GLADSTONE REGIONAL COUNCIL'S LGIP CREATING THE REGION OF CHOICE

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1 GLADSTONE REGIONAL COUNCIL'S LGIP CREATING THE REGION OF CHOICE Emma Hamilton Senior Development Engineer,Technical Services Gladstone Regional Council Chris Adam Director, Strategic AM Pty Ltd Qld Abstract Gladstone Regional Council embraces its responsibility to preserve and enhance the built environment for the benefit of the current generation and without disadvantaging the next. In achieving this, Council recognised how the States Local Government Infrastructure Plan (LGIP) could be a catalyst for sustainably managing its plans for growth, community levels of service and financial prudence. This paper outlines how Council has developed an LGIP that delivers growth in a structured and sustainable way. As one of the first to develop an LGIP, Council's process for producing a sustainable document included: Rigorous assessment of growth potential on sites which were both development ready and minimised the need for trunk infrastructure; Comprehensive (and independent) review of Council's plans for major trunk infrastructure, which ensured that assumptions used in infrastructure planning across Council was consistent; and Recognising that trunk infrastructure is a key driver of Council's capital and operational expenditures, an efficient growth path pays dividends to Council by balancing cost and revenue. This paper will demonstrate how an iterative process for balancing growth, infrastructure and financial capability can have significant benefits to Councils in delivering sustainable growth, minimise rates increases and maintain levels of service to ratepayers. Take home messages: Gladstone Regional Councilsapproachto the development of an LGIP has delivered tangible benefits for the region; A rigorousand cooperative approach to balancing growth, infrastructure and financial capability has delivered a sustainable vision for Council; and Gladstone Regional Council is committed to utilising legislative requirements such as the LGIP (and Long Term Asset Management Plan (LTAMP), Long Term Financial Forecast (LTFF)) in a way that provides tangible benefitsto the region (beyond just a statutory compliance exercise).

2 Introduction Recognised as the industrial powerhouse of Queensland, the Gladstone Region offers much more as a dynamic and vibrant community. The Gladstone Regional Council encompasses the cities of Gladstone, Calliope and pristine areas of Miriam Vale, Agnes Waters and The region covers an area of 10,500 square kilometres and currently accommodates more than 60,000 people. With population growth anticipated to exceed 40% over the next twenty (20) years, Council is focussed on creating the Region of Choice. Gladstonefaces many similar challenges to those of other high growth Regional Councils. In particular, this includes the need forcouncilto effectively manage the pressure that growth can place on Council'sassets (and associated levels of service) servicing geographically distant areas and financial sustainability.as demonstrated below, Council recognised how the states Local GovernmentInfrastructure Plan (LGIP) could be used as a catalyst for sustainably managing the region s growth, community levels of service and financial capacity. Council is in the advanced stages of developing a consolidated Planning Scheme for the entire region. The new Planning Scheme defines the Council's Vision in terms of form and function (land use) and will use the LGIP to define a sustainable sequence of development within a robust Priority Infrastructure Area. What is a Local GovernmentInfrastructure Plan (LGIP)? The LGIP is that component of theplanning Scheme that outlines the scope ofcouncil's growth aspirations, the pathway for accommodating thatgrowth across the region and the trunk infrastructure necessary to support such growth. While the Planning Scheme outlines Council's long term Vision, the LGIP provides a practical road map of how Council sees this Vision being delivered on the ground (e.g. sequencing of growth and timing of trunk infrastructure to accommodate that growth). In this regard, the LGIP is similar to the previous Priority Infrastructure Plan (PIP) in terms of its content but has a more streamlined process for approval. The scopeand structure of the LGIP is outlined in statutory guideline 03/14 which requires that the LGIP is financially sustainable (capable of being funded by the local government) and aligns with the local government s Long TermFinancial Forecast (LTFF) and Asset Management Plans (AMPs) 1. Gladstone s Objectives Gladstone Regional Council was the first in Queensland to develop an LGIP. In doing so, Council was seeking to get more from the process than just compliance with regulatory requirements. The Councils primary objective was to use the LGIP as a vehicle to deliver value for the people of Gladstone. In particular, Council identified that the process could assist Council in the following ways: Develop a pragmatic growth profile that minimised the cost to the community; Provide a catalyst for review and alignment of Councils plans for trunk infrastructure across key asset classes (especially water supply, sewerage and roads); and Facilitated a balance between growth, infrastructure needs and Councils financial capability. These three objectives drove Council's process and ensured that the LGIP was more than just an artefact of statutory compliance. Overview of the Process; The above objectives identified the scope of what Council wanted to achieve but it was the process for achieving those outcomes that delivered the benefit to Council. In particular, it was Council'sdecision to developthe project 1 DSDIP, Statutory guideline 03/14 Local Government Infrastructure Plans, Clause 1.2, June 2014

3 as a cooperative process between the key stakeholder departmentsfunctions of Council that was key. The first goal was to ensure that the projected growth was adequately identified and then undertake a rigorous assessment of the growth potential to identify those sites which were both development ready and minimised the need for trunk infrastructure. As mentioned above, Council is in the advanced stages of developing a single Planning Scheme for the (amalgamated) region. This PlanningScheme will replace the three (3) existing schemes (from the preamalgamationcouncils) As such, the new Planning Scheme will provide a unified Vision for the region in terms of land use (form and function). In effect, the Planning Scheme identifies the target for the rest of Council to deliver (i.e. a vision for Gladstone in 20 years time). This was an essential strategic input into the process. One of the key elements of the LGIP was the detailed projections of population, dwellings and non-residential land uses across the region. These projections (reflectingthe most recent population data from the Queensland Government Statistician s Office (QGSO)) provided a detailed estimate of not just how much growth may occur in the region but where such growth would most likely be located. By combining these projections with its intimate knowledge of the local development market, Council was well placed to identify those sites which werewithin the overall developable area, well placed (i.e. close to existing services) and 'development ready'. The identification of such sites was used to develop a robust 'PriorityInfrastructure Area' (PIA) which reflected the region s growth potential while also minimising the need for trunk infrastructure. However, Council also recognised that its current infrastructureplanning (which tended to reflect old Council boundaries and drivers) may not be aligned with the broader Vision embedded in the draft Regional PlanningScheme. As the cost of providing trunk infrastructure (particularly the heavy engineering asset classes such as water services and roads) are key cost drivers, Councilresolved to undertake a review of these elements. As is the case with many Council's, while the infrastructureplanning may have been done, key assumptions that underpin such planning may not reflect current Councilboundaries (post amalgamation), demand, financial capacities and/or community expectations. To address this issue, Council engaged the services of MWH Global to undertake a comprehensive review of its trunk water services network (including potable water supply and sewerage services) as well as undertake an assessment of the trunk roads network. The objective of these assessments was to ensure that Councils key trunk infrastructure planning was aligned with the new Planning Scheme. The LGIP was used in this context to test and confirm (or adjust) key assumptions both in the broader Planning Scheme as well as with the infrastructure planning. This was undertaken as an iterative process of review to identify a preferred path for growth which minimised the cost to the community over the long term. The LGIP itself includes several elements that can have a significant impact on the timing, scope (desired standards of service), and therefore overall cost of trunk infrastructure delivery across the region. To achieve this alignment between strategicplanning, infrastructure planning, and financial capability,a series of comprehensive workshops were undertaken which involved participation from key departments across Council. The role of these workshops was to understand the broader objectives and implications of the draft Regional Planning Scheme and explore implications and options for infrastructure planning (Water, Sewer and Roads) in a manner that delivered the Vision at reasonable cost. Issues were raised and discussed at length to ensurethatkey aspects of the PlanningSchemeand Infrastructure Planning were understood and aligned in the LGIP. Separatemeetings were held on specific issues. This included discussion on the

4 alignment of the infrastructure program withcouncils Long Term FinancialForecasts (LTFF). The outcomes from thesediscussions were then brought back to the broader group to ensure that all implications were understood in the broader context of the LGIP. Show me the money Perhaps the greatest test of an LGIP is the extent to which it can deliver trunk infrastructure which supports Councils growth ambitions in a manner that minimises the cost to the community. While the focus of the LGIP is on the capital cost of trunk infrastructure, the true cost to the community typically extends well beyond the initial investment. Investment in trunk infrastructuretypically leads to ongoing operational expenditures for Council. These can arise in several ways: Direct operational cost for example, new pump stations or the cost of new community facilities (e.g.an aquatic centre) generates additional direct operational costsforcouncil. Fundingcosts as much of the trunk infrastructure is lead infrastructure (i.e.council needs to provide it before growth occurs), there is typically a needforcouncilto borrow to fund its capital program. The holding cost 2 (interest and redemption) of these borrowings feed straight through to the Council's operating budget; Depreciation as the asset base expands, Council's depreciation costs also increase which are another consideration forcouncil'soperating budget. This relationship between capital expenditure and operational expenditure is often not well understood and can act as either a virtuous or vicious cycle. If capital investment is not optimised, the associatedcosts can feed 2 Holding cost can add up to 50% to the cumulative shortfall. through to Council's operational cost base, thereby placing upward pressure on rates (Vicious cycle). Conversely, an optimised capital program minimises these costs which can in-turn create a virtuous cycle of recurrent operational cost savings and take pressure off rates. The argument that such costs are recovered through the additional rates revenues only applies in cases where the capital cost are minimised. For example, development of infill which may require very little investment in infrastructure may well improve Council's overall financial position but, conversely, development of remote greenfield or constrained (e.g. flood prone) sites which require a considerable investment in infrastructure can have a significant negative impact on Council's finances. The challenge for Gladstone Regional Council was to develop its infrastructure planning in a way that delivered the outcomes required of the Planning Scheme while minimising the cost impact, thereby reducing pressure on rates. The measure of success for this element of the project was to compare the forward forecast of the cost of trunk infrastructurevs.anticipated infrastructure charges revenues. Typically, as trunk infrastructure is required well in advance of development, such a financial profile for high growth regional councils shows a significant funding shortfall in the initial years (5-10yrs) which lessens over timeas the growth occurs and costs are repaid (in part). In the case of Gladstone, Councilachieved a comparatively small (yet consistent) trunk infrastructure deficit. The fact that there is a deficit is an expected outcome (given the lead nature of the trunk infrastructure and the growth profile for Gladstone 3 ) but the consistency and limited extent of the deficit was akey outcome. Such consistency 3 Trunk infrastructure deficits are typical for growth areas. It is only when a Council approaches full development where new greenfield sites are limited would a Council actually have a financially neutral (or, in rare cases possibly a positive) cumulative capital funding projection.

5 suggests that Councils trunk infrastructure program is providing services just in time for growth. This is an ideal outcome as it demonstrates an alignment between the anticipated growth (as accommodated in the PIA) and an infrastructureinvestment program which minimises Councils holding costs. Key Success Factors for the project As stated at the outset, Councils objective was to ensure that the LGIP was more than just a compliance exercise and was developed in such a way that delivered value for the people of Gladstone. It could be argued that the rigorous approach to assessment of growth and the comprehensive review of Councils key infrastructure networks also contributed to the success of the outcomes. However, Councilbelieves that it was the cultural element of the project that allowed the process to succeed. The decision bycouncil to adopt an inclusive process that engaged a wide range of stakeholders (both internally and externally) in decision making enabled issues to be identified and progressed efficiently and effectively. However, a collaborative approach only works where there is a willingness amongst the team to engage effectively. The hallmark of this project was that willingness to be honest, open (neither defensive nor aggressive) in challenging closely held assumptions and engaging in solutions. The challenge for Council going forward is to ensure that the balance of growth, infrastructure and financial capability as outlined in the LGIP is realised on the ground. This will require a disciplined approach to managing Councils various objectives. Conclusion As the first in Queensland to develop a Local Government Infrastructure Plan (LGIP), Gladstone Regional Council was seeking to achieve more from the process than just compliance with regulatory requirements. Council s inclusive and rigorous approach delivered benefit through the development of a sustainable balance of growth, infrastructure needs and financial capacity. While challenges remain, the commitment to the outcomesand understanding of issues that was established as part of the development of the LGIP should assist Council in executing a clear and consistent strategy in Creating the Region of Choice.

6 Author Biographies: Emma Hamilton, BE (Chemical & Bioprocess) Emma Hamilton is a Senior Development Engineer for Technical services within Gladstone Regional Council's Engineering Services division. Previous to this role Emma was the Senior Process Engineer for Water Services within Gladstone Regional Councils Engineering Services division. Emma graduated from Swinburne University, Melbourne, in 2003, receiving a Bachelor of Engineering (Chemical and Bioprocess). Emma also received a diploma in Applied Science (Biological Science) from Swinburne TAFE in Working at Council for the last 5 and a half years, ensuring environmental compliance with regards to Wastewater Treatment Plants and associated Sewer Pumping Stations operations. More recent works include the development of the Priority Infrastructure Plan (PIP) and the Local Government Infrastructure Plan (LGIP) for the Gladstone Region. Phone: Address: emmah@gladstonerc.qld.gov.au (Work) Gladstone Regional Council PO Box 29 Gladstone, QLD, 4680 Chris Adam, BE (Civil), MBA, CPEng, RPEQ Chris has been involved in the development of Priority Infrastructure plans (now Local Government Infrastructure Plans) for well over a decade. In the early-mid 2000s, Chris was a member of the Queensland Department of Local Governments reference group for development of initial guidelines for calculation and application of infrastructure charges. He has been involved in the development of PIPs/ICS for a wide range of Councils including the following: Unity water (incl Noosa Council, Maroochy Water Services); Scenic Rim (Including Beaudesert Shire and Boonah); Gladstone Regional Council (incl Calliope, Gladstone City and Miriam Vale); Livingstone Shire; Logan City; Mackay Regional Council (incl Sarina and Mirani); (previous) Hervey Bay Council and Wide Bay Water; Ipswich City Council; Bundaberg Regional Council (Incl Bundaberg City and Bargara); Gold Coast Water (Peer review role); Redland Council (Peer review role); Banana Shire Council; and Townsville Council (including Townsville and Thuringowa). Chris was recently engaged by the Department of State Development, Infrastructure and Planning to develop the draft Schedule of Works Spreadsheet and associated User Manual as well as provide advice on possible audit options relevant to the development for Infrastructure Charging.