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Kempsey Shire Council is not dissimilar to many local government areas in New South Wales. It has an ageing infrastructure and the historical level of investment into those assets has not matched what was needed to replace assets when they reached the end of their useful life.
Kempsey is facing a large backlog of works on its capital and in doing so facing high maintenance and significant debts to repay. These factors limit the available funds to stop the deterioration of assets from getting any worse.
 Council has a large amount of assets that it is responsible for on behalf of the community. This table shows the quantity and the value of the assets that the Council is maintaining and needing to replace over time.
While there are other assets, these are the ones that have a significant impact on the budget, as they have large costs and limited life spans. This means that a certain portion should be either replaced or planned for replacement each year. All up there is over $600million worth of assets to manage and replace over time.
Each asset has a calculated life. This includes, buildings with 90 years, roads with a design life of 50 years and structures like playground equipment which only realistically lasts 10 to 15 years. Within this lifetime there are also times when replacement of part of the asset is required. Things like steel roofing have to be replaced more often than the brick walls that hold them up. Similarly, roads need to be resealed every 8 – 10 years if they are not going to start to fall apart before their full life is up.
For each asset the amount that should be put aside each year can be calculated. Council has done this for all of the assets listed in the table above. The result is shown in the next chart. The first information shows what should be put aside or invested into replacing assets each year. This is then compared to the amounts that the Council is actually investing. There is a significant difference between the two, which in the past was being covered (in part) by using loan funds.
The difference between what we are investing and what we should be investing is leading to the roads, buildings, footpath and other assets falling apart. Slowly but surely this will continue while the gap exists. Unfortunately, the speed that this is happening will begin to pick up soon.
We know what roads are there. We know what we should be doing to get the best life out of them. The following chart shows the ideal amounts of work we should be doing. It also shows when we should be doing it. The red bars show what we are doing now. In reality, we chase after the worse road sections (fair and poor) with reasonable amounts of traffic, as that is where the complaints mainly come from.
Most people will find it strange that Council is suggesting that it reseal roads that are in excellent condition. You will not notice a road’s deterioration until it is around 80% of the way through its life, particularly as you drive along. If no work is done on a road until it starts to crack, significant extra cost is involved in bringing it back into a condition so that the seal will actually stay in place. Once potholes and lumps and bumps are visible, the damage is done.
This is shown in the following table, where the relative cost of works on different quality roads are shown. You will see that the cost escalates quickly. This is because once the road starts to crack or bend, the whole section of pavement below the seal needs to be dug out, replaced and compacted before the new seal can go down.
In 2008, Council had all of its maintained road network assessed. This was done using a specially set up vehicle that took over 6,700 individual measurements of:
• cracking
• ruts
• potholes; and
• edge breaks.
These were then assessed against the standards used in Australia to determine exactly what state our roads were in. This allows Council to know what state its roads are in. The following graph shows the condition they were found to be in at the time. What we can also do is calculate what condition they will be in at any time in the future. We know what work we can currently do and we know how the roads will deteriorate. The dotted line shows the projected condition in ten years time.
The move in the condition from very good to fair, will mean worse roads. Specifically:
- 88% more of the road will be rough
- the ride will feel 26% rougher to you
- 40% more of the road will be cracked
- those cracks will mean 44% more of the road will pothole after it rains, and
- 32% more of the road edge will be breaking off, making the road seem narrower.
All of this will make it much less enjoyable to drive around the Council area.
Council has undertaken a review of where its money is going. As a result the Council has cut over $1 million from its ongoing budget expenses. It has also brought the loan funding to a halt to make sure it does not worsen the situation. The loan funding will not provide benefits in the short term, with the benefits taking 10 to 15 years to be available.
Based on what Council has done the assets would still continue to go backwards, but the impacts would be lessened in the short term by $1million more being available for capital replacement. This on its own will not significantly improve the deterioration of the assets of the community, but it does reduce the amount needed to be raised by the equivalent of a 9.6% rate increase.
The following chart shows the impact of the community agreeing to moving towards the average rates paid (with similar grouped Councils).
Allowing for the extra income means that the infrastructure will still be going backwards for the next 20 years, but with the rate slowing over time. Under this version of events, and without any other change, the Council is unlikely to ever be in the position of being able to provide more services and will not keep infrastructure at the level it is currently at.
 
If the community wants to be in a position where the Council can keep the existing infrastructure in a good quality state and have some choice in what new or improved services it can have, then there is a need for more. The chart below shows what would happen if the community went to the average rate and then agreed to increasing the rates by $2 per week on average above the rate peg amount.
The point where the top line starts to rise is where the Council reaches the point where the funds are sufficient to stop the assets going backwards over the longer term.
None of us like to pay more tax. But, not unlike your household budget, Council has to live within its means. So, in reality, the community has to work out what it wants and can afford to pay for. At the moment we pay relatively cheap general purpose rates. The chart to the right shows the average rates for residents in this local government area against others that are classed the same as us by the Division of Local Government, as well as near neighbours.
As can be seen, for general purpose rates we are currently operating in the “bargain basement” area. We can decide to remain as a budget player.
Any service provided (roads, parks, kerb & gutter, stormwater, etc) has to be fully funded. If not, we are just fooling ourselves and the service will go as soon as the building, road or drain fails and the Council does not have the funds to replace it.
But we can accept a lower standard. For example:
- less sealed roads
- more roads not maintained
- less areas with stormwater drained away
- less parks and sporting fields or less facilities on them
- less cleaning of footpaths.
By changing the services or removing services the cost comes down and so the rates do not have to be as high.
This is an alternative that the community can choose. In this regard you should start to think about what is around you and what you use. When you drive, are you willing to accept that the road may not be sealed? Do you go past parks? Are they valuable to the community and can they be less neat and tidy? When you go for a walk, do you want to have a footpath, and when it rains do you want the water drained away?
Some people do not have all of these services, but the intention is for you to look at what is around you so you can consider whether there are things you would prefer to sacrifice. Historically, when faced with the closure of a facility, or lowering standards, people have been against this.
We will still have a backlog of assets in various conditions. With the funds at the level that we are not going backwards, the community can start to decide whether it needs to deal with the backlog and which parts. Council will develop a 10 year plan of the projects and activities that it will be able to achieve with the level of funding that is available. This will give everyone some idea of where Council is going into the future.
The Local Community Plans will allow the various communities to identify the issues and problems at the scale they occur. We will knit those together into a list of priorities that the councillors will adopt as their plan. Recommendations will be made based on factors such as the impact on people (level of nuisance and risk) and the scale of the impact (how many of you does it impact) to try and ensure that the funding first goes to the areas it will provide the greatest benefit. The plan will be realistic, in that it will only include things that we can realistically afford.
Once we have the “big picture” we will report regularly on the projects and changes that are occurring. So you will be able to follow where something that matters to you is sitting.
But it has to be clear that this is an either/or situation. You cannot choose not to pay to keep things and not to reduce services. This path, which has been followed in the past will simply lead to the services and facilities disappearing when they reach the point where Council cannot replace them.
I do not believe that this is in the best interests of the community to continue as we are, going backwards. But it is up to the community to make this decision, not me. It has been put to me many times that we need to get employment, jobs and growth. I believe that to attract jobs, we have to have good lifestyle. And this will not be possible if we are going backwards with our public areas.
Local government has a huge impact on our lifestyle. The roads we drive on, the parks and walkways, public toilets and the streetscape in the town centres all impact on our lifestyle.
If we choose to allow things looking run down and cheap, we will not compete with the other local government areas that business people can choose to set up in. The mid north coast is a popular area to live, recording the second highest population growth in 2007-08. But, within our region, those councils who are in the bottom half of the average rating table are not getting the growth.
This does not mean it all has to come from increasing rates. But, it does mean that if we don’t want to pay, we need to sacrifice something. The problem is already there and it will not simply go away if we ignore it. It is only the way that we solve it that the community can determine.
Your feedback is important in this. There are nearly 30,000 people living in this area. We will have forms (printed and on the web page) that can be returned. You can also simply write your own letter or ring up. We have set up special systems to allow us to track the letters and telephone calls we get. We will probably also have an independent survey undertaken to allow us to get to people who otherwise would not normally respond to Council. All of this together will then drive the response from Council for what way to go into the future.
D L Rawlings
GENERAL MANAGER
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