The original cost curve was established by graphing the contract out-turn costs of pipe renewals undertaken within the district. This data source is maintained and updated with all new contract costs. In 2013 and 2014 an additional 4% was added the indexed reticulation and plant rates to cover design and supervision costs. A further 4% will be added to the plant rates in 2015 in recognition of the additional design and supervision required on complex plant installations. The introduction of the design and supesiocosts was pased in oer two/three year perod to avoid a sudden price shock to the funding stream Recent tender prices ave shown a sharp incease in ppeaygcosts particularly at lager diameters. Whilst these have been added to the data the cost curve has not been re-aligned as there is some doubt as to whether this a permanent increase in prices or a transient peak. The price curve will be re-assessed prior to 2015 re-valuation with the best available information. In the foreseeable future depreciation will continue to be calculated on a straight-line basis. There are significant and unpredictable risks to the valuation process – prices of raw materials, local pant and abour costs, fluctuatons in inte ational exchange ates, etc. Peaps the major risk to future valuations is a significant shift in life expectancy of a large group of assets either a material type is deteriorating faster than expected or a widespread external influence is causing accelerated deterioration. Optimisation The Marlborough water supply systems are relatively young and continuing to expand as the population continues to grow. None of the systems are over-designed or have significant redundant capacity. There are very few opportunities for optimisation. The reservoir at Aerodrome Road, Blenheim is unlikely to be needed for the drinking water supply but maybe required as a similar store of water maybe needed for firefighting purposes due to its close proximity to the airfield. The small water treatment plant at Seddon School will become obsolete once the general supply is treated to meet the NZ Drinking Water Standards. Due to the problems of water quality in the Barnes Dam, Picton and the extreme difficulty of access to re-build the dam it is unlikely to be replaced, however an equivalent source will need to be developed and an equivalent sum has been included in the valuation. The Andrew Street borehole and treatment plant was de-commissioned in 2012/13. The components have been removed from site and put into storage for re-use or sale. They have been given a nominal re-sale value and will be depreciated over five years. 5.5 Key Assumptions The key assumptions regarding: • Legislation • Inflation • Interest rate on Council borrowing • Population Growth • Economic Life • Subsidy rates Page 78