Asset Management

valuation of stormwater assets

  • 1.  valuation of stormwater assets

    Posted 28 June 2015 22:52
    Hi all
    I know this is a bit of a perennial one, and as far as I see it, the valuation community appear to stand a bit at odds with practitioners, but, I still hold the view that, of all the asset classes, the methodology for valuing stormwater assets is still deficient and results in substantial understatement of "true" replacement value, or cost to the community to replace the network in the event of failure/reaching end of life.

    This is because of the view that the costs should be based on "greenfield" type installation which means:
    1: no allowance for traffic control
    2: no allowance for adjustment/repair/working in proximity of services
    3:no allowance for cutting and disposal of contaminated material (eg hotmix)
    4:no allowance for disposal of existing pipes
    5:no allowance for temporary diversions/working/delays in wet weather ...etc

    I appreciate that intervention options including relining can 'extend" or, more likely "retain" the useful life of pipes, and that the cost of relining in constrained locations is clearly lower than replacement, but is relining the same as replacement and/or will the network still require replacement at some point in the future?  I know that in SA -our accepted useful life of stormwater pipes is still based on limited historic record,  limited technical findings and "gut feel" and varies between about 50 years and 120 years per Council/pipe type.  This in itself presents as a controversial, and potentially misrepresentative view of the life of these assets, and in due course, as our knowledge grows, could have as much impact on valuations as adjustments to the actual cost of replacement. 

    I would be interested in hearing of anyone's experience in "more appropriately" accounting for renewal of stormwater assets, how you went about convincing your valuers, and what success/impact this may have had on your valuation process/LTFP and AM plans.


    cheers

    -------------------------------------------
    Andrew Thomas
    Asset Planner Water Resources
    City of Onkaparinga
    NOARLUNGA CENTRE SAau
    -------------------------------------------
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  • 2.  RE: valuation of stormwater assets

    Posted 30 June 2015 06:34
    I don't know why you would think it has to be valued on a greenfield situation - this is not true. It is based depreciated replacement cost - i.e. replacement in brownfields situation at prevailing market prices - depreciated as a proportion of the expired useful life (which is a proxy for consumption of economic benefits - which is the definition of depreciation).
    This value is further reduced (optimised) by removing redundant assets (no value), surplus assets or overdesign. You might want to replace a pump station with a modern equivalent which is cheaper that trying to replicate the old station.
    What is trying to be replicated is the market value -which is not feasible as there is no market -  so just try to understand that and all the costs you sugggst should be included in a valuation.

    -------------------------------------------
    Tim Davin
    Director External Relations
    IPENZ
    Wellington
    -------------------------------------------


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  • 3.  RE: valuation of stormwater assets

    Posted 30 June 2015 06:35

    Hi Andrew

    It is a difficult one but it is important to remember that if the purpose of your valuation is for financial compliance then the valuation is aimed at valuing the asset already in the ground NOT the one you are replacing it with - hence the exclusion that you have noted. It is fair to say however we seem to have a hybrid of both if you consider such adjustment factors as those used to reflect development. 

    I would be concerned if you can 'convince' the valuer to change their approach as the financial valuation would be incorrect but they may be in a position to provide guidance as to an appropriate factor to allow in renewal planning for the LTFP and the Asset Management Plans.
    -------------------------------------------
    Carolyn Jackson
    Manager Capital and Asset Accounting
    Redland City Council
    CLEVELAND QLD
    -------------------------------------------


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  • 4.  RE: valuation of stormwater assets

    Posted 30 June 2015 06:36
    Andrew,
    Cross-jurisdiction answers are not always the solution,, however ...

    You are correct in raising the limitations of green-fields asset valuations, In NZ we have always used brownfields rates for infrastructure asset valuations, this is in line with the previous and current international standards. I understand Aust is signed up to the international standards too.

    With regards to re-lining, the work will give the pipe an additional x years life, so that should be the Expected Useful Life in the depreciation calculation. The Replacement Cost can be a bit more problematic - how do you think it will be replaced in future? If it will require full replacement, then that is the rate you use; if it will be able to be re-lined again, that is the rate. A similar approach is required when looking at existing unlined pipes, are they candidates for complete renewal or re-lining?

    Hope this helps

    George


    -------------------------------------------
    George JasonSmith
    AECOM New Zealand Ltd
    Auckland
    -------------------------------------------


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  • 5.  RE: valuation of stormwater assets

    Posted 30 June 2015 06:36

    Hi Andrew,

    The first thing I would suggest is to understand/to model the standard life of your stormwater assets. The Council I worked before had CCTV footages collected from last two decades, and relatively high confidence against the creation date of individual asset. After reviewed and scored these footages based on WSAA code, a correlation between condition scores and ages for certain assets group (i.e. 150-450mm RCP) can be built. By undertaking a cumulative frequency analysis on this correlation, it should help you to form a degradation curve and to predict the standard life (i.e. 90% of condition 1 less than 80 years old, 75% of condition 2 less than 110 years old etc.).  

    Using creation date + standard life to predict renewal date would not  reflect the stormwater renewal in the real world. It is envisaged that a huge peak will be showing in your forecast. I would imagine for lots of Councils, a standard life + creation date based renewal forecast will only tell that no money needs to be spent in the next 10 - 20 years as majority of the stormwater assets are built post WWII.

    Given stormwater asset life distributions is normally following a bell curve with the standard life as the peak, the Monti Carlo formula would be useful to smooth the peak. Excel can easily achieve that and generates a new forecast diagram with more flat or evenly distributed renewal forecast. Forecast the LTFD using this newly generated diagram is more close to the reality. 

    In terms of renewal cost, applying factors such as depths, locations, soil types, road hierarchy to reflect the costs of working at different locations would be more close to the actual spend, and this will also help to estimate the capital works for the following years. 


    -------------------------------------------
    Ruofan(Frank) Chen
    Hydraulic Engineer
    Glenorchy City Council
    GLENORCHY TAS
    -------------------------------------------


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  • 6.  RE: valuation of stormwater assets

    Posted 01 July 2015 22:54
    Frank
    what a luxury to have 20 years of CCTV and assessment against the WASSA code!
    Im afraid that is just a "pipe dream" for us!

    You are right about the likely impact of a Mount Everest showing up in future renewals.  Thankfully - I think we have 30 or more years to better understand our useful lives before we get there, and based on limited obs of performance to date there will be a flattening of that peak due to a variety of early failure mechanisms and hopefully, some extended performance.  It will be an interesting bit of data for someone (else!) in 30 - 50 years to look back and see how far off we really are with our predictions.....

    Im not forgetting that the whole point of this exercise is to ensure the LTFP has enough funding allocated to deal with renewals as they arise.  While its not a major issue now, due to (relatively) young age of network, it will be too late in years to come if the LTFP fails to address these liabilities.

    cheers
     
    -------------------------------------------
    Andrew Thomas
    Asset Planner Water Resources
    City of Onkaparinga
    NOARLUNGA CENTRE SAau
    -------------------------------------------


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  • 7.  RE: valuation of stormwater assets

    Posted 01 July 2015 20:57
    Hi all,

    Following is an extract from AASB116 Property Plant & Equipment:

    Elements of Cost

    16 The cost of an item of property, plant and equipment comprises:

    (a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates;

    (b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and

    (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

    17 Examples of directly attributable costs are:

    (a) costs of employee benefits (as defined in AASB 119 Employee Benefits) arising directly from the construction or acquisition of the item of property, plant and equipment;

    (b) costs of site preparation;

    (c) initial delivery and handling costs;

    (d) installation and assembly costs;

    (e) costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment); and

    (f) professional fees.

    When calculating replacement costs, Council considers all costs expected to be incurred in the replacement of the asset and I think this approach is compliant with the intent of the accounting standard. These include staff overheads, disposal costs, construction/access difficulty (eg adjacent to highway), material cartage costs, etc and vary with each asset group and sometimes with individual assets. Our auditors have had no problem with this approach.

    The NSW Ministry of Energy & Utilities publish the NSW Reference Rates Manual for Water, wastewater & stormwater assets. Notes to the unit rates they provide state the rates include costs to supply, excavate, construct, backfill & restoration and do not include tipping or disposal of soil. Also recommended is a SID of 15% and contingencies of 10%. This also seems to compliant with the intent of the standard.

    As for the life of assets, we have also relied on best estimates, gut-feel, etc. We would be grateful for some definitive guidelines on this, particularly from state or federal bodies who are intent on using these financial values for comparison. This year, we have completed a condition audit of a portion of the stormwater system and hope to use that to refine the estimated effective lives we apply.

    When considering relining of sewer pipes, in the past Council has used the difference between the cost to replace entirely and the cost to reline as the residual value of the pipe. The estimated effective life of unlined pipes needs to be to the estimated time to the point of intervention. After relining, the estimated effective life needs to be reassessed and will be different to the original estimated life and there will be no residual value. In effect, for accounting purposes, I suppose the original unlined pipe asset has been 'replaced' by a lined pipe. We haven't yet applied that level of 'sophistication' to our stormwater inventory valuation. 

    Not sure how that methodology will comply with the Accounting Board's most recent ruling however! I must also confess that I am not an accountant....

    -------------------------------------------
    Helen Rooth
    Asset Management /GIS Coordinator
    Muswellbrook Shire Council
    Muswellbrook NSW
    -------------------------------------------


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  • 8.  RE: valuation of stormwater assets

    Posted 05 July 2015 22:15
    Thanks Helen
    Thanks for the heads up - although clearly the info you provided is stuff that all asset planners should know.  I think its a challenge for asset planners everywhere to make sure they are aware of, and (if possible!) understand the policy and statutory framework. I think we tend to work with an engineering focus without  due appreciation of the financial guidelines that frame this process.  It seems to me there is still some confusion/dispute/lack of awareness in this space - at least I hoping Im not the only one who isn't up to speed on this.  (sign up for the IPWEA AM certificate!)  

    re asset life - and accounting for re-lining. I agree some industry wide guidelines should apply for useful life, and even residual values, but with capacity for "local environmental factors" to be applied with appropriate knowledge of their impact and how they may affect the outcome.  A challenge for the new age!

    cheers

    ---------------------------------------
    Andrew Thomas
    Asset Planner Water Resources
    City of Onkaparinga
    NOARLUNGA CENTRE SAau
    -------------------------------------------


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  • 9.  RE: valuation of stormwater assets

    Posted 06 July 2015 01:21
    Hi,

    The questions below highlight the on-going issue most councils come across when undertaking valuations. The first question should be; why are we undertaking this valuation? That will define the approach and hence the outcomes for the correct department (finance or asset management) within council. Rarely does one outcome match the differing requirements of FM and AM, and nor should they.

    Also its good to remember accounting standards are not valuation or AM standards; and 'intervention' is more commonly found in religious doctrine.



    -------------------------------------------
    Martin Burns
    Liquid Pacific
    (
    www.liquidpacific.com)
    -------------------------------------------


    Elements of Cost

    16 The cost of an item of property, plant and equipment comprises:

    (a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates;

    (b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and

    (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

    17 Examples of directly attributable costs are:

    (a) costs of employee benefits (as defined in AASB 119 Employee Benefits) arising directly from the construction or acquisition of the item of property, plant and equipment;

    (b) costs of site preparation;

    (c) initial delivery and handling costs;

    (d) installation and assembly costs;

    (e) costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment); and

    (f) professional fees.

    When calculating replacement costs, Council considers all costs expected to be incurred in the replacement of the asset and I think this approach is compliant with the intent of the accounting standard. These include staff overheads, disposal costs, construction/access difficulty (eg adjacent to highway), material cartage costs, etc and vary with each asset group and sometimes with individual assets. Our auditors have had no problem with this approach.

    The NSW Ministry of Energy & Utilities publish the NSW Reference Rates Manual for Water, wastewater & stormwater assets. Notes to the unit rates they provide state the rates include costs to supply, excavate, construct, backfill & restoration and do not include tipping or disposal of soil. Also recommended is a SID of 15% and contingencies of 10%. This also seems to compliant with the intent of the standard.

    As for the life of assets, we have also relied on best estimates, gut-feel, etc. We would be grateful for some definitive guidelines on this, particularly from state or federal bodies who are intent on using these financial values for comparison. This year, we have completed a condition audit of a portion of the stormwater system and hope to use that to refine the estimated effective lives we apply.

    When considering relining of sewer pipes, in the past Council has used the difference between the cost to replace entirely and the cost to reline as the residual value of the pipe. The estimated effective life of unlined pipes needs to be to the estimated time to the point of intervention. After relining, the estimated effective life needs to be reassessed and will be different to the original estimated life and there will be no residual value. In effect, for accounting purposes, I suppose the original unlined pipe asset has been 'replaced' by a lined pipe. We haven't yet applied that level of 'sophistication' to our stormwater inventory valuation. 

    Not sure how that methodology will comply with the Accounting Board's most recent ruling however! I must also confess that I am not an accountant....

    -------------------------------------------
    Helen Rooth
    Asset Management /GIS Coordinator
    Muswellbrook Shire Council
    Muswellbrook NSW
    -------------------------------------------


    Original Message:
    Sent: 28-06-2015 22:18
    From: Andrew Thomas
    Subject: valuation of stormwater assets

    Hi all
    I know this is a bit of a perennial one, and as far as I see it, the valuation community appear to stand a bit at odds with practitioners, but, I still hold the view that, of all the asset classes, the methodology for valuing stormwater assets is still deficient and results in substantial understatement of "true" replacement value, or cost to the community to replace the network in the event of failure/reaching end of life.

    This is because of the view that the costs should be based on "greenfield" type installation which means:
    1: no allowance for traffic control
    2: no allowance for adjustment/repair/working in proximity of services
    3:no allowance for cutting and disposal of contaminated material (eg hotmix)
    4:no allowance for disposal of existing pipes
    5:no allowance for temporary diversions/working/delays in wet weather ...etc

    I appreciate that intervention options including relining can 'extend" or, more likely "retain" the useful life of pipes, and that the cost of relining in constrained locations is clearly lower than replacement, but is relining the same as replacement and/or will the network still require replacement at some point in the future?  I know that in SA -our accepted useful life of stormwater pipes is still based on limited historic record,  limited technical findings and "gut feel" and varies between about 50 years and 120 years per Council/pipe type.  This in itself presents as a controversial, and potentially misrepresentative view of the life of these assets, and in due course, as our knowledge grows, could have as much impact on valuations as adjustments to the actual cost of replacement. 

    I would be interested in hearing of anyone's experience in "more appropriately" accounting for renewal of stormwater assets, how you went about convincing your valuers, and what success/impact this may have had on your valuation process/LTFP and AM plans.


    cheers

    -------------------------------------------
    Andrew Thomas
    Asset Planner Water Resources
    City of Onkaparinga
    NOARLUNGA CENTRE SAau
    -------------------------------------------














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  • 10.  RE: valuation of stormwater assets

    Posted 09 July 2015 02:08
    I agree with Martin when he says "The first question should be: why are we undertaking this valuation?"

    He is correct when he suggests that valuations for asset management purposes can differ from those warranted for accounting purposes. For example AASB13 requires the use of observable (i.e., market based) valuations in financial reporting by entities where assets can reasonably be deemed to have a market value.

    Many local government assets (e.g., infrastructure) do not have a market value. Replacement cost is then often a suitable basis of valuation for financial reporting purposes. In such cases I would normally expect the valuation applied for financial reporting purposes to be consistent with those utilised in quantifying asset renewal and replacement needs for asset management planning purposes.

    -------------------------------------------
    Posted by Chris Champion on behalf of John Comrie
    Co-author
    IPWEA Australian Infrastructure Financial Management Guidelines
    -------------------------------------------




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  • 11.  RE: valuation of stormwater assets

    Posted 06 July 2015 01:36
    Message on behalf of John Comrie & John Howard, authors of the IPWEA's Australian Infrastructure Financial Management Guidelines (AIFMG's):

    The fully revised 2nd edition of the Australian Infrastructure Financial Management Guidelines is currently being finalised for publication by IPWEA (keep an eye out for it). It provides up-to-date and more comprehensive information regarding valuation and revaluation of long-lived infrastructure assets than the 1st edition did. It emphasises three factors relevant to the revaluation of stormwater and other long-lived infrastructure assets that don't have a market value.

    Firstly valuation should be based on the cost of a modern equivalent replacement asset. If replacement involves incurring additional traffic management and other costs associated with the asset's site and circumstances then such costs should be taken into account in the valuation.

    Secondly assets should be componentised for accounting purposes where appropriate based on local asset management practices. This means for example that if a stormwater pipe is expected to be relined then materiality considerations may warrant it being accounted for as two distinct assets, a shorter lived inner component and an outer component with a longer life.

    Finally the Australian Accounting Standards Board has recently explicitly confirmed that residual values should only be applied to reflect expected net receipts from disposal of an asset to another party at the end of its useful life, i.e. sale to an external party. Expected savings to an organisation from renewal rather than replacement of an asset should not be recognised as a residual value. Such 'savings' are appropriately and fully recognised instead by componentising assets into shorter and longer-lived components, valuation as modern equivalent assets and depreciating the components over their expected useful lives.

    -------------------------------------------
    John Comrie, John Howard
    Co-authors
    Australian Infrastructure Financial Management Guidelines
    -------------------------------------------




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  • 12.  RE: valuation of stormwater assets

    Posted 07 July 2015 03:34
    Hi Chris,

    Can you confirm what the definition of value the valuation guidelines below refer to?

    -------------------------------------------
    Martin Burns
    Liquid Pacific
    (
    www.liquidpacific.com)
    -------------------------------------------


    The fully revised 2nd edition of the Australian Infrastructure Financial Management Guidelines is currently being finalised for publication by IPWEA (keep an eye out for it). It provides up-to-date and more comprehensive information regarding valuation and revaluation of long-lived infrastructure assets than the 1st edition did. It emphasises three factors relevant to the revaluation of stormwater and other long-lived infrastructure assets that don't have a market value.

    Firstly valuation should be based on the cost of a modern equivalent replacement asset. If replacement involves incurring additional traffic management and other costs associated with the asset's site and circumstances then such costs should be taken into account in the valuation.

    Secondly assets should be componentised for accounting purposes where appropriate based on local asset management practices. This means for example that if a stormwater pipe is expected to be relined then materiality considerations may warrant it being accounted for as two distinct assets, a shorter lived inner component and an outer component with a longer life.

    Finally the Australian Accounting Standards Board has recently explicitly confirmed that residual values should only be applied to reflect expected net receipts from disposal of an asset to another party at the end of its useful life, i.e. sale to an external party. Expected savings to an organisation from renewal rather than replacement of an asset should not be recognised as a residual value. Such 'savings' are appropriately and fully recognised instead by componentising assets into shorter and longer-lived components, valuation as modern equivalent assets and depreciating the components over their expected useful lives.

    -------------------------------------------
    John Comrie, John Howard
    Co-authors
    Australian Infrastructure Financial Management Guidelines
    -------------------------------------------




    Original Message:
    Sent: 01-07-2015 00:14
    From: Helen Rooth
    Subject: valuation of stormwater assets

    Hi all,

    Following is an extract from AASB116 Property Plant & Equipment:

    Elements of Cost

    16 The cost of an item of property, plant and equipment comprises:

    (a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates;

    (b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and

    (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

    17 Examples of directly attributable costs are:

    (a) costs of employee benefits (as defined in AASB 119 Employee Benefits) arising directly from the construction or acquisition of the item of property, plant and equipment;

    (b) costs of site preparation;

    (c) initial delivery and handling costs;

    (d) installation and assembly costs;

    (e) costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment); and

    (f) professional fees.

    When calculating replacement costs, Council considers all costs expected to be incurred in the replacement of the asset and I think this approach is compliant with the intent of the accounting standard. These include staff overheads, disposal costs, construction/access difficulty (eg adjacent to highway), material cartage costs, etc and vary with each asset group and sometimes with individual assets. Our auditors have had no problem with this approach.

    The NSW Ministry of Energy & Utilities publish the NSW Reference Rates Manual for Water, wastewater & stormwater assets. Notes to the unit rates they provide state the rates include costs to supply, excavate, construct, backfill & restoration and do not include tipping or disposal of soil. Also recommended is a SID of 15% and contingencies of 10%. This also seems to compliant with the intent of the standard.

    As for the life of assets, we have also relied on best estimates, gut-feel, etc. We would be grateful for some definitive guidelines on this, particularly from state or federal bodies who are intent on using these financial values for comparison. This year, we have completed a condition audit of a portion of the stormwater system and hope to use that to refine the estimated effective lives we apply.

    When considering relining of sewer pipes, in the past Council has used the difference between the cost to replace entirely and the cost to reline as the residual value of the pipe. The estimated effective life of unlined pipes needs to be to the estimated time to the point of intervention. After relining, the estimated effective life needs to be reassessed and will be different to the original estimated life and there will be no residual value. In effect, for accounting purposes, I suppose the original unlined pipe asset has been 'replaced' by a lined pipe. We haven't yet applied that level of 'sophistication' to our stormwater inventory valuation. 

    Not sure how that methodology will comply with the Accounting Board's most recent ruling however! I must also confess that I am not an accountant....

    -------------------------------------------
    Helen Rooth
    Asset Management /GIS Coordinator
    Muswellbrook Shire Council
    Muswellbrook NSW
    -------------------------------------------


    Original Message:
    Sent: 28-06-2015 22:18
    From: Andrew Thomas
    Subject: valuation of stormwater assets

    Hi all
    I know this is a bit of a perennial one, and as far as I see it, the valuation community appear to stand a bit at odds with practitioners, but, I still hold the view that, of all the asset classes, the methodology for valuing stormwater assets is still deficient and results in substantial understatement of "true" replacement value, or cost to the community to replace the network in the event of failure/reaching end of life.

    This is because of the view that the costs should be based on "greenfield" type installation which means:
    1: no allowance for traffic control
    2: no allowance for adjustment/repair/working in proximity of services
    3:no allowance for cutting and disposal of contaminated material (eg hotmix)
    4:no allowance for disposal of existing pipes
    5:no allowance for temporary diversions/working/delays in wet weather ...etc

    I appreciate that intervention options including relining can 'extend" or, more likely "retain" the useful life of pipes, and that the cost of relining in constrained locations is clearly lower than replacement, but is relining the same as replacement and/or will the network still require replacement at some point in the future?  I know that in SA -our accepted useful life of stormwater pipes is still based on limited historic record,  limited technical findings and "gut feel" and varies between about 50 years and 120 years per Council/pipe type.  This in itself presents as a controversial, and potentially misrepresentative view of the life of these assets, and in due course, as our knowledge grows, could have as much impact on valuations as adjustments to the actual cost of replacement. 

    I would be interested in hearing of anyone's experience in "more appropriately" accounting for renewal of stormwater assets, how you went about convincing your valuers, and what success/impact this may have had on your valuation process/LTFP and AM plans.


    cheers

    -------------------------------------------
    Andrew Thomas
    Asset Planner Water Resources
    City of Onkaparinga
    NOARLUNGA CENTRE SAau
    -------------------------------------------














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  • 13.  RE: valuation of stormwater assets

    Posted 09 July 2015 02:08

     

    The Australian Infrastructure Financial Management Guidelines (AIFMG) attempt to address a broad range of issues associated with financial planning, management and accounting for infrastructure. In particular it provides guidance on the application of Australian Accounting Standards in accounting for infrastructure. The forthcoming second edition includes expanded discussion on valuation issues including advice regarding the requirements of the Australian Accounting Standards Board's Fair Value Measurement Standard (AASB 13). In its glossary it defines valuation as "The process of determining the worth of an asset or liability. Different valuation methods may be appropriate in different circumstances."

    -------------------------------------------
    Chris Champion
    Director International
    IPWEA Australasia
    Sydney NSW
    -------------------------------------------


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  • 14.  RE: valuation of stormwater assets

    Posted 07 July 2015 18:37
    Hi All

    I have been following with interest. There seems to be consensus here that the surrounding built environment should be considered in a revaluation of buried pipes if I am gleaning the correct message.

    Our council has been given professional advice that that is not correct as the Replacement Value should be determined following the thinking that to replace the service what would a modern equivalent asset cost in a greenfield situation. I agree with the earlier post that that thinking undervalues the cost of renewal in a built up area by a long way.

    I was thinking that Helen's extract below may be about the recognition of costs when an asset is built originally which is in my opinion a different exercise to considering the replacement cost of an existing buried asset with a modern equivalent located in a CBD.

    I don't believe everyone is on the same page as yet. I personally think it is logical that we consider brownfield when we revalue.

    Thoughts?

    Cheers

    Bruce Janke

    -------------------------------------------
    Bruce Janke
    Maintenance Planner
    Bundaberg Regional Council
    BUNDABERG QLD
    -------------------------------------------


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  • 15.  RE: valuation of stormwater assets

    Posted 09 July 2015 01:08
    Hi All,

    in relation to valuing stormwater assets - does anyone include vegetated assets such as bioretention systems / wetlands? and if so what parameters are addressed?

    As I understand it these types of assets (ie vegetation in general) is not given a value, but perhaps should be.

    any thoughts / examples / guidance much appreciated! cheers gabrielle

    -------------------------------------------
    Gabrielle Ryan
    Environment Engineer
    Coffs Harbour City Council
    COFFS HARBOUR NSW
    -------------------------------------------


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  • 16.  RE: valuation of stormwater assets

    Posted 10 July 2015 02:17
    Hey Gabrielle

    We would routinely include in a drainage valuation the "hard" infrastructure components of basins such as earthworks,  inlets, outlets, fencing and similar but not include the "soft" vegetation.  You could put a value on the "green" assets if your accounting policy allowed it but this has some specific problems and would be unusual.  It is easier to do if the "green" assets are acquired as a capital procurements.

    I had a very interesting discussion on valuing soft landscaping (trees, turf, shrubberies)  with a leading WA auditor and a Local Government Finance Manager on a recent project.

    The Local Government client wanted to value soft landscape assets (particularly turf ) but this was in our experience fairly unusual.  They specifically wanted it valued because it was an important community asset of significant financial and social value that they managed and they wanted this reflected in their books.  In this remote location keeping turf alive and in good condition was a bit tricky. 

    Playing fields are not an asset you can sell or establish a market price for so it needed to be valued on replacement cost methodology.  

    Unless you buy roll on turf it is typically not a capitalised purchase.  Even when you buy roll on turf that capital expense does not reflect the cost of the intense preparation, fertiliser and watering regime to establish it.  The accounting standard says you need to include all of the costs of replacing the asset.


    Working out a replacement cost for reticulation, selected sub-grade and other components is relatively straight forward.  However the grass itself grows over a period of time and apart from initial seed/stolens, fertiliser, sun, water and mowing it "grows" it's own "value" (Please excuse the pun) It's unusual to capitalise these expenses but they add value to the turf.

    Ultimately we valued this at the cost of buying and installing roll on turf including 6 months of intense aftercare and support  We then set the depreciation rate as non depreciating because if the vegetation is properly maintained it will (in theory) have an unlimited asset life.

    We didn't get into the issue of how and when you would capitalise the grass or reflect it's increasing value over the first few years.  In our case the Shire was recognising an existing mature asset.  However it would be interesting to hear how accountants would treat a new installation and the accrual of value over the first few years.

    The Local Government and auditors were satisfied with this approach.

    The relevance to your query is that in order to value vegetation I think you would need to

    a. Get your organisation to recognise "green" assets
    b. Get your organisation to recognise green assets have financial value
    b. Get the accounting policy changed to include valuation of greens
    c. Specifically address how you will capitalise green assets and when you will recognise their financial value given they acquire value over time 
    d. Develop a sound method to determine the replacement cost of the green asset.
    e, Develop a sound method to treat depreciation and other matters

    I'm also very interested in any feedback and alternate suggestions on this.

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    Graham Lantzke
    Opus International Consultants
    OSBORNE PARK WAau
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