Special Schedule No 7

Special Schedule No 7

Mahmud Kaiser 16 Sep 2010 22:24

Recently we prepared the Special Schedule No 7 which was asked by the Department of Local Government, NSW. Some questions are raised in our mind and I want to share them with others (council in NSW), if you are also working on Special Schedule No 7. Please give me your feedback. I am working in Wyong Shire Council as an Asset Management Engineer and my responsible area is only Water and Sewer assets.

Q.1. How do you determine asset lives?

WSC: We follow the NSW Reference Rates Manual for determining the Asset Lives and Replacement Cost. That manual was published by the Ministry of Energy and Utilities, NSW.

Q.2. How do you depreciate your assets i.e. straight line or use other methodologies?

WSC: We use parabolic equation for calculating depreciation for ASI (Actual Service Index) 1 to 4, when ASI is greater than 4; we use a straight line equation. The Asset Condition categories are as follows:
1 Excellent
2 Good
3 Average
4 Poor
5 Very poor

Q. 3. What type of Service Index you are using for Condition Assessment?

WSC: Already mentioned in the above.

Q. 4. Which methodology you are using to prepare the Estimated Cost to bring to Satisfactory level for Special Schedule No 7?

WSC: Determining the replacement cost for all the assets which have ASI greater than 3.

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Mahmud Kaiser
Asset Management Engineer
Water and Waste Services
Wyong Shire Council
P.O. Box 20
WYONG NSW 2259
Tel: [phone]
E-mail: ua.vog.wsn.gnoyw|resiaK.dumhaM#ua.vog.wsn.gnoyw|resiaK.dumhaM
WWW: http://www.wyong.nsw.gov.au/

Re: Special Schedule No 7

darronlpasslow 20 Sep 2010 06:57

Mahmud
You are reasonably efficient with your breakdown of how you handle SS7.
I am not sure you need to be quite so efficient. But if it is easy enough go for it.

Personally I do not think there is a lot of notice taken of SS7 as I have seen wide and glaring disparities in SS7 which no one (particularly in NSW state gov) even question.

For valuation we use proper (current) accounting standards formulations with "componentised fair value". We have a set of rates (probably from the same source as you for water & sewer), including rates for roads and roads ancillaries.
Properties we get an approved valuation and depreciate each year.
All our depreciation is done straight line (as I feel with anything else you may be kidding yourself! Also anything other than straight line punishes current or future rate payers - if you are not careful).

Most things in SS7 are simple, except to cost to bring to satisfactory - most councils(?) lick their finger here and stick it in the air and see what the wind blows up! Satisfactory to NSW Gov is defined at Condition Level = 2 (Good)?
NSW state gov under the new IP&R legislation (changes to the LGA) is significantly changing the reporting formats (and I think SS7 will disappear).

However there may still be a need to specify cost to bring to "good" condition (where NSW specifies good as Condition Level 2 in a 1 - 5 scheme as you describe. If this happens there will be a lot of Councils in NSW needing "HUGE" amounts of money to do this.
In fact, most Councils will not be able to achieve this (even in the longer term).

Condition however, will be a key measure and reporting of this will be required on an annual basis. NSW state will (I assume) look at the longer term view here, to make sure condition (over time) is not significantly deteriorating. (BIG picture stuff).

So in summary, I would not get too hung up on SS7 (which I feel will disappear) and be replaced by IP&R specific reporting.

Regards
Darron Passlow
Wingecarribee Shire

Re: Special Schedule No 7

Mahmud Kaiser 01 Oct 2010 04:18

@Darron:

Thank you very much for your quite humorous and nice post. I am 100% agree with you about it: “there will be a lot of Councils in NSW needing "HUGE" amounts of money to do this. In fact, most Councils will not be able to achieve this (even in the longer term).”

For that reason we determine the replacement cost for all the assets which have ASI greater than 3 not 2. But that figure is only for theory, just the filling up the column in the SS7 table. Because we are really unable to allocate that budget in the Capital Works. So we insert another column referring the Estimated Cost to bring back to Satisfactory Level considering financial ability. In this column we use some percentage of previously determined replacement cost (ASI>3).

My feeling is: Preparing the SS7 table is time consuming fruitless product; it will never reflect the true picture of council’s ability to bring back all the assets to satisfactory level unless the DLG will change the Definition of Satisfactory level.