Part 3: Infrastructure strategies

Matters arising from our audits of the 2021-31 long-term plans.

3.1
In this Part, we discuss:

What is an infrastructure strategy and what does it need to include?

3.2
Section 101B of the Local Government Act 2001 requires councils to prepare and adopt an infrastructure strategy as part of their long-term plan. The purpose of the infrastructure strategy is to identify:

  • significant infrastructure issues for the local authority during the period covered by the strategy; and
  • the principal options for managing those issues and the implications of those options.

3.3
The Act requires an infrastructure strategy to include existing or proposed assets to be used to provide certain services by, or on behalf of, the council. Figure 10 shows the core assets required under the Act.

3.4
Councils can include other assets in their infrastructure strategies, such as community facilities, parks, and solid waste facilities. Forty-three councils included other assets as well as their core assets in their infrastructure strategy. This is an increase from the 27 councils that included other assets in the infrastructure strategies in the 2018-28 long-term plans.

Figure 10
The core assets presented in councils' infrastructure strategies

The core assets presented in council infrastructure strategies were flood protection and control works, roads and footpaths, sewerage and the treatment and disposal of waste, stormwater drainage, and water supply.

Figure 10 - The core assets presented in councils' infrastructure strategies

3.5
Figure 11 shows the other types of infrastructure assets that some councils decided to include.

Figure 11
Other types of infrastructure assets that some councils included in their infrastructure strategies

Forty-three councils included other types of infrastructure assets in their infrastructure, such as coastal structures (including harbours), community facilities, information technology and environmental science, ports (airports and seaports), public transport, reserves and open spaces, waste and landfill, and water races.

Figure 11 - Other types of infrastructure assets that some councils included in their infrastructure strategies

3.6
Section 101B(3)(a) to (e) of the Act prescribes the content of infrastructure strategies in some detail. An infrastructure strategy must outline:

  • how a council intends to manage its infrastructure assets (having regard to matters such as when assets need to be renewed or replaced);
  • how the council will respond to growth or decline in demand for services;
  • how the council plans for increases or decreases in levels of services; and
  • other matters, such as the need to improve public health or environmental outcomes (or mitigate adverse effects on them) and to manage risks from natural hazards.

3.7
Infrastructure strategies are meant to provide a higher-level strategic view of infrastructure issues than a council's asset management plans. Infrastructure strategies join up operational planning at the asset level and strategic planning at the corporate level.

Why are infrastructure strategies important?

3.8
Councils hold significant infrastructure assets. Most of their spending is on infrastructure operations and works. Councils are responsible for managing these assets for their community's safety and quality of life. An infrastructure strategy that provides, at a minimum, a 30-year view allows councils to present a strategic picture of their infrastructure portfolio.

3.9
As mentioned in paragraph 2.5, along with the council's financial strategy, the infrastructure strategy provides the strategic direction and the underpinning context for the long-term plan.

3.10
Like many other infrastructure owners, councils face significant challenges in managing their assets. These challenges include:

  • having a sound understanding of the age and condition of the assets they own to inform good decisions about asset maintenance, renewals, and replacement;
  • the constrained funding that many councils have and the increasingly limited supply of materials and expertise to manage assets;
  • the evolving expectations about the levels of service that ratepayers desire, as well as increases in standards for providing certain services (for example, the need to meet drinking water standards); and
  • the need for infrastructure to be resilient and fit for the future. This includes considering the impact of changing demographics and technologies, and what that may mean for infrastructure use, as well as the impact of climate change.

3.11
Councils should be planning for, and engaging with their communities about, these challenges.

3.12
Given its purpose, we expect the infrastructure strategy to bring this information together and provide a clear and transparent description of how these issues, as well as others that may be specific to a council, affect the council and how the council proposes to manage these.

What makes a good infrastructure strategy?

3.13
We consider that infrastructure strategies should:

  • tell the story about where councils are, where they expect to be, and how they intend to get there;
  • include relevant assumptions and disclosures of funding, data, risks, and delivery; and
  • create the right debate and be credible by connecting with financial strategies, demographic change, and other relevant influences. This includes matters such as those mentioned in paragraph 3.10 and being clear about the effect of change on infrastructure needs.

3.14
In previous reports, we have commented that including other assets as well as the core assets described in Figure 10 can help improve strategies. Including other assets that are strategically important to the council's delivery of services provides a more comprehensive overview of the infrastructure challenges and issues that the council faces.19

3.15
We consider that including other assets would also allow the infrastructure strategy to be better integrated with the financial strategy. As mentioned in paragraph 3.4, an increasing number of councils are disclosing more than their core assets in their infrastructure strategy. In our view, this is a positive trend.

3.16
Infrastructure strategies should also cover the period needed to adequately show the future situation of the council. For example, if major infrastructure renewals are expected to peak in 2060, then it would be helpful for the council to disclose this information, any funding implications, and the approach it needs to take to successfully renew the infrastructure, recognising that the strategy in addressing the peak will change overtime.

Our observations about the most recent infrastructure strategies

3.17
Most councils provided a good description of the assets they own and manage. They also provided details of the main projects that are needed in the next 30 years.

3.18
We observed that most council infrastructure strategies provide a clear overview of the issues that councils face. We considered that Ashburton District Council and Upper Hutt City Council produced good infrastructure strategies.

3.19
Ashburton District Council produced a clear and well-written infrastructure strategy. The strategy took an effective long-term view of the district's future infrastructure needs and what is needed to address the major issues facing the district in the next 30 years. The Council also had good links between its infrastructure and financial strategies.

3.20
Upper Hutt City Council produced a very clear infrastructure strategy. The Council identified three key challenges in the strategy. It identified themes within each challenge to help focus its responses to the challenges. The Council also considered resilience and incorporated this into its renewals programme well.

There are opportunities for councils to enhance disclosures in their infrastructure strategies about risks to the delivery of infrastructural services and how they are seeking to mitigate or manage those risks.

3.21
An increasing number of councils included information about risk and risk mitigation in their infrastructure strategies. This is an improvement on previous infrastructure strategies, where this type of discussion was not as obvious.

3.22
We see this as an example of an improving maturity in council infrastructure planning. We encourage councils to consider where they could enhance their risk management disclosures.

3.23
We still saw instances where it appeared that the preparation and presentation of the infrastructure strategy had been treated as a separate exercise and not integrated with the long-term plan. For example, some infrastructure strategies were attached as an appendix to the long-term plan, with no clear link to explain how the long-term plan built on the strategy.

How are councils disclosing asset condition and performance information?

3.24
An understanding of the age, condition, and performance of critical assets, as well as future demand, is important in assessing whether councils' actual and planned expenditure is sustainably maintaining assets.

3.25
In 2017, we carried out work looking at asset information held by councils. In our report on that work, we observed that, once councils comprehensively understood their critical assets and the cost of maintaining them, elected members could make informed decisions about management and consult with their community about how to fund that cost or the consequences of not doing so.20

3.26
We expected to see continued improvement in the information disclosed in infrastructure strategies about the condition and performance of critical assets. Most infrastructure strategies provided information about the condition and performance of councils' assets. However, many councils had gaps in their condition and performance information.

3.27
In many instances, those councils made disclosures about their plans to collect better condition and performance information. For example:

  • Bay of Plenty Regional Council invested significantly into condition assessment of its rivers and drainage assets after the 2017 floods. The Council's infrastructure strategy states that the average condition of its assets is good, but that it is still collecting information about its stop banks and waterways.
  • Environment Southland placed a high importance on regular river surveys, condition and performance surveys, and structural inspections to inform its work programme and activities to improve the condition of its assets.
  • Grey District Council worked to improve its asset condition information by applying sound asset management practice during the past decade. The Council's long-term plan and infrastructure strategy is clear about what it needs to do.
  • Kaikōura District Council said that little effort had been made in the past to invest in collecting asset data. In preparing the 2021-31 long-term plan, asset assessments were completed after the 2016 earthquake. The Council recognises that it needs to complete further work on pipe data, but the overall asset information for roading and three-waters assets has significantly improved.
  • Ruapehu District Council plans to implement a risk-based critical asset condition assessment as a priority so it can meet levels of service and legislative requirements and be resilient to any disruption.

3.28
It is encouraging to see councils outline their plans to gather better information where they have identified gaps. Understanding how an asset's condition and performance are changing over time can assist in understanding the best time to intervene with maintenance, extend its life, or replace the asset and maintain levels of service.

3.29
In some instances, gaps in asset condition and performance information were reflected in the audit opinions we issued. This is because we considered that the readers of the long-term plans needed to understand where there were limitations in councils' judgement about managing their assets. We discuss this further in paragraphs 4.66 to 4.84.

Integration with financial strategies

3.30
We expected to see strong links between a council's infrastructure strategy and its financial strategy. In our view, the strongest and most integrated infrastructure strategies connected to important issues of financial and service management.

3.31
We found that about 20% of councils' infrastructure strategies had little to no disclosures that explain how councils plan to fund infrastructure. In our view, this would make it particularly difficult for communities to effectively engage with the strategy. Councils should continue to focus on better integrating their financial and infrastructure strategies in the future.

Councils need to include better disclosures about how they plan to fund infrastructure in their infrastructure strategies.

3.32
Wellington City Council and Chatham Islands Council both prepared combined financial and infrastructure strategies. We recognise that there are difficulties in combining these strategies.

3.33
The disclosure requirements for financial and infrastructure strategies do not fit together well. For example, the infrastructure strategy has a 30-year life and needs to cover only the five groups of network infrastructure. The financial strategy has a 10-year life and needs to incorporate all the council's activities.

3.34
South Taranaki District Council provided a good overview of how it plans to fund infrastructure and the importance of prioritising debt management during the term of the long-term plan.

3.35
Waimakariri District Council said that continuing to deliver current levels of service is a high priority. The Council has developed a renewals programme for the "whole of life" of its assets for the next 150 years. The renewals programme has graphs that show the amount of funding it plans to collect to fully fund the renewal of its infrastructure networks for the next 150 years.

How are councils describing changes to levels of service?

3.36
Levels of service describe the outputs a council intends to deliver. They relate to service attributes such as quality, reliability, responsiveness, sustainability, timeliness, accessibility, and cost. In our view, an effective infrastructure strategy should clearly define the levels of service and any changes to them.

3.37
Looking at councils' infrastructure strategies, we did not see many examples of councils proposing to lower levels of services over time.

3.38
Some infrastructure strategies clearly described changes to levels of service and the reason for those changes. For example, some councils mentioned investment to improve the quality of water supply either to prepare for growth and/or to meet environmental and health standards. Councils also disclosed that changes in levels of service to meet compliance standards are creating significant costs.

3.39
Waimakariri District Council described the changes to levels of service for different assets over time and how rates and debt may be affected. The way that this information is set out made it easy for the community to understand the significant issues and choices it faces.

3.40
However, some councils disclosed little to no information about any proposed changes to levels of service. It is possible that they are not expecting any change to levels of service during the period of the long-term plan. However, being explicit about this would be useful to readers of the infrastructure strategy.

3.41
Where councils are proposing a change in levels of service, or improving actual performance to meet expected levels of service, this should be disclosed in the infrastructure strategy, so readers clearly understand the implications.

Good infrastructure strategies clearly disclose proposed changes in levels of service and the implications of these changes.

3.42
We note that many ratepayers may not understand the implications of changes in levels of service. However, councils have a role to educate communities as to what changes in levels of service mean and the associated implications.

How are councils investing for growth?

3.43
Changes in future demand could include changes to demographics and population, environmental standards, or land use. Many councils expected growth within their cities, districts, or regions, so were thinking about how to manage the resulting demand on infrastructure.

3.44
Some councils are revising their growth forecasts, either because growth has not been as high as expected or because higher-than-forecast growth has occurred. Councils that are preparing for growth are planning to increase investment in their infrastructure assets so that they can manage demand.

3.45
For example, New Plymouth District Council made proposals for the infrastructure needed to support population growth. The Council's infrastructure strategy stated that the Council is updating its District Plan. The infrastructure strategy displayed the future urban zones and development areas. It outlined that the Council (as opposed to the developers) will lead the growth-related infrastructure to ensure that it meets the requirement of the 2020 National Policy Statement for Urban Development.

3.46
Napier City Council forecast medium to high population growth of 5.4% over 10 years and said that three major subdivision developments are under way or planned for the city. To support this forecast growth, the Council is reviewing long-term master plans and prioritising work to make infrastructure more resilient and compliant. This includes developing infrastructure network models to inform the impacts of growth on the current networks and greenfield developments.

3.47
Selwyn District Council has been one of the fastest growing districts in New Zealand in recent years. The Council continued to assume that the district's population will grow at a medium-high rate during the next 10 years. It has based its plans for managing and expanding its infrastructure on the population projections. The infrastructure strategy stated that, if growth should occur at different rates than projected, the Council can respond using tactics it has employed before: accelerating, delaying, or revising planned capital works.

3.48
In some instances, councils facing population growth included other assets in their infrastructure strategies as well as their core assets. This provided a more complete story about the integrated impact of growth on a council.

3.49
For example, Central Hawke's Bay District Council's infrastructure strategy included the core assets as well as waste and landfill assets, community facilities, and reserves and open spaces. The Council disclosed that it is expecting a rising population and it is currently underprepared for such high levels of growth.

3.50
The Council's infrastructure strategy stated that the Council was planning for, and responding to, growth opportunities and set out what this meant for all of the asset classes included in the strategy.

How infrastructure strategies discussed technology

3.51
We also observed that the infrastructure strategies discussed technology more than they had previously. Infrastructure planning must increasingly consider the rapid development of technology.

3.52
There are opportunities for significant improvements in monitoring and data gathering as technology advances. Technology enables strengthened governance and improved services. It can also provide opportunities to help with demand management. This will become increasingly necessary as resources become scarcer and the effects of climate change increase.

3.53
We saw that some councils are taking a flexible approach to infrastructure renewals and replacement so that they can consider possible future scenarios and solutions.

How are councils considering resilience?

3.54
In our 2019 report on matters arising from the 2018-28 long-term plans, we indicated that the 2021-31 long-term plans will need to include a discussion with the community about resilience and climate change issues. New Zealand's economy is vulnerable to the effects of natural disasters, and several significant events have occurred since the 2021-31 long-term plans were adopted.

3.55
We observed that many councils provided a clear story about their resilience and climate change challenges in their infrastructure strategies. In Part 6, we discuss in more detail how councils are planning for climate change and how they discussed climate change issues in their long-term plans.

3.56
Addressing the resilience of infrastructure means councils need to understand risks that are complex, uncertain, and unpredictable. Councils need to determine:

  • the likelihood of a natural hazard event occurring, where it is likely to occur, and in what time frame (this includes both shock events, such as earthquakes, and natural hazard events that result from the gradual effects of climate change, such as coastal erosion from sea-level rise);
  • how exposed to natural hazard events their infrastructure assets are – in particular, the age, condition, and location of their critical infrastructure assets (poorly maintained and/or ageing infrastructure poses a potentially higher risk to councils);
  • the consequent vulnerability of those assets to damage from natural hazard events; and
  • how they would maintain service continuity if a significant asset failed.

3.57
The Act requires councils to make appropriate financial provision to address the risks from natural hazards to their infrastructure assets. Councils cannot do this effectively if they have a limited understanding of those risks.

3.58
In many infrastructure strategies, councils said that they would look to build resilience into their asset network when they carried out their renewals programme. Examples of this include using materials that would be less affected by earthquakes or changing the location of the asset so it was better protected from the effects of climate change.

3.59
This is a reasonable approach to take. However, the size of renewals that councils are forecasting implies that council infrastructure may be affected by extreme events in the meantime.

3.60
Some councils clearly outlined the expected impacts of climate change and the mitigation issues in their infrastructure strategies.

3.61
For example, Greater Wellington Regional Council was clear about the impacts of climate change and mitigation actions in its infrastructure strategy. One of the Council's overarching strategic priorities is responding to its declared climate emergency by demonstrating leadership in regional climate action and advocacy and by aiming for its operations to be carbon neutral by 2030.

3.62
Greater Wellington Regional Council's infrastructure strategy stated that the region is already experiencing the effects of climate change. As a result, the Council considered the risk assessment of assets for its key infrastructure activities. This was predominately in flood protection, bulk water, and public transport.

19: Office of the Auditor-General (2015), Matters arising from the 2015-25 local authority long-term plans, page 43.

20: Office of the Auditor-General (2017), Getting the right information to effectively manage public assets: Lessons from local authorities, Part 1.