessment, but may lack the knowledge and/or resources to manage this effectively.
  • It is accepted that councils will need some general flexibility as asset lives can vary across areas, reflecting factors such as methods, maintenance, usage, and geography

There is an identified need to review and learn from interstate and international models. If asset lives are not appropriately managed, infrastructure backlogs could create significant sustainability issues that future Tasmanian communities will have to pay for.

8.2 Introduce requirement for councils to undertake and publish ‘full life-cycle’ cost estimates of new infrastructure projects

It is important that councils and their communities are informed and make decisions about their investments with a clear picture of the ‘whole-of-life’ costs of new infrastructure projects, and the ‘trade-off’ implications this may have, whether in relation to the management and maintenance of existing assets, the provision of other services, or the need to raise additional revenue.

  • Councils are under constant community pressure to provide new infrastructure and are regularly offered ‘one-off’ infrastructure grants from other spheres of government in response to these demands. While this support is welcome, it can require both up-front co-contributions and ongoing expenditure for asset maintenance that can be hard for councils to accommodate within already constrained budgets.
  • There is a need for accountability and oversight systems, including transparent reporting. This could be done via audit panels if they were given a strengthened role and clear responsibility

A carefully designed system could help councils make investment decisions and also build community awareness of the whole-of-life costs of new infrastructure and facilities. This should make it easier for councils to say ‘no’ to one-off capital grants that impose long-term financial burdens on councils.

8.3 Introduce a requirement for councils to undertake regular service reviews for existing services

Regular service reviews would be an opportunity for councils and their communities to consider if a service currently being provided is still a priority, and should be continued. They would complement and inform other strategic planning processes/decisions councils undertake regularly. Community engagement would be mandated.

Regular service reviews could provide councils with the opportunity to have frank and open conversations with their communities about their service preferences and priorities, informed by data about up-front and lifecycle costs, and feedback on satisfaction with/value of services.

This process could give councils a stronger and more confident mandate to make asset management and budget decisions (particularly around long-lived infrastructure investments) and should improve general community awareness of the ‘true’ cost of providing services.

  • Feedback from the local government sector is that community service expectations continue to grow, but with no clear appreciation or understanding of service costs, or the consequent trade-offs required.

The Board has heard that strategic service planning across the sector is generally uneven and there could be more discipline and rigor around regularly reviewing the value of both existing and prospective services.

8.4 Support councils to standardise core asset management systems, processes, and software

Currently, asset management practices are inconsistent across councils, in terms of systems, processes, data captured, and software used. The Board’s analysis found that less than half of councils are currently complying with the relevant requirements of the Local Government Act 1993. Increasing the standardisation and consistency of asset management practices would support robust service level benchmarking and investment prioritisation, as well as potentially increased skills and resource sharing between councils.

  • There was in-principle support for this option, providing that a cost-effective system can be developed to meet the needs of councils.
  • The general view expressed was that the State mandates reporting on asset management but does little to facilitate and coordinate the process.

This will be an important reform to facilitate better and more sustainable asset management.

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