Economies of infrastructure through a local authority lens

New Zealand is in an uncertain period as it adjusts to the impacts of the COVID-19 pandemic. This will have far-reaching impacts on the economy and challenges our ability to sustain the infrastructure that facilitates a thriving society: roads, water, public spaces and recreational facilities. Wayne Hatcher, WSP Technical Director, looks at how local authorities can make informed decisions in this environment.

Local and central government have a critical role to play in the post COVID-19 economic recovery through investment in infrastructure and the creation of jobs, which will have flow-on benefits to society. However, even prior to COVID-19, local government was challenged to find sustainable ways to fund investments in essential infrastructure. Several councils already operate with high debt ratios and this is likely to be heightened with reduced income from commercial ventures and rates and/or asset devaluation.

A significant number of councils have traditionally received income from commercial activities based on travel (e.g. airports) and tourism which will continue to be severely impacted for the foreseeable future. In addition, some councils have investments which may have reduced returns.

Without relief there is a danger this could lead to austerity measures, which would significantly prolong recovery. Delaying or cancelling investment in infrastructure is a false economy. Infrastructure that isn’t sustained leads to serviceability issues (leading to increased lifecycle costs) resulting in a decrease in infrastructure network value without a corresponding decrease in depreciation As we look to find the optimal solution for individual authority’s there will be a number of trade-offs to navigate. Each organisation faces its own unique set of challenges depending upon its commitment to growth, exposure to tourism, industrial and primary sector activity. Key to unlocking the potential for recovery will be gathering information to support informed decision-making.

Asset Management offers an approach to solving what is now a complex challenge of uncertainty and competing demands. Done well, it delivers value for an organisation through the application of systems.

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The key premise is that data and information is generated through the system and this enables informed decision-making. The type of data and information has been built up over many years, principally looking at historic investment and outcomes, and developing trends from successive years of data. However, societal change occurring as a result of COVID-19 will mean the value of historic data is reduced – or rendered irrelevant - if sectors of the economy fail to recover. Furthermore, many of the drivers used to inform decisions have also changed.

As a result of the economic impact of COVID-19 we expect to see regional migration across the country as employment opportunities evolve to adapt to a new normal. These population changes will be reflected in demand on infrastructure, placing additional pressure on stretched systems in growth areas and impacting affordability in communities facing population decline.

Migration will change the demographic profile of regions, affecting demand and affordability, which will require reprioritisation of investment. As such, it’s vital to have a clear view of growth, both positive and negative, to understand potential demand for new infrastructure and demand and affordability of existing infrastructure.

Traditionally, Asset Management has relied heavily on investigating past trends to inform future needs. Given the significant change we are about to undergo, past trends are unlikely to be good future indicators.

Thankfully there are other tools we can utilise.

Technology has the potential to give us previously unimagined levels of data in real time. Bridges can transmit data related to structural integrity, preventing failures. Buildings can include sensors to monitor operating systems. For example, sensors can quickly identify a leaking ceiling issue that needs to be addressed promptly, and the appropriate sequence of actions will be triggered to minimise additional risk to building structure, sustainability, or occupants. In a smart city, sensors monitor and track huge amounts of data; cloud-based apps translate that data into useful intelligence and transmit it to machines on the ground, enabling mobile, real-time response. This technology isn’t new, but until now it’s been a nice-to-have. In the new normal it may be a key requirement for projects.

We expect to see insights emerge on how existing infrastructure systems have performed through the lockdown period. Many will have functioned as designed, but it’s expected that some systems were unable to be operated remotely or failed to perform to expectations. Asset Management offers an approach to help decision-makers identify the key information upon which to make informed decisions.This will ensure balanced outcomes that are affordable, maximise serviceability and stimulate local economies. However, do this requires significantly more diverse thinking viewed through the lens of changing demand, demographics and affordability.

About:

Wayne Hatcher is Technical Director – Asset Management at WSP. He has been practicing in Asset Management for 30 years, developing his skills firstly in local government before joining the private sector on the late 1990’s. Wayne has consulted on Asset Management nationally and globally for both local and central government organisations particularly in establishment of Asset Management Systems and decision-support tools to assist informed decision-making at a national, regional and local level.
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