The Auditor-General's water and roads report - 2014

The full report is available at http://www.oag.govt.nz/2014/assets.

The main points from the Auditor-General's overview and conclusions are:

• Our analysis shows that most local authorities' planning and decision-making about their infrastructure services, assets, and associated funding are adequate for short- to medium-term planning. However, local authorities need to do more to manage infrastructure and financial strategies for the long term, given the wider economic and population changes we face.
  
  
• Although local authorities tend to have a lot of data, they do not necessarily use it well or use the best data to support decision-making. In our analysis, we found that local authorities:
  - have better and more reliable information (such as condition and quantity) about their above-ground assets than their below-ground assets;
  - are likely to know more about newer assets than older assets (such as those that have been in the ground for 50 years); and
  - are more likely to reinvest more in their roading assets than in their "three waters" assets (based on the ratio of their forecast renewals expenditure to depreciation).
  
  
•  Local authorities need to build their capability to use their information and systems to get the best performance from their asset networks. They need to understand how assets perform throughout their lives to know the points at which and whether to maintain, renew, or replace individual asset parts.
  
  
• Wider economic and population changes mean that there are long-term risks to local government's infrastructure and financial management.
  
  
• Population movement into urban centres will continue to drive capital investment, particularly in areas such as Auckland, Hamilton, and Tauranga. At the same time, economic and population growth will decline in some provincial areas. New Zealand also has an ageing population. Retirees might own assets such as their home, but their incomes often do not change much and they might be living on savings. New Zealand's population changes will affect demand for, and the affordability of, the services provided by infrastructure assets.
  
  
• In places with declining economic growth and ageing and shrinking populations, local authorities could end up with under-used assets (such as roads and water treatment plants). These assets will still need to be maintained and renewed so they can continue to provide services. Local authorities operating, and communities served by, these assets will eventually face costly replacement decisions on shrinking revenue bases.
  
  
• A significant renewal cycle of three waters assets is likely to occur during 2040 to 2060.
  
  
• We observed that, except for bridges, asset management results were better for roading than for three waters assets. In some instances, the results were only slightly better, but in others they were significantly better. More than one factor is likely to account for this difference. For example, roads are above ground, which makes it easier to assess their condition. Roads also have a shorter life expectancy so are more likely to need frequent attention.
  
  However, it is likely that the arrangements for roading funding and management also play a part. Local authorities receive funding towards capital expenditure on roading through New Zealand Transport Agency (NZTA) subsidies. In contrast, capital expenditure on three waters assets comes primarily from rates and other revenue.
  
  
• NZTA requires local authorities to provide regular information to receive roading subsidies. NZTA regularly audits the information in local authorities' roading asset management information systems. Although there have been government grant and subsidy schemes for water (for instance, the wastewater subsidy scheme administered by the Ministry of Health), there are no arrangements similar to transport for three waters or other local authority assets.
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• Overall, 30-year strategies will be a useful planning tool for local authorities only if they are supported by robust information about asset performance.