Purpose

The purpose of this policy is to ensure that before committing to major infrastructure expenditures of $0.5M or more it is essential that Council undertakes a Capital Expenditure Review. A more holistic and disciplined approach is required to ensure that capital expenditure proposals are not under-developed at time of Council approval and to ensure that Council does not find itself in an adverse financial position as a result. The policy is supported from a planning perspective by other relevant policies including Council’s Asset Management Policy and Asset Management Plans.

Scope

This policy applies to capital infrastructure construction projects with an estimated cost in excess of $0.5M – other than infrastructure construction subject to separate approval from Council’s policies.

General Principles

To ensure that capital expenditure projects recommended to Council for approval

1. Comply with relevant legislation

2. Are fully developed and planned at the time of costing

3. That construction costings are complete and realistic

4. That appropriate funding is secure for the entire project cost and

5. The recurrent budget implications are identified

Broken Hill City Council

Capital Project Expenditure Policy

Policy Details

i) Concept Plan

Preliminary work on potential forward projects will be undertaken by Council staff in accordance with the priorities outlined in Councils adopted Management Plan.

A capital infrastructure project concept plan presented to Council for approval will in addition to any other supporting information (Asset Management Plan or Business Plan considerations) fully address the issues outlined in items (1) – (3) of the NSW Department of Local Government Circular – Guidelines on Capital Expenditure Projects (DLG – CAPEX Guidelines) namely:

1. Justify the need for additional facilities based on firm estimates of future demands.

2. Prioritise the project in relation to existing capital commitments and future works.

3. Consider the full range of project alternatives including, alternative service delivery, centralise/decentralise, external provision of services, alternative methods of acquisition, rent, renovate, construct, purchase existing building.

Council approval of a concept plan will act to authorise the preparation of :

a. Detailed development and construction plans sufficient to support an application pursuant to the Environmental Planning and Assessment Act

b. Detailed identification of ancillary works and expenditures

c. Detailed quantity survey and indicative costings

d. A report addressing the issues outlined in item (4) of the DLG – CAPEX Guidelines including operating budget implications, utilisation of Council and other available funds, servicing of any debt and identification of best case, worst case and most likely scenarios

Such approval shall not authorise the calling of tenders, the commencement of the public consultation process or any other action which may initiate the commencement of construction.

ii) Management Plan

The General Manager shall report to Council on the completion of the process and table all relevant documents prior to Council approval of the commencement

of the public consultation process referred to in item (5) of the DLG – CAPEX Guidelines.

The capital expenditure proposal will then be included in Council’s Draft Management Plan as part of the plan development process including public consultation.

In the event that the capital expenditure proposal has not been previously included in its current form in the Councils Management Plan, a schedule of proposed amendments to the adopted plan shall be prepared, public notice of which shall be given in accordance with the requirements of a management plan prepared pursuant to Section 403 of the Local Government Act, 1993 as amended.

iii) Grant Funds

Special purpose grants should be regarded as an offset against capital cost of the project (or as a component of available operational funds) on the basis that grant payment is made to meet the objectives of the other level of government and not necessarily those of the Council.

The amount of grant must in most cases allways be less than or equal to the expenditure incurred and no enforceable undertaking of grant funds is made until after Council has committed to the project.

iv) DLG Referral

Where Council is seeking to fund a capital expenditure proposal either partially or fully through a new money borrowing allocation or a special rating variation, then a copy of Council’s capital expenditure review must be forwarded to the DLG prior to any determination of funding being made.

Definitions

Capital expenditure – amounts expended by Council on the purchase or construction of non-financial assets (such as land, buildings, roads, bridges, storm water and drainage network, equipment, furniture and fittings and the like).

Capital expenditure review – a review prepared in accordance with the DLG – CAPEX Guidelines.

Concept plan – any capital expenditure proposal prior to Council approval of the General Managers report of completion of the process.

Associated Policies & Documents

Asset Management Policy

Asset Management Plans

Management Plan

DLG Circular - Guidelines on Capital Expenditure Projects

File Reference No.: A10/3, O1/5

Adopted: January 30, 2008

Minute No.: 42505

Amended:

Minute No.:

Review Date: January 2010

Responsible Officer: General Manager