APRIL 2018 STRATEGIC ASSET MANAGEMENT POLICY TOOLKIT

Transcription

1 APRIL 2018 STRATEGIC ASSET MANAGEMENT POLICY TOOLKIT

2 Acknowledgments The Municipal Finance Officers' Association of Ontario (MFOA), established in 1989, is the professional association of municipal finance officers with more than 2,300 individual members. We represent individuals who are responsible for handling the financial affairs of municipalities and who are key advisors to councils on matters of finance policy. Learn more at: This Toolkit project was funded in part by the Government of Ontario. The views expressed in this document are the views of MFOA and do not necessarily reflect those of the Province. The MFOA would like to thank the following Project Contributors. Project Steering Committee The MFOA would like to thank the following organizations for providing strategic direction for the this document: Province of Ontario - Ministry of Infrastructure; Province of Ontario - Ministry of Municipal Affairs; Association of Municipalities of Ontario; Canadian Network of Asset Managers, as well as several representatives from MFOA's board of directors. Pilot Municipalities The MFOA would like to thank the following municipalities for piloting usage of the Toolkit: City of Brantford; Brock Township; Dufferin County; Township of Georgian Bay; Township of Gillies; Town of Kearney; Municipality of Kincardine; United Counties of Leeds and Greenville; Town of Plympton-Wyoming; and Municipality of Port Hope. This Toolkit has been compiled by KPMG LLP ( KPMG ) for the MFOA pursuant to the terms of KPMG s engagement agreement with the MFOA dated July 17, KPMG relied on the information provided by the MFOA and the Project Contributors. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. KPMG hereby expressly disclaims any and all responsibility or liability to any person or entity in connection with their use of this Toolkit.

3 INTRODUCTION WHY DOES ASSET MANAGEMENT MATTER 06 BENEFITS OF ASSET MANAGEMENT 07 THE CHALLENGE OF ASSET MANAGEMENT 08 BACKGROUND ON THE REGULATION 10 REGULATION TIMELINE 11 WHY STRATEGIC ASSET MANAGEMENT POLICIES 12 PREPARING FOR SUCCESS 13 Table of Contents POLICY PLANNING IDENTIFYING THE CHAMPION 17 REVIEWING THE EXISTING POLICY 19 IDENTIFYING STAKEHOLDERS 20 BUILDING COMMITMENT 22 POLICY DEVELOPMENT POLICY DEVELOPMENT TOOLS 24 PROCESS FOR DEVELOPING A POLICY 25 STRATEGIC ALIGNMENT 27 GUIDING PRINCIPLES 29 CAPITALIZATION THRESHOLDS 33 GOVERNANCE & CONTINUOUS IMPROVEMENT 35 BUDGETING 37 COMMUNITY PLANNING 40 CLIMATE CHANGE 42 STAKEHOLDER ENGAGEMENT 4 4 POLICY IMPLEMENTATION PUBLISHING THE POLICY 47 ASSET MANAGEMENT PLANNING 48 ANNUAL BUDGETING 49 GOVERNANCE 50 CONTINUOUS IMPROVEMENT 51 ONGOING ENGAGEMENT 52 APPENDIX PERSPECTIVES 53 WORKSHEETS 59 CASE STUDIES 68

4 The Province of Ontario (Province) introduced and enacted the O. Reg. 588/17: Asset Management Planning for Municipal Infrastructure Regulation under the Infrastructure for Jobs and Prosperity Act, 2015, S.O. 2015, c. 15. The impact of this regulation on each Municipality is unique and will require varying levels of adjustments to current asset management plans. About the Toolkit The MFOA s goal is to promote the interests of its members in carrying out their statutory and other financial responsibilities through advocacy, information sharing, networking opportunities, and the promotion of fiscal sustainability. In line with this goal, with the proclamation of the new regulation as part of the Act in 2015 (the regulation was eventually finalized and released on December 27, 2017), the MFOA began to consider the changes that would be required from the Municipalities and to develop a plan to help with the transition. As a result, the Strategic Asset Management Policy Toolkit (Toolkit) was created to assist in the interpretation of the regulation and putting into practice the required Strategic Asset Management Policy (Policy). Navigating the Toolkit The Toolkit provides foundational guidance and information to municipalities to support Policy development and implementation. It includes: Scalable policy example statements meeting the requirements of the regulation Guidance covering policy preparation and development to its socialization, adoption, and implementation Case studies highlighting the experience and lessons learned by ten pilot municipalities who have worked with and informed the Toolkit development process The Toolkit is designed to flow from start to end following prescribed steps from planning to development to implementation, but readers can also jump to specific sections of interest or case studies and return to reference material as needed. *Read through the introductory pages even if your municipality has an existing asset management policy. They will help you engage your colleagues to update it.

5 Introduction

6 INTRODUCTION Why Does Asset Management Matter? Municipalities of every size and structure across Canada are revisiting their approach to managing the services that depend on infrastructure assets to better understand, plan for, and address a variety of challenges. The context that led municipalities to take action includes the: Shift of public infrastructure stock from the federal and provincial levels to municipalities; Increased need for accountability and transparency to Council and the public on large infrastructure purchases; Growing infrastructure investment needs that have outpaced available funding; and Need to demonstrate the risks of investment decisions regarding service levels and more. The primary objective of municipalities is to address the following key challenges: Target the use of limited resources Balance current quality of service expectations with long-term affordability Find time to complete preventative tasks while responding to pressing demands on staff time Reduce the impact of deferred maintenance on future generations Be resilient to changing realities Prevent potential impacts of Council and staff turnover, or a looming wave of retirement Prepare for the service related impacts of extreme weather on operations, infrastructure, and budgets Mitigate the service and reputational risk inherent to operating with aged assets and regulations Proactively address long-term budget and service impacts from economic and demographic trends Maintain the public s trust Meet the mounting expectations of Council and the public for increased accountability and transparency Demonstrate responsibility, stewardship, due diligence, and respect Work across municipal disciplines to develop comprehensive, transparent, and defensible plans Incorporate socio-economic considerations, such as willingness to pay or financial position, into plans Of all levels of government, municipal government is closest to its citizens and able to directly influence quality of life by effectively delivering local programs and services. Many municipal governments have looked abroad and elected to use asset management as the business model to support the ongoing sustainability of these services and to help address the above challenges by adapting it to the Canadian context. 6

7 INTRODUCTION Benefits of Asset Management It is necessary to revisit the long-standing definition of asset management that is still upheld by many financial officers. Originally, the term asset management was viewed as a financial reporting obligation to support responsible financial management. This definition enabled an initial introduction to the asset management model by bringing attention to the value of long-term financial planning for funding the renewal of existing assets, but it has since broadened. Asset management is no longer simply about building financial reserves and achieving lowest lifecycle costs by optimizing investments for the upkeep of existing assets. According to the international standard for asset management, it is the coordinated activity of an organization to realize value from assets. In the municipal context, value means delivering services at an appropriate cost while managing long-term risks. This entails coordination across the service areas with an integrated and long-term approach. Asset management is now recognized across the municipal sector as a business model or a way of doing things that strengthens administrators positions as advisors to Council. After all, the underlying complexity of managing many services meant to last for generations requires a holistic method. It requires collaboration between the many municipal disciplines that have direct and indirect involvement with municipal assets such as planning, technical services, operations, and finance. Benefits Internal management: It enables a holistic inter-departmental view that facilitates coordination between groups. Accountability and transparency: It enables the adoption of consistent methods that facilitate effective dialogue with Council and the public about investment recommendations. Articulates service needs: It helps bring due consideration to critical services with unseen infrastructure that stakeholders may not view as exciting or important to invest in. Positive legacy: Its practices have enabled analysis that guide the delivery of services in a way that is affordable and sustainable for generations. 7

8 INTRODUCTION The Challenge of Asset Management Some asset management methods are already in place in pockets of local government but are most often dependent on the vision and initiative of one or a few individuals in the organization. Even so they can be vulnerable to staff change. The challenge is achieving consistency across the organization and building sustainable systems and processes that will last beyond current and future organizational cultures. This is why the first step that is often advocated is to get a political level endorsement by having the Council publish an asset management policy. This formalizes organizational commitment to strengthen the administration by integrating asset management methods with the local methods already in place. It also enables continuity by sheltering the administration s efforts to improve its methods from Council and staff turnover interference. The Province is supportive of the municipal level push for asset management. It has recognized the benefits and challenges that come with it. Its endorsement of the change is most visible through regulation that expands municipal practices beyond the production of asset management plans. The regulation indicates for instance that all municipalities are required to develop and publish an asset management policy that is consistent with O. Reg. 588/17: Asset Management Planning for Municipal Infrastructure by July 1, Municipalities with an asset management policy already in place may need to update it to reflect the regulatory requirements. Methods to draw greater benefit to your organization and those managing assets from the regulation, beyond just compliance, are provided in this document with details on the regulation.

9 Asset management is the coordinated activity of an organization to realize value from assets. 1. Environment 2. Safety 3. Risk 4. Service levels 5. Cost 6. Community 7. Sustainability ISO

10 INTRODUCTION Background on the Regulation The regulation is a progression of the Municipal Infrastructure Strategy launched in 2012 and the Infrastructure for Jobs and Prosperity Act of The regulation builds upon the Municipal Infrastructure Strategy and Building Together Guide for Municipal Asset Management Plans launched in 2012 and the Infrastructure for Jobs and Prosperity Act of 2015, to strengthen the role of municipal asset management within municipal planning and budgeting. For example, asset management plans must now be considered in the development of annual budgets. The vehicle for this new form of municipal governance is a policy. In the regulatory context of Ontario it is considered a strategic asset management policy, as it requires municipalities to describe processes as well as accountabilities. The timeline and scope defined in the regulation and depicted here stem from provincial consultation with municipal representatives across Ontario on an initial draft. The regulation allows municipalities to progressively build on the strengths they have in managing core infrastructure assets to adopt municipal asset management best practices adapted to their size and capacity. Municipalities can then leverage that experience in broadening their asset management approach to all infrastructure assets. Regulatory requirements include: Establishing a process by which asset management plans are considered in budgeting Expanding the use of levels of service and lifecycle management as drivers for investment and a basis for decision making Engaging with stakeholders regarding asset management planning Monitoring and reporting progress on the asset management plan through annual updates by Council Reviewing the asset management policy, if necessary, and updating the asset management plan on a five year cycle 10

11 INTRODUCTION Regulation Timeline February 2016 Approximately two year consultation period with the municipal sector through online and regional consultations. December 2017 Regulation finalized and enacted based on feedback received during May 25-July 25 consultation period. July 1, 2019 All municipalities required to prepare and publish a strategic asset management policy July 1, 2021 July 1, 2023 July 1, 2024 All municipalities required to develop enhanced asset management plans covering core infrastructure assets All municipalities required to expand enhanced asset management plans to cover all infrastructure assets Expand asset management plans to provide further details for all infrastructure assets PHASE III PHASE II PHASE I *Core Infrastructure Assets means any municipal infrastructure asset that is a: (a) water asset that relates to the collection, production, treatment, storage, supply, or distribution of water, (b) wastewater asset that relates to the collection, transmission, treatment, or disposal of wastewater, including any wastewater asset that from time to time manages stormwater, (c) stormwater management asset that relates to the collection, transmission, treatment, retention, infiltration, control, or disposal of stormwater, (d) road, or (e) bridge or culvert. This Toolkit is structured to help create a line of sight between the policy and the asset management plans that will need to be submitted in 2021, 2023, and 2024 and updated every five years thereafter. 11

12 INTRODUCTION Why Strategic Asset Management Policies? If you anticipate resistance from your colleagues it will be helpful for you to know the value of writing things into policy before approaching them. Asset management requires executive buy-in to implement but importantly it also requires a mechanism to withstand Council and staff turnover. An asset management policy is a tool to mitigate this turnover risk. A strategic asset management policy includes additional information on processes that is typically found in strategy documents. Anyone s understanding of strategic asset management policies will grow the most by putting theory into practice in the process of developing the policy while using the Toolkit. A description of strategic asset management policies is provided below. What is a strategic asset management policy? A policy complements and supports a municipality s strategic plan and other core documents by: Affirming organizational commitment to asset management principles and philosophies; Aligning and integrating asset management into an organization s strategic planning process, as well as other key plans and policies; Guiding the asset management planning process, and embedding asset management principles into ongoing capital, operations, and maintenance activities; Defining asset management responsibilities and accountabilities for Council, leadership, management, and staff; and Supporting the formation of a culture that values asset management and makes it a priority. Guiding Principles Principles guide the analysis completed to inform decisions and the management process followed to make decisions. Governance (Roles & Responsibilities) Responsibility identifies which executive lead is responsible for asset management planning and how Council will be involved. Accountability sets the commitment to annual updates by Council on ongoing efforts to implement the asset management plan and strategy options to address factors affecting the Municipality s policy commitments. Strategic Alignment Strategic alignment in the context of asset management is about integrating diverse municipal initiatives into coherent plans and decisions. 12

13 INTRODUCTION PREPARING FOR SUCCESS Developing a policy that governs organization-wide practices for managing assets and the services they provide cannot be done by one individual or group in isolation. There are a few reasons why it is important to get others involved. Depending on municipality size, asset management methods impact many groups, or the few key people that wear many hats. They should therefore be consulted while the policy is being developed so the policy will be adhered to and the benefits of asset management can come through. Engaging others in the process also helps to build consensus and a shared understanding about what the policy seeks to achieve. This is especially important as it is reasonable to anticipate resistance from peers. In the transition from a Tangible Capital Asset (TCA) based definition of asset management, or other to the contemporary definition of asset management some municipalities saw tensions arise between people and groups. They sometimes had to work past a legacy of implementing TCA or another source of strain on group dynamics in order to identify a common vision of asset management benefits to aspire to. The Toolkit is broken into three sections, and is designed to give you the basic knowledge required to plan, develop, and implement a regulation compliant policy and help you navigate the social inputs that will bolster its positive impact on the municipality. Low effort: Demarcates a step that requires no coordination between stakeholders. Medium effort: Demarcates a step that requires stakeholder engagement. High effort: Demarcates a step that requires ongoing coordination with and between stakeholders to manage change. Policy Planning: This section of the Toolkit describes the people that are necessary to develop the Policy or review an existing one. Guidance on how key stakeholders within the municipal organization should be identified and engaged about the Policy is provided. Identifying the Champion: A first step to get started is to select who will coordinate the policy development process; who will be the policy champion. This is regardless of the fact that there is a policy in place. Someone still needs to have ownership of the policy file and make sure it covers the different parts of the regulation. Low effort Reviewing an Existing Policy (if applicable): If your municipality has an existing policy, it should be reviewed to verify if it complies with the regulation and identify what is missing to make it compliant in this step. Low effort Identifying Stakeholders: This step is the opportunity to identify who in the municipality organization will be impacted by the regulation and the Policy so they can be involved in writing it. Low effort Building Commitment: Once stakeholders are identified, it is important to get the buy-in to participate in the policy development process. Guidance on how to achieve this is provided in this step. Medium effort 13

14 INTRODUCTION Policy Development: This section of the Toolkit offers guidance on how to interpret the regulation, how to coordinate the input of stakeholders, and how to write the various sections of the Policy. This work can be approached many different ways depending on the organization s culture. Options are described to help select the most appropriate approach and guidance is provided on each Policy element required by the Province. High effort Strategic alignment: Many of the Municipality s other policies, goals, and plans that will be supported by the asset management plan will be decided locally. Guiding principles: The Province has dictated principles to be followed in asset management planning that service mangers need to be aware of. The Municipality can select other principles to include as well in its Policy. Capitalization threshold: The difference between the perceived value of an asset from a financial reporting and long-term financial planning standpoint will be defined locally. Governance & continuous improvement: New responsibilities, some of which are dictated by the Province, will arise from the Policy. Their scope will be defined locally. Budgeting: The asset management plans must be aligned with certain financial plans and considered in the budgeting process. Processes to do so will be defined locally. Community planning: How asset management planning will be aligned with Ontario s land use planning framework and the municipality s official plan will be defined locally. Climate change: Municipality s must commit to consider climate change in asset management planning. The methods used and their scope will be determined locally. Stakeholder engagement: Municipality s must commit to engage with stakeholders about asset management planning. Local norms and methods should be the basis for this. Policy Implementation: This section of the Toolkit offers high level guidance on how to publish and implement the Policy. The specifics of publication and implementation will vary according to the local administrative procedures. High effort Publishing the Policy: This work will be achieved by following local guidelines and administrative norms for submitting documents to Council. Adopting the asset management plans: This work will be achieved by following local guidelines and administrative norms for submitting documents to the CAO and Council. Budgeting with asset management plans: The scope of this work will be determined by local budgeting practices and service managers needs. Annual review by Council: The scope of this work will be determined by the organizational culture and local administrative norms. Ongoing engagement: This work will be achieved by following local stakeholder engagement methods and norms. 14

15 INTRODUCTION A very good way to start a discussion about the Policy s content is to create a rough draft and use it as the basis for the discussion. It is much more effective than starting a group effort such as writing a policy with a blank sheet. This Policy Development section offers guidance on how to prepare draft content for each provincial requirement. These will later need to be brought into a file that matches the organization s formatting standard. The Worksheets in the appendix are there to help you gather feedback on the rough draft of each section. The author(s) of the rough draft(s): Does not need to prepare a perfect policy statement but something that is a starting point for key stakeholders Needs to be ready and willing to receive feedback on what was written from content to specific terminology Despite their level of engagement in the process it is possible that the final document undergoes further changes following CAO and Council review. Some can be disheartened by this but the end goal is that the document produced is in line with the Province, reflects the sought after outcomes for the community, and reflects the core vision of the key individuals involved in its development. It is important and valuable to iterate with stakeholders to get the language right. Once endorsed by Council the Policy will be difficult to modify. A helpful tip to save you time: Use a draft as the basis for group work. 15

16 Policy Planning

17 PLANNING Identifying the Champion Level of effort: Low Find, equip, and enable a champion Developing a policy requires a champion, someone who takes ownership of the file. This person does not need to be an asset management expert. The key skills are the ability to influence members of the organization in order to get their buy-in and support and to get them involved. Development of the Policy should not rest on them, making the ability to galvanize key people and obtain executive support is important. The person should be willing to: Identify peers within the municipality to engage with about the Policy Coordinate development of the policy across a small group of key individuals Engage with other municipal or industry associations as needed If key individuals within the municipality need convincing about the value of an asset management policy note that this is now a regulated requirement. The Province has gone so far as to establish a series of requirements that must be embedded in the language of asset management policies. These requirements are largely in line with the current thinking on municipal asset management across Canada and presented in the Toolkit so far. Before engaging others internally, the champion should also be willing to become familiar with the regulation and this MFOA Toolkit. Ensure you have sufficient time to have the policy completed by July 1,

18 PLANNING Provincial Requirements There is a series of 12 requirements the Province has established for the strategic asset management policies included below. The 12 requirements were grouped into three categories of expectations to simplify their meaning/understanding. The three categories are: Statement, Process, and Commitment described in the table below. Category SAM Policy Provincial Expectations Toolkit Section Statement The municipality s declaration of information required as per the regulation. Process The municipality s defined methods that comply with the regulation. Commitment The municipality s pledge to develop asset management plans in accordance with the regulation. As per O. Reg. 588/17: Asset Management Planning for Municipal Infrastructure. 1. Any of the municipality s goals, policies or plans that are supported by its asset management plan. Strategic Alignment 4. The principles to be followed by the municipality in its asset management planning, which must include the principles set out in section 3 of the Act. 8. An explanation of the capitalization thresholds used to determine which assets are to be included in the municipality s asset management plan and how the thresholds compare to those in the municipality s tangible capital asset policy, if it has one. 10. The persons responsible for the municipality s asset management planning, including the executive lead. 2. The process by which the asset management plan is to be considered in the development of the municipality s budget or of any long-term financial plans of the municipality that take into account municipal infrastructure assets. 3. The municipality s approach to continuous improvement and adoption of appropriate practices regarding asset management planning. 6. A process to ensure that the municipality s asset management planning is aligned with any of the following financial plans: i. Financial plans related to the municipality s water assets including any financial plans prepared under the Safe Drinking Water Act, ii. Financial plans related to the municipality s wastewater assets. 7. A process to ensure that the municipality s asset management planning is aligned with Ontario s land use planning framework, including any relevant policy statements issued under subsection 3 (1) of the Planning Act, any provincial plans as defined in the Planning Act and the municipality s official plan. 11. An explanation of the municipal Council s involvement in the municipality s asset management planning. 5. The municipality s commitment to consider, as part of its asset management planning, i. the actions that may be required to address the vulnerabilities that may be caused by climate change to the municipality s infrastructure assets, in respect of such matters as: A. operations, such as increased maintenance schedules B. levels of service, and C. lifecycle management ii. the anticipated costs that could arise from the vulnerabilities described in subparagraph i iii. adaptation opportunities that may be undertaken to manage the vulnerabilities described in subparagraph i iv. mitigation approaches to climate change, such as greenhouse gas emission reduction goals and targets, and v. disaster planning and contingency funding. 9. The municipality s commitment to coordinate planning for asset management, where municipal infrastructure assets connect or are interrelated with those of its upper tier municipality, neighbouring municipalities, or jointly-owned municipal bodies. 12. The municipality s commitment to provide opportunities for municipal residents and other interested parties to provide input into the municipality s asset management planning. Guiding Principles Capitalization Thresholds Governance Budgeting Continuous Improvement Budgeting Community Planning Governance Climate Change Stakeholder Engagement Stakeholder Engagement 18 These requirements, the requirements about asset management plans, and the asset management experience of Ontario municipalities are covered in this Toolkit. Continue to the next page if your municipality has an asset management policy for which compliance should be verified. Otherwise proceed to the Identifying Stakeholders page for continued guidance on how to develop an asset management policy.

19 PLANNING Reviewing an Existing Policy Level of effort: Low Compare your existing policy with regulatory requirements If your municipality has a Council-adopted asset management policy, this document may need to be revised and adopted by Council once again if it does not meet the Province s requirements. The questions included to the right will guide you in the review of your municipality s existing asset management policy. This number scheme connects these questions to the provincial requirements sorted in the table on the previous page. If, in your review, the answer to any of these questions is no the policy will need to be revised. Before starting to initiate policy updates, find out who was involved in developing the first policy. Discuss with them what is missing in the policy by referencing the regulatory requirements. Communicate the need to update the policy and to involve others in the organization in order to broaden its impact. Then proceed to the Identifying Stakeholders page to reflect on who else in particular should be involved. Case Study: The Municipality of Kincardine had an existing policy which had been adopted in The policy needed updating to comply with the regulation. These questions and the Toolkit were practical tools that helped us work through our current policy to identify where we had gaps, and what we needed to do to ensure our Policy was compliant with the new legislation. The Toolkit is a good bridge between the requirements dictated by the regulation and the understanding needed to put it into practice. Roxana Baumann, CMO, CPA, CA Treasurer/Director of Finance, Municipality of Kincardine In your asset management policy: # 1 Strategic Alignment: Is there a reference to the municipal goals, policies, and plans that are supported by the asset management plan? # 8 Capitalization Thresholds: Is the distinction made between the capitalization thresholds used for financial reporting and those used for planning? # 4 Guiding Principles: Are guiding principles stated and do they include those the Province requires (see page 29 in the Toolkit) # 2, # 6 Budgeting: Is the process that relates the asset management plan with the municipal budget, long-term financial plans, and water and wastewater financial plans defined? # 7 Community Planning: Is the process that aligns asset management planning with Ontario s Land Use Planning Framework defined? # 3 Continuous Improvement: Is the municipality s approach to continuously improving asset management planning defined? # 10, # 11 Governance: Are the persons responsible for asset management planning identified and the Council s involvement in asset management planning defined? # 9 Stakeholder Engagement: Is there a commitment to coordinate planning with neighbouring cities or others about interrelated infrastructure assets with separate ownership structures? # 5 Climate Change: Is there a commitment to consider the actions needed to address vulnerabilities and risk of climate change, climate change mitigation approaches, and disaster planning within asset management planning? # 12 Stakeholder Engagement: Is there a commitment to provide opportunities for municipal residents and other parties to provide input into asset management planning? 19

20 PLANNING Identifying Stakeholders Level of effort: Low Identify who needs to be involved in Policy (re)development In the bullets below are statements to help identify who will be impacted by the regulation and how. The people identified in this manner will be the key individuals that should be involved in writing sections of the Policy. Council and the CAO: The Asset Management Plan (AMP) will have to go through formal approval processes as executive and Council approvals, by resolution, are now required. Finance: They will need to be involved in developing the AMP since they are best positioned to:»» Assess the funding available to support the AMP and»» Build a valid link between the AMP and the budgeting process. They will also need to support the distinction established between the capitalization threshold used for financial reporting and the basis that defines the inventory used for the AMP. Community planner and service managers: The people involved in the community planning and asset management planning processes will have to consult with each other since:»» The 2014 Provincial Policy Statement of the Planning Act emphasizes the need for cost-effective development patterns and standards to minimize servicing cost and»» The asset management planning process will need to align with the community plan. Service managers: They will have to see that the engineers, technicians, superintendents, and other disciplines that factor weather into planning consider the potential impacts of climate change. Further guidance on who should be involved in developing each of the policy sections, and the value of their involvement, is provided in the Bridging Perspectives Appendix and Policy Development section of the Toolkit. 20

21 PLANNING Assets Data Service Laws Asset Management Planning Finance The group of key individuals depends on the organization Large organization: There should be representatives of every service area, including including the administrative services such as finance.. Small organization: The one to three people that actively lead the local operations and wear many hats should be consulted. People How early and closely should councillors be involved? Council CAO Finance Officer Service Directors Community Emergency Management Coordinator Community Planner The answer to this question depends on the Council, Councillors and the relationship they have with the administration. If Council is kept at arm s length from the administration and there is trust, Councillor involvement is still advised. If the relationship with Council is tenuous, finding an advocate within the Council to involve early in the process is key. 21

22 PLANNING Building Commitment Level of effort: Medium Get commitment from those that need to be involved Be mindful that asset management is often seen differently by the various stakeholders that need to be involved. More often than not, stakeholders that have mixed levels of interest do not always perceive immediate benefits being derived from new and different practices. As such, they might exhibit resistance or lack of interest and buy-in despite regulated requirements. This is usually detrimental to the long-term success of a new asset management policy and the plans that need to stem from it. In the Appendix, perspectives of asset management are provided to help prepare and guide the initial discussions about asset management, the regulation, and the Policy with the key individuals that need to be involved in writing the policy. You might also want to refer to the Policy Development section of the Toolkit to both prepare and guide the discussion on what their contribution and/or role might be in the policy development process. Don t forget to share with your colleagues why you think they are valuable to the process and how it benefits them. People that will be approached about developing the policy need to know: What is the change happening? Why is the change happening now? What is the risk of not changing? The answers to this pertain, at a base level, to the regulation but more broadly to the changes afoot across the municipal sector. What are the personal motivators and organizational drivers that would cause me to support the change? This is an important question that will be answered through the policy development process outlined in this Toolkit. This Toolkit is structured to help create a line of sight between the policy and the asset management plans that will need to be submitted in 2021, 2023, and 2024, and updated every five years thereafter. How does the policy relate to the plans and people in the organization? 22 Organizational Strategic Plan Vision, mission and values, business policies, stakeholder requirements, goals and risk management Strategic Asset Management Policy Published commitment, mandated requirements, link between strategic objectives and priorities, overall intentions, principles, processes to carry out, align, and improve asset management planning Asset Management Plans Tactical plan or plans guiding use of the asset management system in creating, maintaining and renewing infrastructure and other assets to deliver an agreed level of service and achieve asset management objectives *Adapted from the Institute of Asset Management and PAS 55. The strategic asset management policy required by the Province documents commitments and processes that specify how the asset management plans will be produced, updated, and integrated into existing processes. The policy is a blueprint that the entire organization will have to abide by. If done well, writing the policy can be an impactful foundational step that will facilitate the development of the asset management plans. It will do so by allowing people to take ownership of: What the asset management plans will include Who will be involved in developing the asset management plans How the asset management plan will actually be rolled out

23 Policy Developement 23

24 DEVELOPMENT Policy Development Tools BUDGETING GUIDING PRINCIPLES GOVERNANCE CLIMATE CHANGE STRATEGIC ALIGNMENT In addition to understanding the policy elements, your team will also depend on a number of processes and interactions with different stakeholders. A process can be a meeting, discussion, interview, or documentation used to communicate information or create content. Stakeholders (referenced here as People) can be internal stakeholders such as the CAO or treasurer, or external stakeholders such as the public or a community group. Use the following components of this toolkit to facilitate the Policy development process. 24 Worksheets provide materials to support the policy development discussion with key individuals. Case studies provide leading practices and checklists to address common challenges.

25 DEVELOPMENT Process for Developing the Policy Level of effort: High First - Agree on a vision for asset management and policy goals The process of developing the policy entails focused conversations with stakeholders since once adopted it is hard to change its wording. Before getting to the policy language details, the stakeholders should agree on the vision and goals they share in asset management. Not only does this facilitate the process, it is also best practice to include a vision and asset management objectives in the policy. By the end of the initial discussions with key individuals, the basis to create a common vision of asset management should emerge and the link between the policy and plans be clearer. Getting this in writing will make the policy development process easier since everyone will be working towards the same outcome. This should be done over the course of a meeting that includes all stakeholders identified in the previous step. How to write an asset management vision To create an asset management vision, think about what you want asset management planning to look like in your organization. Use the following statements as a starting point for your colleagues and you to discuss. How to write policy goals To create policy goals, think about the outcomes you wish to achieve from the Policy once you have Council endorsement. Use the following statements as a starting point for your colleagues and you to discuss. Example Vision 1: The City s vision is to proactively manage its assets to best serve the City s objectives, including: Effectively delivering services, Supporting sustainability and economic development, and Maintaining prudent financial planning and decision making. Example Vision 2: The City meets the agreed service levels in the most efficient and effective way possible through asset lifecycle management. Citizen expectations, sustainable development, and the actual needs of existing and future assets are prioritized and aligned to manage service level expectations. Financial management is sound and aligns with the means of the City s stakeholders. Example Goals 1: The objectives of the policy are to: Provide a framework for implementing asset management to enable a consistent and strategic approach at all levels of the organization. Provide guidance to staff responsible for asset management. Example Goals 2: The asset management policy aims to: Communicate to stakeholders the management principles and approach endorsed by the City; Provide transparency and demonstrate to stakeholders the legitimacy of decision-making processes which combine strategic plans, budgets, service levels, and risks; and Commit the City to support the implementation of asset management methods that are consistent with the organization and meet the Council s priority objectives. 25

26 DEVELOPMENT Second - Select the approach to develop the Policy Once the stakeholders have set a common vision and policy goals, they can decide how they will work* together to develop the policy; specifically how each section will be discussed and who will be involved. The champion should be involved in all conversations as he or she serves as a common thread to all. The conversations should generally be about: The regulatory requirements and their value to the organization; What is already being done internally; What should be done in the future; What must be written into policy; and How it must be written to pass the tests of time and Council. The Policy Development section and Worksheet Appendix sections offer guidance on the points to cover with stakeholders and which stakeholder(s) to engage with about each requirement. The two primary ways by which these conversations can take place are: Centralized groups Decentralized small groups Kickoff (Group) Kickoff (Group) Development (Group) Development (Small groups) Final review (Group) Final review (Small groups) Submission (Group) Submission (Step 6) The time required to develop the policy by the centralized method can amount to two days of background work spent by the champion overall and two half day workshops with key stakeholders. The decentralized method to developing a policy requires more time than the centralized one. Meetings, each focused on a particular requirement, get spread out over a longer period and the champion has more coordination work to do. *The approach selected by your municipality should depend on its size, the diversity of stakeholders, and existing relationships. The champion should consult with the CAO or other senior administrator about the approach he or she endorses to carry out development of the policy. 26

27 DEVELOPMENT Strategic Alignment Read the content of this page to prepare to facilitate a discussion on the goals, plans, and policies that may be supported by asset management plans and which ones should be cited in the policy. In your preparation, assemble a list of the relevant documents, adapt the example statements to the local context, and then go over these in a meeting with key individuals, as a draft to finalize. The key individuals that should be involved in the discussion are a representative(s) from finance and from planning, and the service managers. Their buy-in to this policy section is important because it dictates the policy s impact on the organization. A first meeting should generate feedback that allows you to finalize the policy statement. Depending on the size of the organization and its culture, the CAO and a Councillor may be involved in this first meeting or only after a final draft is produced. What to consider Asset management planning will have a limited reach and could be counterproductive if it is done without consideration of the municipality s existing goals, plans, and policies. This exercise of alignment between plans is already followed to varying degrees in municipal planning. For example, community plans have historically been used as the basis for master plans. How existing goals, plans, and policies are used in making decisions on assets is the starting point. The policy will apply to all tangible assets owned, operated, and/or maintained by the municipality. It will apply to the activities and information that supports their planning, commissioning, maintenance, and disposal. Outlining in the policy the other documents that impact asset management planning helps to make asset management plans the strategic tools they are intended to be. It is through integrated planning that decision making improves which helps municipal departments, and the broader organization, achieve their goals. ASSET MANAGEMENT POLICY Age-friendly Action Plan Wastewater Financial Plan Reserve Fund Policy Strategic Plan Master Plans Sustainable Development Plan Official Plan Greenhouse Gas Reduction Plan Pedestrian Strategy Other Plans Water Financial Plan Active Transportation Plan ASSET MANAGEMENT PLAN Regulation language The policy must include: 3.(1)1. Any of the municipality s goals, policies or plans that are supported by its asset management plan. 27

28 Example 1: Our vision to maintain a safe community with sustainable growth requires alignment of the many initiatives underway in our organization at any given time in order for it to be achieved. This alignment is necessary to properly consider whether the level of service provided by our existing and planned assets is congruent and supports our vision. Asset management planning therefore will not occur in isolation from other municipal goals, plans, and policies. Rather, an integrated approach will be followed to successfully develop practical asset management plans that align with the overarching accountabilities and aspirations of our community. The elements of our asset management planning approach keep us mindful of the goals described in our Strategic Plan, respect our borrowing policy, and leverage our Community Plan, our Master Plans, and our Financial Plans. Example 2: The Council and senior management will review this policy and incorporate it into the asset management planning approach that fosters the integration of municipal documents such as: The strategic plan The financial plan The community plan The sustainable development plan The climate change adaptation plan Master plans 28

29 DEVELOPMENT Guiding Principles Review the contents of this page and become familiar with the principles provided in the the following pages. This review prepares you for the development of the recommended principles section of the policy, and engagement with key individuals about it. One of the sections on the next page presents the asset management principles typically included in asset management policies that are embedded in the regulation. The other presents the principles that the Province has prescribed in the regulation. Though it is not possible to change the principles prescribed by the Province, each key individual involved in the asset management policy should be informed of these as they must be included in the municipality s policy and applied in asset management planning. Building awareness of the prescribed principles before writing them into policy is a matter of going over them in a meeting with key individuals. These include a representative from finance and the service managers. Depending on the size of the organization and its culture, the CAO and a Councillor may be involved in this discussion or engaged only after a final draft is produced. During the meeting the group should: Identify the principles that have been applied locally Determine how the remaining principles might be applied in the local context Highlight the principles that resonate most with Council If your municipality has an existing policy with asset management principles that guide local practices, consider the additional principles that the Province has specified. These will have to be added to the language of your current policy. What to consider The principles section of the Policy will communicate the management concepts your municipality will adhere to in asset management planning. At a minimum, your municipality must state the principles required by the Province to comply with the regulation. Though some of these principles have rarely been seen in existing policies they reflect the values that guide Canadian public institutions, including local government. These values, such as innovation and economic development, can influence not just planning but also the delivery of infrastructure projects and broaden the positive impact of your municipality s investments. Regulation language The policy must include: 3.(1)4. The principles to be followed by the municipality in its asset management planning, which must include the principles set out in section 3 of the Act. 29

30 DEVELOPMENT Presenting the guiding principles There are different ways of presenting the guiding principles to key individuals and introducing them in the policy. They can be shown and transferred directly from the Infrastructure for Jobs and Prosperity Act, Or they can be presented with a header, such as on the following page, that simplifies the review by efficiently bringing attention to the principle in question. The principles presented in this section of the asset management policy should be introduced by one of the following: The key guiding principles of the asset management policy are outlined in the following list. The Municipality shall adopt the following principles in managing its infrastructure assets: The policy ensures that Municipality staff follow a consistent and regulatory-compliant approach to making decisions regarding infrastructure planning and investment. The decision-making approach shall be in line with the following principles: The key guiding principles for infrastructure priority setting, planning, and investment of the asset management policy are the following: Asset management principles Selected by your municipality Province required principles } Guiding principles of the policy 30

31 DEVELOPMENT Asset management principles Asset management principles can be drawn from Section 5 Asset management plans, current levels of service and Section 6 Asset management plans, proposed levels of service of the regulation. These are principles often found in municipal asset management policies. Statements of these principles, from the City of Ottawa Integrated Asset Management Policy, are included below so they may be considered as possible inputs to be adapted to the local context in your municipality s policy. Customer focused: The City will have clearly defined levels of service and apply asset management practices to maintain the confidence of customers in how City assets are managed. Service focused: The City will consider all the assets in a service context and take into account their interrelationships as opposed to optimizing individual assets in isolation. Risk-based: The City will manage the asset risk associated with attaining the agreed levels of service by focusing resources, expenditures, and priorities based upon risk assessments and the corresponding cost/benefit, recognizing that public safety is the priority. Value-based affordable: The City will choose practices, interventions and operations that aim at reducing the lifecycle cost of asset ownership, while satisfying agreed levels of service. Decisions are based on balancing service levels, risks, and costs. 31

32 DEVELOPMENT 32 Required principles from the Infrastructure for Jobs and Prosperity Act, 2015 The text below was adapted from the Act and is compliant with the Act. Forward looking: The Municipality shall take a long-term view while considering demographic and economic trends in the region. Budgeting and planning: The Municipality shall take into account any applicable budgets or fiscal plans, such as fiscal plans released under the following: 1. Fiscal Transparency and Accountability Act, Budgets adopted under Part VII of the Municipal Act, Budgets adopted under Part VII of the City of Toronto Act, Prioritizing: The Municipality shall clearly identify infrastructure priorities which will drive investment decisions. Economic development: The Municipality shall promote economic competitiveness, productivity, job creation, and training opportunities. Transparency: The Municipality shall be evidence-based and transparent. Additionally, subject to any prohibitions under an Act or otherwise by law on the collection, use, or disclosure of information, the municipality shall: Make decisions with respect to infrastructure based on information that is publicly available or made available to the public, and Share information with implications on infrastructure and investment decisions with the Government and broader public sector entities. Consistency: The Municipality shall ensure the continued provision of core public services, such as health care and education. Environmentally conscious : The Municipality shall minimize the impact of infrastructure on the environment by: 1. Respecting and helping maintain ecological and biological diversity, 2. Augmenting resilience to the effects of climate change, and 3. Endeavouring to make use of acceptable recycled aggregates. Health and safety: The Municipality shall ensure that the health and safety of workers involved in the construction and maintenance of infrastructure assets is protected. Community focused: The Municipality shall promote community benefits, being the supplementary social and economic benefits arising from an infrastructure project that are intended to improve the well-being of a community affected by the project, such as: 1. Local job creation and training opportunities (including for apprentices, within the meaning of section 9 of the Infrastructure for Jobs and Prosperity Act, 2015), 2. Improvement of public space within the community, and 3. Promoting accessibility for persons with disabilities. Innovation: The Municipality shall create opportunities to make use of innovative technologies, services, and practices, particularly where doing so would utilize technology, techniques, and practices developed in Ontario. Integration: The Municipality shall where relevant and appropriate, be mindful and consider the principles and content of non-binding provincial or municipal plans and strategies established under an Act or otherwise, in planning and making decisions surrounding the infrastructure that supports them.

33 DEVELOPMENT Capitalization Thresholds Read the content of this page to prepare to facilitate a discussion about assets, their value, and why some should be managed regardless of their low cost. As you will read below, it is not the purchase price that determines if an asset should be included in an asset management plan. It is rather the service it provides that determines this. Use this explanation, the text that follows, and the draft statements as the basis of the discussion to craft the capitalization thresholds section of the policy. The key individuals that should be engaged with are the service managers as they will be the ones responsible for developing the asset management plan for their service area. Those responsible for preparing the financial statements should also be included, especially if your municipality has a Tangible Capital Asset (TCA) policy. A first meeting should generate feedback that allows you to adapt the example material provided in the toolkit. What to consider The thresholds in the TCA policy, if your municipality has one, should not be the basis for asset management planning. Assets of a small dollar value, relative to the TCA threshold, may be excluded from financial statements but may be critical to the safe and reliable operation of the infrastructure. They may therefore need to be actively managed and included within an asset management plan. The perspectives taken to define what an asset is in financial reporting and in asset management planning differ. The regulation requires that your municipality must clarify in the policy the differentiation it will make between each perspective. The financial perspective focuses on the monetary value of an asset. It uses a cost threshold, usually stated in TCA policy, as a guide to identify assets that must be accounted for in the financial statements. Using a backward view, the original purchase price is the basis for depreciating the value of the assets and reporting. The asset management perspective focuses on the service provided by the asset. It assesses the role of the asset and if it warrants that inspections, maintenance, and overhauls be planned for. Using a forward looking view, the cost of owning the asset over its service life is the basis for short- and long-term financial planning. Regulation language The policy must include: 3.(1)8. An explanation of the capitalization thresholds used to determine which assets are to be included in the municipality s asset management plan and how the thresholds compare to those in the municipality s tangible capital asset policy, if it has one. 33

34 DEVELOPMENT Example 1: The Asset Management Policy applies to all assets whose role in service delivery requires deliberate management by the Municipality. The service-focus intent of this policy differentiates its requirements for identifying assets from the capitalization thresholds which are developed for the purposes of financial reporting. For this reason, the capitalization threshold developed for financial reporting will not be the guide in selecting the assets covered by asset management planning processes. Example 2: The service rendered by an asset will be the determining factor of whether or not to include it in asset management plans. It is the assets whose role in service delivery requires deliberate management by the municipality that will thus be included in the asset management plan. The threshold used to determine which assets are to be included in the asset management plan is therefore a guideline for the application of Council-endorsed principles in professional judgment. This qualitative approach is unlike the quantitative and dollar value-based methodology prescribed in the tangible capital asset policy. Financial reporting Planning & forcasting 34

35 DEVELOPMENT Governance & Continuous Improvement Use this page to think through how asset management activities might be governed in your organization, in compliance with the regulation. Example statements that you should adapt to the local context and then go over in a meeting with key individuals, as a draft to finalize, are found on the following page. Because the regulation puts governance responsibilities on Council and an executive lead, a Councillor and the CAO should also be consulted, along with the service managers, while the governance language of the policy is finalized. It is best to go over the regulation language with the group first and then reword a draft together. This mitigates the possibility of future rework by allowing them to become familiar with regulation and influence the policy sections that directly impact their work in an open setting. What to consider Executive support is important because the organization needs an executive level sponsor that leads by example in aligning him or herself to the policy, driving the change it brings, and following its directive. This person is responsible for seeing to the continuous improvement of the organization, including to its asset management practices. The regulation requires the production of annual reports on asset management progress. The annual report requirements specified by the Province reflect the Plan > Do > Check > Act continuous improvement model and match the Check portion of this model. If your municipality does not produce thorough annual reports, note that municipalities in other Provinces are required to provide them to the public. This is a measure that has been adopted to balance the need for public accountability with increased local autonomy. It is a best practice that serves as a communication and continuous improvement tool that fosters public trust. Should your municipality not comply with the regulation in time, it should include continuous improvement sections in its asset management plans. Regulation language The policy must include: 3.(1)3. The municipality s approach to continuous improvement and adoption of appropriate practices regarding asset management planning. 3.(1)10. The persons responsible for the municipality s asset management planning, including the executive lead. 3.(1)11. An explanation of the municipal Council s involvement in the municipality s asset management planning. Asset management plans must be: 7.(1) Reviewed and updated at least five years after the year in which the plan is completed under section 6 of the regulation and at least every five years thereafter; 8.(a) Endorsed by the executive team lead of the municipality; and 8.(b) Approved by a resolution passed by the municipal Council. Annual review of asset management planning progress 9.(1) Every municipal Council shall conduct an annual review of its asset management progress on or before July 1 in each year, starting the year after the municipality s asset management plan is completed under section 6 of the regulation. 9.(2) The annual review must address; (a) the municipality s progress in implementing its asset management plan; (b) any factors impeding the municipality s ability to implement its asset management plan; and (c) a strategy to address the factors described in clause (b). 35

36 DEVELOPMENT PLAN DO CHECK ACT Example 1: The policy requires the commitment of key stakeholders within the Municipality s organizational structure. The following details the responsibilities of the key stakeholders within the City: Council Approve by resolution the asset management plan and its updates every five years; Conduct annual reviews of management plan implementation progress on or before July 1 of every year; that includes:»» Progress on ongoing efforts to implement the asset management plans;»» Consideration of the asset management policy;»» Any factors affecting the ability of the municipality to implement its asset management plans;»» Consultation with department leads; and»» A strategy to address these factors including the adoption of appropriate practices; and Support ongoing efforts to continuously improve and implement the asset management plans. Chief Administrative Officer Maintain compliance with the asset management policy and provincial asset management regulation. Department leads Oversee asset management planning activities that fall within their service area and in support of others. Example 2: The Council is entrusted with the responsibility of overseeing, on behalf of citizens, a large range of services provided through a diverse portfolio of assets. Council, having stewardship responsibility, is the final decision maker on all matters related to asset management in Municipality. The Council and the executive lead are committed to the success of asset management planning. Within asset management planning, the Council is responsible for: Approving by resolution the asset management plan and its updates every five years; Conducting annual reviews of management plan implementation progress on or before July 1 of every year; and Supporting ongoing efforts to improve and implement the asset management plan. The executive lead is ultimately responsible for asset management planning across the municipality and maintaining compliance with the regulation. Department leads are responsible for asset management planning activities that fall within their service area and in support of others. Council s annual asset management reviews are the basis of the municipality s approach for continually improving its methods and adopting appropriate practices. The annual review will be completed in consultation with the asset management steering committee. It will include: Progress on ongoing efforts to implement the asset management plan; Consideration of the asset management policy; Any factors affecting the ability of the municipality to implement its asset management plan; Consultation with department leads, and A strategy to address these factors including the adoption of appropriate practices. 36

37 DEVELOPMENT Budgeting Use this subsection to become familiar with the financial considerations that come into play in asset management planning and possible relationship to budgets and existing financial plans. Example statements that you should adapt to the local context and then go over in a meeting with key individuals, as a draft to finalize, are found on the following page. An outline of the local methods used for budgeting and financial planning should be used as a reference point to define how they will incorporate asset management plans. How exactly asset management plans will inform budgeting process inputs by departments must be defined locally. Because asset management plans can no longer be set aside once finalized, the financial officer(s) should be involved in the asset management planning process and writing the financial sections of the policy. The service managers that will be responsible for developing the asset management plans should also be involved in writing the policy section. They must not only understand the financial processes related to asset management but also buy into them as their work ultimately feeds into it. What to consider It is important to remember that the value of asset management planning is achieved when it impacts the overall budget and specific investment decisions. Because asset management plans will be produced every five years and monitored annually, they are well suited to inform existing budget inputs used by the service areas and the water/wastewater utility financial plans. From the advent of asset management plans, the expectation is that municipalities should act upon the findings made about their asset spending needs in the asset management planning process. Finance officers are the municipal professionals well poised to enable this. The involvement of finance personnel in developing the financial Regulation language The policy must include: 3.(1)2. The process by which the asset management plan is to be considered in the development of the municipality s budget or of any long-term financial plans of the municipality that take into account municipal infrastructure assets. 3.(1)6. A process to ensure that the municipality s asset management planning is aligned with any of the following financial plans: i. Financial plans related to the municipality s water assets including any financial plans prepared under the Safe Drinking Water Act, ii. Financial plans related to the municipality s wastewater assets. Asset management plans must include: 6.(1)2. An explanation of why the proposed levels of service are appropriate for the municipality, based on an assessment of the following: iv. The municipality s ability to afford the proposed levels of service. 6.(1)4. A lifecycle management and financial strategy that sets out the following information with respect to the assets in each asset category for the 10-year period iii. An identification of the annual funding projected to be available to undertake lifecycle activities and an explanation of the options examined by the municipality to maximize the funding projected to be available. 37

38 components of asset management plans, which must be updated every five years, facilitates things on many fronts. It will bring consistency to the financial analysis conducted in each plan and will foster inclusion of the plan in the budgeting process. For each asset management plan they can for instance help specifically with: Assessing the projected annual funding available; Assessing what the municipality can afford; and Maintaining alignment with other financial plans Example 1: The Municipality will integrate findings from the asset management plans into its long-term financial planning and budgeting processes. Sound financial analysis will be encompassed in asset management planning in order for the asset management plan to be a sought after guide to employees in budgeting and financial planning. The financial strategy included in each asset management plan will be completed by a multi-disciplinary team that will include representative(s) from finance and the concerned service area. The asset management plan will be referenced by the service area personnel in the preparation of their budget submission Budget Inputs by Service Budgeting Process Asset Management Plan Cost of Providing Current Level of Service Cost of Providing Proposed Level of Service Funding Available Water & Wastewater Financial Plans 38

39 DEVELOPMENT to help them: 1. Identify all potential revenues and costs (including operating, maintenance, replacement, and decommission) associated with forthcoming infrastructure asset decisions; 2. Evaluate the validity and need of each significant new capital asset, including considering the impact on future operating costs; and 3. Incorporate new revenue tools and alternative funding strategies where possible. The department level budget submission prepared by each service area will be evaluated by the budget committee in the preparation of the municipality s annual budget. The financial analysis used for the water and wastewater asset management plans will align with existing financial plans related to water and wastewater assets. The analysis completed in each tangential document will reference the most up-to-date information from the same datasets, will be based on common methods, and will improve upon one another. Example 2: The asset management plans and progress made on the plans will be considered annually in the creation of the municipality s capital budgets, operating budgets, and long-term financial plans. It is service area personnel that will reference the asset management plan for their area in order to: Look up forecasted spending needs identified in the plan; Verify progress made on the plan to identify potential gaps; and Prioritize spending needs, across the gap identified in the plan and recent developments, for the years to be budgeted for. The budgets thus prepared by each service area will then be processed in accordance with the broader municipal budgeting process. Financial services personnel will be involved in asset management planning to facilitate the bridge between: The financial strategy developed in the asset management plan(s); The budget submissions of each service area; and The overall budgeting process they ultimately oversee. Financial services, water services, and wastewater services personnel will work together to align the financial strategy developed in the asset management plan with the financial plans related to the water and wastewater assets. The alignment will stem from a multi-disciplinary team, common analytical methods followed, and common data sources used. 39

40 DEVELOPMENT Community Planning Read the content of this page to prepare to facilitate a discussion about the similarities between asset management planning and recent developments in community planning requirements in Ontario. As you will read below, principles such as long-term affordability are common to both. Use this foundation, the text that follows, and the draft statements as the basis of the discussion to outline the process that will align asset management planning with community planning. Finalize your draft in a meeting with key individuals. The key individuals that should be involved in the discussion are the service managers and the person(s) that is responsible for community. A first meeting should generate sufficient feedback to finalize the policy statement that should then be reviewed by all. What to consider To have an asset management plan with a complete forward looking view, the focus cannot just be aging infrastructure. It must also consider how the community is changing. Asset management is after all a business model that covers existing assets as well as the processes related to acquiring new assets. This is reflected in the asset management planning regulation but also in the 2014 Provincial Policy Statement of the Planning Act. Mentions of long-term financial viability that are akin to core asset management principles in the Policy Statement include: a) promoting efficient development and land use patterns which sustain the financial well-being of the Province and municipalities over the long term; e) promoting cost-effective development patterns and standards to minimize land consumption and servicing costs; and b) the infrastructure and public service facilities which are planned or available are suitable for the development over the long term, are financially viable over their lifecycle, and protect public health and safety and the natural environment. The asset management principles that guide the long-term analysis of levels of service and investments are thus already expected to be applied in the analysis of community development or redevelopment that impacts the asset inventory. The asset management plans will need to be aligned with the development decisions documented in the official plan. Regulation language The policy must include: 1. 3.(1)7. A process to ensure that asset management planning would be aligned with Ontario s land use planning framework, including any relevant policy statements issued under section 3(1) of the Planning Act, any provincial plans as defined in the Planning Act, and the municipality s official plan. 40

41 DEVELOPMENT Example 1: The combination of lifecycle analysis and financial sustainability principles will be the driver in the design and selection of community development or redevelopment that requires new assets, or existing asset enhancements, to take place. Parties involved in the development of the asset management plans will reference the direction established in the community plan as well as the methods, assumptions, and data used in its development. The aim of cross-referencing these plans is to ensure that development and redevelopment occur within the Municipality s means through an understanding of current and future asset needs. Example 2: Asset management planning will be aligned with the Municipality s official plan. The asset management plans will reflect how the community is projected to change and the related asset impacts. The Municipality will achieve this with the following: Those responsible for managing services impacted by development or redevelopment will:»» Be consulted while the community plan is being prepared;»» Provide input to the analysis of future servicing costs; and»» Provide written comment about the financial viability of development as it pertains to the service they manage. Methods, assumptions, and data used in the selection of development or redevelopment initiatives documented in the community plan will be available in support of the production of asset management plans. 41

42 DEVELOPMENT Climate Change Use this page to first think through how weather already influences operations, maintenance, and investment decisions. Then consider how the weather-related risks identified might evolve under a changing climate and impact business continuity. Use the results of this reflection to think broadly about what needs to be done to mitigate the risk and adapt the example statements to the local context. Finalize your draft in a meeting with key individuals. The key individuals that should be involved in the discussion are the service managers and the person that was designated by the Municipality the Community Emergency Management Coordinator role. If applicable to your municipality, the design engineers and the risk managers should also be included. A first meeting should generate sufficient feedback to finalize the policy statement. What to consider Current planning practices lend themselves well to the requirements stated in the regulation. The Canadian climate is already a consideration in the design and operational planning of drainage, water supply, and transportation systems. Mitigation approaches are already considered when low energy consumption is a decision driver for the selection of a new asset. Disaster planning is a collaborative process in which many municipal departments contribute to develop business continuity solutions that reestablish a level of service after a shock. The primary expectation set forth by the Province is that, wherever weather is a factor in design and operational planning of municipal services, the potential risks and vulnerabilities caused by climate change will need to be considered. The risks identified in this way will need to be managed either through operations, capital investments, or emergency response plans. As insinuated, the field of emergency management will be asked to contribute a new perspective to asset management planning. The knowledge and experience this sector brings is poised to foster better consideration of resilience. It can help think through actions that address the risks of climate change and those that accelerate recovery. These actions might need to be added to disaster response plans and contingency funding and/or also to capital plans and maintenance plans. Regulation language The policy must include: 3.(1)5. The municipality s commitment to consider, as part of its asset management planning: i. the actions that may be required to address the vulnerabilities that may be caused by climate change to the municipality s infrastructure assets, in respect of such matters as, A. operations, such as increased maintenance schedules, B. levels of service, and C. lifecycle management, ii. the anticipated costs that could arise from the vulnerabilities described in subparagraph i, iii. adaptation opportunities that may be undertaken to manage the vulnerabilities described in subparagraph i, iv. mitigation approaches to climate change, such as greenhouse gas emission reduction goals and targets, and v. disaster planning and contingency funding. 42

43 DEVELOPMENT The emerging discourse around municipal liability in a changing climate suggests that the standard of care municipalities might reasonably be expected to uphold is becoming more stringent. (Climate Change, Floods, and Municipal Risk Sharing in Canada; IMFG) Planning Practice Primary Driver Unifying Factor Asset Management Planning Disaster Response Planning Sustainable Service Delivery Business Continuity Levels of Service Example 1: Example 2: The Municipality commits to the development of tailored actions that make the best use of its resources to mitigate and adapt to climate change. These actions that will go beyond acquiring or modifying assets based on greenhouse gas reduction targets and risk exposure. Bolstering resilience to climate change in Municipality also means modifying the scope of current operations, anticipating possible costs to support contingency funds, leveraging alternative funding mechanisms, integrating the disaster response perspective to planning, and revising levels of service. The Municipality will tailor these actions by striking a balance between its organizational capacity, financial and stakeholder support, and the local risks and vulnerabilities related to climate change. The asset management plan will encompass this sustainable approach to climate change mitigation and adaptation. Climate change will be considered as part of Municipality s risk management approach embedded in local asset management planning methods. This approach will balance the potential cost of vulnerabilities to climate change impacts and other risks with the cost of reducing these vulnerabilities. The balance will be struck in the levels of service delivered through operations, maintenance schedules, disaster response plans, contingency funding, and capital investments. The Municipality s contribution to climate change through greenhouse gas emissions will be mitigated in accordance with its local reduction targets, financial capacity, and stakeholder support. 43

44 DEVELOPMENT Stakeholder Engagement within the municipal boundary just as they do right at the municipal boundary and sometimes beyond. Coordinating projects between agencies with interconnected assets is therefore a form of stakeholder engagement. 44 Use this page to think through how stakeholders, including neighbouring municipalities, might be consulted in asset management planning. Example statements that you should adapt to the local context and then go over in a meeting with key individuals, as a draft to finalize, are provided. The key individuals that should be involved in the discussion are a representative from planning because they typically have the most experience with public consultation and the service managers. If your municipality has a communications manager or coordinator he or she should also be involved. A first meeting should generate feedback that allows you to finalize the policy statement. Depending on the size of the organization and its culture, the CAO may be involved in this first meeting or only after a final draft is produced. What to consider The purpose of asset management is to enable municipalities to achieve their objectives through a proactive approach to managing their infrastructure. The primary objective of any municipality always is to provide the municipality s direct stakeholders (citizens, businesses, institutions, community groups, future generations, etc.) with the services they need now and in the future. In order to achieve this goal, it is necessary to understand the needs and perspectives of the municipality s stakeholders. Only then is it possible to integrate their needs into asset management planning and decisions made about infrastructure. Users of municipal services are not the only stakeholders to bear in mind in managing municipal assets. After all municipal infrastructure is rarely isolated from other agency s assets such as energy utilities, rail, and provincial roads. These assets intersect Stakeholders (users of municipal services and external agencies) are therefore an integral part of a complete asset management approach. This is the primary concept to bear in mind when developing a commitment to stakeholder engagement in the policy. Regulation language The policy must include: 3.(1)9. The municipality s commitment to coordinate planning for asset management, where municipal infrastructure assets connect or are interrelated with those of its upper tier municipality, neighbouring municipalities, or jointly-owned municipal bodies. 3.(1)12. The municipality s commitment to provide opportunities for municipal residents and other interested parties to provide input into the municipality s asset management planning.

45 DEVELOPMENT Example 1: The ultimate goal of the municipality is to efficiently provide its various stakeholders with the municipal services they need within the bounds of regulatory requirements, the built environment, and the natural environment. In order to achieve this goal, it is necessary that the municipality understand the needs of current stakeholders, consider the needs of future generations, and incorporate these perspectives into asset management plans. The municipality recognizes them as an integral part of the asset management approach. Accordingly, the municipality will: Provide opportunities for residents and other stakeholders served by the municipality to provide input in asset management planning; and Coordinate asset management planning with other infrastructure asset owning agencies such as municipal bodies and regulated utilities. Example 2: The municipality recognizes the residents, businesses, institutions on its territory as stakeholders and neighboring municipal bodies, provincial agencies, and regulated utilities partners in service delivery. Accordingly, the municipality will foster informed dialogue with these parties using the best available information and engage with them by: Providing opportunities for residents and other stakeholders served by the municipality to provide input in asset management planning; and Coordinating asset management planning with other infrastructure asset owning agencies such as municipal bodies and regulated utilities. 45