Proposed CAPITAL BUDGET. THE CITY OF EDMONTON CITY COUNCIL October 23, 2018

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1 Proposed CAPITAL BUDGET THE CITY OF EDMONTON CITY COUNCIL October 23,

2 OUR CAPITAL BUDGET Financial and Corporate Services Financial Strategies & Budget Opening Comments - City Manager Good morning - We re pleased to present the proposed Capital Budget. The City of Edmonton s Capital and Operating Budgets are about building a great city. They work together as two parts of an overall commitment to imagining and animating Edmonton. This Capital Budget is about the stuff that we build and maintain. It s about the new - and renewal of - roads, bridges, sidewalks, parks and facilities that we use every day. It s a mix of maintaining the infrastructure we have and building the infrastructure we need - all in benefit to 2

3 Edmontonians and their quality of life. It was thoughtfully prepared to help City Council make informed decisions on how best to prioritize and allocate available funding. I m enormously proud of the work done by City of Edmonton employees across the corporation to give you the most accurate data and analysis possible. And now I d like to hand the presentation over to Barry McNabb, Branch Manager of Financial Strategies and Budget.

4 PRESENTATION OUTLINE 1. Overview & Economic Context 2. Available Capital Funding & Debt Capacity 3. Capital Investments in ($4.3B) a. b. 4. New Infrastructure Growth ($2.3B) i. Previously Approved Transformational/Growth ($1.8B) ii. New Growth Projects ($0.3B Constrained/$0.2B Unconstrained) Renewal of Existing Infrastructure ($2.0B) Next Steps & Closing Remarks Financial and Corporate Services Financial Strategies & Budget Thank you Ms. Cochrane and Good Morning Mr. Mayor and members of Council In this presentation of the Proposed Capital Budget, I will begin by providing a brief overview of the development of the budget including the economic context in which it was prepared. I will then review the projected available capital funding over the timeframe, with Ms. Padbury then discussing the debt capacity of the City of Edmonton to finance capital investments. Mr. Meliefste and Mr. Leeman will then review at a high level the $4.3 Billion of capital investments recommended by Administration as part of the Capital Budget 4

5 including: the continuation of transformational and other growth projects during the timeframe in the amount of $1.8 billion that were previously approved by City Council the proposed new growth projects Administration is recommending for based on $306 million of constrained and $241 million of unconstrained available funding, and the renewal of the City s existing infrastructure in the amount of $2 billion. and then finally we ll look at next steps following today s presentation working towards Council deliberations and approval of the budget in late November and early December, with Ms. Cochrane providing closing remarks.

6 OVERVIEW OF CAPITAL BUDGET Capital Investment Outlook (Council April 2018) Limited available funding for new projects Council reconfirmed priority on renewal Proposed Capital Budget Guided by: Council's strategic goals Principles & prioritization criteria (Council June 2018) Capital Project Governance (C591) Financial and Corporate Services Financial Strategies & Budget The foundation for the development of the Proposed Capital Budget is the 10-year Capital Investment Outlook that was presented to Council in April The Capital Investment Outlook identified a potential funding gap of $3.8 billion over the next 10 years, with $15 billion of projected funding being available for $18.8 billion of potential infrastructure investment. As part of the guidance and direction received during the discussion of the Capital Investment Outlook, Council reinforced the need to continue to invest in the renewal and maintenance of the City s existing infrastructure. This direction has been reflected in the Proposed 6

7 Capital Budget, as Mr. Leeman will discuss further in this presentation. The development of the Proposed Capital Budget has also been guided by: the City s strategic planning framework and four strategic goals which were approved by Council earlier in the year the capital planning principles and prioritization criteria used in prior budget cycles which were reaffirmed by Council on June 26, 2018, and the Capital Project Governance Policy A key element of the Capital Budget is its alignment with the Capital Project Governance policy and in particular the project development and delivery model, which Mr. Meleifste will be reviewing in a few moments

8 CONTEXT FOR CAPITAL BUDGET (Economic Outlook/Emerging Issues) Constrained Capital Budget Continued economic uncertainty (oil prices, tariffs) Moderate population (1.9%)/economic growth (2.5%) Rising interest rates & borrowing costs Emerging Issues Could Impact Budget Metropolitan region, annexation, grant funding In depth Economic Presentation ( Operating Budget Nov 7/18) Financial and Corporate Services Financial Strategies & Budget The development and execution of the proposed Capital Budget is very much dependent on the state of the municipal, provincial and global economies. The Province and City are gradually recovering from the significant and prolonged downturn in the economy that began in mid and this gradual improvement and growth is expected to continue over the next four years with moderate population and economic growth of 1.9% and 2.5% respectively. However, economic uncertainty and volatility is also expected to continue with fluctuating oil prices and potential US trade restrictions and tariffs. This economic uncertainty could impact the projected 8

9 capital funding over the next four years, including the timing and amount of federal and provincial grants. This economic uncertainty, along with rising interest rates, could also impact the cost and delivery of projects included in the capital budget. And finally there continues to be emerging issues that could impact the proposed Capital Budget going forward, including potential shared investment in the greater metropolitan region and the growth in City boundaries through annexation Administration will be providing a more in-depth analysis of the economic outlook and the continued growth of the City on November 7 as part of the presentation to City Council of the Proposed Operating Budget.

10 CAPITAL FUNDING & DEBT Financial and Corporate Services Financial Strategies & Budget This next slide provides a breakdown of the projected available capital funding and debt included in the Proposed Capital Budget. It is important to note that debt is not a funding source in itself but rather a method of financing capital projects. The issuance of debt is an important tool to allow the City to complete its capital infrastructure, including providing matching funding in order to qualify for provincial & federal grants. The Capital Budget includes $824 million of debt financing in with an additional $94 million in 2023 & beyond. This debt financing is for the continuation of transformational and other growth projects previously 10

11 approved by City Council. Given the current economic and funding constraints, and the need to maintain sufficient debt capacity for future transformational and emerging projects including the continued build-out of LRT, Administration has not included the issuance of debt to finance any new proposed projects in the Capital Budget. Administration has provided a list of unfunded projects in the Proposed Capital Budget that were rated as important to the City through the Corporate Prioritization Process that would be eligible under the City s debt funding policy if Council chose to do so. Mr. Melifste will be reviewing these projects in a few moments later in this presentation. So as also shown on this slide, the City s ability to execute on its capital program is very dependent on obtaining funding from the federal and provincial governments which comprise $2.1 billion, or nearly 50% of the total $4.3 billion of funding excluding debt financing. this grant funding will assist with the continued renewal and maintenance of the $30 billion of existing infrastructure and facilities as well as the completion of other transformational projects including Yellowhead Trail and the LRT buildout.

12 GRANT FUNDING Provincial MSI $244M reduction for 2018 to 2021 ($61M/yr) Impacts both renewal (90%) & new growth projects Grant Funding Not Included in Budget Future LRT Buildout Federal PTIF - $878M; Provincial - $1.5B Green Infrastructure and Affordable Housing Financial and Corporate Services Financial Strategies & Budget Notwithstanding this, the City continues to be challenged by reductions in Provincial funding. As part of the 2018 Provincial Budget announced in March, the Province reduced the MSI funding to the City of Edmonton by $244 million in total from 2018 to this equates to an average decrease of $61 million per year from the $270 million of MSI funding previously projected for This projected reduction in MSI funding has a direct impact on the Proposed Capital Budget. This includes renewal investment being held to 90% of the ideal recommended levels, and limited unconstrained funding being available 7

13 to execute on a number of important new growth projects. The City is engaged in discussions with the Province on a new fiscal framework that would commence when MSI ends in March At this time it is uncertain how much funding will be provided under the new framework or what projects would be eligible. There are also a number of Federal and Provincial grant funding programs that the City will be eligible for in coming years that have not been incorporated into the Proposed Budget: This includes the $878 million of PTIF Phase II funding (public transit infrastructure funding) announced by the Federal Government as well at the City of Edmonton s $1.5 billion share of the $3 billion of LRT funding announced by the Province for Edmonton and Calgary over the next 10 years. This also includes Green Infrastructure and Affordable Housing funding as part of the bilateral agreement between the federal and provincial government. The City has submitted a number of applications and is continuing to assess civic priorities and other

14 potential projects that may be eligible for funding under these programs going forward. Ms. Padbury will now discuss the CIty s debt levels and debt capacity in further detail.

15 DEBT LEVELS AND AVAILABLE CAPACITY Financial and Corporate Services Financial Strategies & Budget The graph on this slide shows the City s total outstanding debt forecast for the next 10 years. The top of the bars represents the Municipal Government Act debt limit. The bottom three bars represent all debt previously approved by City Council. The striped bar represents the impact of the potential new projects identified in the capital budget as being debt eligible. While this graph identifies debt eligible projects the operating impacts of those projects (including debt servicing) has not been contemplated in the operating budget. The light green bar shows a range of total debt room that must be considered and reserved for future LRT expansion. The range shown for LRT expansion allows for uncertainties relating to the projects, 15

16 including delivery methods and funding. The solid purple bar represents remaining room available. You can see from the graph the available future debt room is constrained after 2022 which could limit future capital decisions, fiscal flexibility and the City s ability to use debt for emergent items and constrain the City s ability to match future federal and provincial funding.

17 DEBT LEVELS AND AVAILABLE CAPACITY Financial and Corporate Services Financial Strategies & Budget This next graph illustrates the impact of approved capital on the City s internal tax-supported debt servicing limit as defined by the Debt Management Fiscal Policy. Again the top of the bars represent the total internal debt servicing limit in millions of dollars. The portions of the graph beneath the striped bar represent tax-supported debt servicing for approved capital projects. The striped bar represents projected debt servicing for new projects identified in the capital budget as debt eligible. While identified on this graph, the debt servicing for these projects has not been identified in the operating budget. The light green line again represents the range of debt servicing required for LRT expansion allowing for 17

18 uncertainties relating to the projects, including delivery methods and funding. Once again the solid purple bar represents the available future debt servicing room. You can see from the graph that debt servicing under the City s current Debt Management Fiscal Policy becomes constrained in 2022 and depending on the level of funding and method of procurement for future LRT Projects the use of debt in the next capital cycle may be constrained by the current policy. The impact of this constraint, as indicated earlier, could limit future capital decisions, fiscal flexibility and the City s ability to use debt for emergent items as well as constrain the City s ability to match future federal and provincial funding. I will now turn the presentation backover to Mr. McNabb.

19 PROPOSED CAPITAL INVESTMENTS Financial and Corporate Services Financial Strategies & Budget Having now discussed the available capital funding and debt capacity, the next set of slides will focus on the capital investments included in the proposed Capital Budget: This initial slide provides a breakdown of the $4.3 billion of proposed capital investments for 2019 to 2022 into renewal and growth: $2.0 billion (or 45%) of the total capital investment has been earmarked for the renewal of the City s existing infrastructure, of which Council has approved $0.1 billion in previous decisions. The remaining $2.3 billion (or 55%) of the total capital investment is for the design and delivery of 19

20 new growth projects. This includes $1.8 billion in for the continuation of transformational and other growth projects previously approved by City Council And $0.5 billion for proposed new growth projects of which $306 million is tied to constrained funding and $241 million is available from unconstrained funding sources. So of the $4.3 billion of total investments included in the Proposed Capital Budget, City Council has previously approved $1.9 billion with the remaining $2.4 billion of proposed investments being requested for approval as part of this Budget. I will now turn the presentation over to Mr. Meliefste and Mr. Leeman to discuss these proposed growth and renewal investments in further detail.

21 NEW INFRASTRUCTURE GROWTH PROJECTS Financial and Corporate Services Financial Strategies & Budget This next part of the presentation focuses on the Project Considerations and General Overview as it relates to GROWTH. 11

22 PREVIOUSLY APPROVED GROWTH PROJECTS Previously Approved Growth Projects $1.806B in ; $0.825B in 2023 & Beyond Transformational Projects Yellowhead Trail Freeway Conversion LRT Expansion Valley Line Southeast Blatchford Redevelopment Financial and Corporate Services Financial Strategies & Budget In developing the approach to the Capital Budget for , Administration started with a review of the previously approved projects. City Council has previously approved funding for initiatives that extend beyond the budget for either; 1) Transformation Projects where the Delivery span multiple budget cycles, or 2) Key Projects that were advanced to take advantage of specific grants available, or 3) to align with co-funded or Partner projects. The total value of these pre-approved projects represents a total of $1.8B in cashflow in the and a further $825M cashflowed in 2023 and beyond. 22

23 In addition to the Transformation projects listed in the slide (which includes Yellowhead, Valley Line, and Blatchford), this funding is also represented by other large significant projects such as; 50 Street / CPR Underpass ~$100M Coronation Rec Centre $112M PTIF Program - Phase 1 $288M

24 CAPITAL BUDGET PROCESS FLOW Limited Funding for New Growth Projects Constrained = $306M; Unconstrained = $241M CAPITAL INVESTMENT OUTLOOK CORPORATE PRIORITIZATION PROCESS DEPARTMENT CONSULTATIONS/ DISCUSSIONS COUNCIL DISCUSSIONS CURRENT PROJECT LIST Health and Safety Integration with Renewal Provincial Coordination Leveraging Funding (Partner & Governments) Financial and Corporate Services Financial Strategies & Budget In terms of available funding, Administration has been able to confirm $306M of available Constrained Funding. Constrained Funding is funding that has specific parameters in terms of how it can be applied as a capital funding source. This is primarily attributed to CRLs (with projects restricted within a geographic area) and Land Enterprise (which includes restrictions in terms of its use land assembly and development). It also includes other smaller reserve accounts included in this category. This leaves approximately $241M of unconstrained funding available over the total 4 years of the capital budget, or approximately $60M per year. This amount of funding has presented challenges in terms 24

25 of the approach in recommending projects to put forward for consideration. This isn t to suggest that projects not funded, are not a priority, but simply a rationalization of approximate $18B of needs identified in the 10-year CIO against $241M (or $547M including constrained funding) available for this 4-year Capital Budget. The Corporate Prioritization has been helpful in establish a first cut of ranking of projects best aligned with Council s Priorities. That said, there are further considerations or filters that have been applied to rationalize the recommendations included in the budget presented today. The first is health & safety and other legislative changes. This includes providing essential provisions for the very basic needs of a safe work environment for employees as well as responding to various new safety codes or safety legislation. An example of this is can be found in City Operations where projects are being advanced that provide basic washrooms at various sites or in Citizen Services where improvements to the chlorination systems in pools are being recommended.. The second is integration with renewal. This has to with the risk of Renewal Investments and Growth Investments being properly integrated to take advantage of opportunities to sequence/program the work in a cost

26 effective manner. An example of this is related to Imagine Jasper Avenue or the Fire Station Gear Rooms where these projects are cross-referenced with high priority renewal locations.. The third relates to provincial coordination. This includes examples such as parkland base level development to correspond with funded school construction. It similarly includes roadway planning coordination with Provincial Roadway projects. The last filter speaks to leveraging funding with Partner groups.. This includes programs like Roots for Trees, Neighbourhood Park Development Program, Shared Park Development Program, or River Valley Alliance all which contribute to achieving outcomes at a discounted rate.

27 CAPITAL PROJECT GOVERNANCE POLICY (C591) Project Develop & Deliver Model (PDDM) Checkpoint 1 - Capital Investment Outlook Checkpoint 2 - Authorization for Design Expenditure Checkpoint 3 - Capital Budget Approval Checkpoint 4 - Authorization to Construct Checkpoint 5 - In-Service Financial and Corporate Services Financial Strategies & Budget This budget looks and functions significantly different than past capital budgets. This is largely as a result of the recently approved Capital Project Governance Policy C591 which is designed to improve the information that Council receives from Administration as it relates to project Scope, Schedule, and Budget. This approach is consistent with other public utilities or private companies with large capital investments. The result is anticipated to improve project performance and improve Council s ability to make informed decisions. Policy 591 translates to an administrative process referred to as the Project Develop & Deliver Model. Many of the projects listed in the capital budget are currently at 27

28 various levels of maturity represented by checkpoints described in this Model as shown on the slide and referenced in the budget document. These checkpoints correspond to the various phases of the project lifecycle spanning from Strategy to Operate. In past Capital Budgets, many of the projects approved were at approximately checkpoint 1. Council approved them once. The intent with the model is that Council will approve projects twice, once representing the Develop phase (checkpoints 1->3), and a second for the Deliver phase (checkpoint 3>5). With this enhanced approach, it s important that Council not only provide direction as it relates to Deliver or Build priorities, but provide similar thoughtful consideration to the priorities related to Develop or Planning & Design. Briefly expanding on this, if a project is currently at checkpoint 1, the initial funding to be considered for approval would be for the Develop work. Once a project has completed this work and advanced to checkpoint 3 the project would then presented to Council for approval for Delivery. At this point the project would be created as a standalone profile to ensure transparency and allowed for improved oversight and accountability by Council to Administration as it relates to project performance. The

29 project and associated funding could be presented as an emerging priority for Delivery funding in a future SCBA, or the funding can be held in both the Develop and Delivery composite profiles as part of this 4-year capital budget process.

30 RECOMMENDED NEW GROWTH PROJECTS Financial and Corporate Services Financial Strategies & Budget All things considered, Administration has recommended a portfolio of projects across various lines of business including Infrastructure, IT, Fleet, and Partner. The funding put forward includes, where applicable, funding distinctly for either Develop and Delivery. In Building Great Neighbourhouds there are items to continue work on the concept of Community Hubs, and Industrial Neighbourhoods, as well as continuing the core work of Building Great Neighbourhoods integrated with the Neighbourhood Renewal program as aligned with separate reports to Council earlier this year. Facilities primarily includes projects responding to Health & Safety, such as addressing the risk of Chlorinated gas in 30

31 pools, and off-gassing from Fire Gear Rooms. Transportation includes the first/initial stage of Jasper Avenue ( Street) and the next phase of 105 Avenue ( Street). Both sections of road are in poor condition. The investment identified in the growth category corresponds with the base renewal funding found in other programs. Open Spaces includes base level park development for various sites where Schools are under construction or will be built in the next 3 years. It also includes basic core programs such as tree canopy growth, and continuing work with cemetery development to keep the supply of services in alignment with demand. Information Technology includes amounts primarily for the implementation of eprocurement and Information Security and Disaster Recovery Enhancements, as well as other IT growth. Fleet includes new apparatus for Fire Rescue Services, as well as additional snow plow clearing equipment. The total of these recommendations makes up the $241 million made available from Unconstrained sources. Projects funded by Constrained Sources accounts for $306 million and is mainly comprised of land acquisition and development ($188M as well as projects funded through

32 community revitalization levies ($94M) (Jasper Avenue New Vision, Green & Walkable Downtown, Warehouse Campus Nbhd Central Park) More information on the complete list of projects can be found in each of the corresponding profiles listed on this slide.

33 POTENTIAL DEBT FINANCED PROJECTS PROJECT STATUS Lewis Farms Recreation Centre, Library and District Park Checkpoint 4 Terwillegar Drive - Expressway (Phase 1) Checkpoint 2 Edmonton Soccer Association - South Soccer Centre Expansion Checkpoint 4 Valley Zoo Nature s Wild Backyard - Phase 2 Checkpoint 3 Stadium LRT Station Upgrade Checkpoint 2 EPS Firearms Facilities Checkpoint 2 On-Site Microgeneration Solar Photovoltaics Checkpoint 1 LED Streetlight Conversion Checkpoint 1 Ambleside Integrated Operation Site (Stage 1) Checkpoint 2 Financial and Corporate Services Financial Strategies & Budget This still leaves some large funding decisions on other Council high priority projects that have been advancing over the past few years. The combined value of the projects listed on this slide are in excess of $600M, or almost 3 times the amount of the available unconstrained funding available. Administration worked through the balance of high priority projects and reconciled them against the Debt Policy to come up with this initial list. This list is not complete or extensive and could vary based on the considerations and decisions by City Council. For projects that have not advanced to Checkpoint 3, the initial funding through Debt would include the remaining 33

34 funding to complete the Planning & Design, whereafter the results would be presented to Council and the borrowing bylaw would be updated to reflect the Delivery amount.

35 RENEWAL OF ASSETS Financial and Corporate Services Financial Strategies & Budget I will now turn things over to Mr. Leeman to discuss the Renewal Program 17

36 WHY RENEWAL? We renew to ensure the asset is performing for its intended use We ensure existing infrastructure is operating in an efficient manner and condition We renew to extend the service life of our infrastructure Renewal is guided by the Infrastructure Strategy and the Infrastructure Asset Management Policy (C598) Financial and Corporate Services Financial Strategies & Budget There are many reasons we, as a municipality, reinvest in our infrastructure. To provide services, our infrastructure needs to be in good working order; operating in an efficient manner, and condition. We renew our assets to extend the service life, essentially ensuring we get the most we can out of our investment. By continuing to renew our assets throughout their lifecycle, we will save resources, and maximize the value of our assets as it relates to the services they provide. Our latest reports indicate that 49.2% of our assets are in Good and Very Good physical condition. However, 40.5% are in Fair condition with the remaining 10.2% in Poor and Very Poor condition. 36

37 Our renewal decisions are guided by the Infrastructure Strategy and the Infrastructure Asset Management Policy. These documents provide guidance to assist in a systematic approach to asset management; ensuring we realize value for our assets. The Policy provides 5 Key principles that shape intent for the practice of asset management in Edmonton - Service Delivery to Stakeholders, Long Term Sustainability and Resiliency, An Integrated, Holistic Approach, Investment Decision Making, and Innovation and Continuous Improvement. Keeping our Asset Management Strategy and Policy top of mind as we identify and address our renewal needs for the next four and 10 years assists to ensure we are renewing the right assets, at the right time, using our available resources as effectively as possible.

38 WHAT IS RIMS AND THE ALLOCATION METHODOLOGY? RIMS is a Made in Edmonton, Risk-Based Infrastructure Management System RIMS is used to assess the rehabilitation needs of the City s assets RIMS uses basic asset information to support allocation of available funding such as; An asset s current physical condition The target physical condition Renewal and investment options/costs Expected lifecycle deterioration curve These inputs model the effect of different investment options and their timing throughout the life of an asset Financial and Corporate Services Financial Strategies & Budget One of the first steps in the development of this budget was the use of RIMS to assess our renewal funding needs. RIMS, or the Risk-based Infrastructure Management System, is a made in Edmonton solution developed to assist in the process of deciding what to fund, and to what degree reinvestment is required. RIMS has been used since 2012 and uses an assets current physical condition, its target physical condition, renewal investment options, and expected life cycle deterioration curves to model the effect of different investment options and their timing throughout the life of the asset. Ideally, the condition of any asset will fall within an acceptable tolerance range or standard. This tolerance,

39 or conversely, the physical condition beyond which the deterioration is unacceptable, differs for every asset. The physical standard is dependent on the type of service the asset is providing, the risk to the City if it fails, and the best combination of investment and performance to maximize the life of the asset, at a minimized cost.

40 INVESTMENT AND ASSET CONDITION Financial and Corporate Services Financial Strategies & Budget The graph you see in front of you provides a snapshot of historical investment compared to the percent in poor and very poor condition. As you can see, with significant levels of reinvestment, we have been able to reduce the percent in poor and very poor condition from a high of 17% in 2011 to 10.2 percent in Using RIMS, modeling was performed to understand both ideal funding levels, and reduced funding scenarios to determine the impact of investment on asset performance. As Mr McNabb mentioned, administration is recommending funding for renewal of approximately $488M/year, or just under $2 billion for the capital cycle. To be clear, this is a reduction from the RIMS ideal 40

41 allocation of $2.1 billion as discussed earlier this year in the Capital Investment Agenda, and is based on the premise of preserving the same amount of PAYG and MSI funding dedicated to renewal in the proposed Capital Budget as was used in the previous Capital Budget. In the face of continued need to reinvest in our existing assets, reduced Provincial MSI, and mounting growth pressures, Administration believes this to be a prudent compromise in the balancing of these risks. Funding dedicated by Council to particular assets or programs, namely Neighbourhood and alley renewal, and non-transit fleet assets, is preserved in this budget. With this funding proposal, we project that the overall condition of assets in poor and very poor condition will increase again over time. Although Administration believes this is manageable. In addition, in the coming years Edmonton will experience an increase in the amount of assets in Fair condition, as assets currently in Good and Very Good condition deteriorate. Without reinvestment, these assets could continue their downward trend to poor and very poor condition. The longer the required renewal of municipal assets is deferred, the more deterioration impacts are felt and the more expensive it becomes to bring these assets back to

42 an acceptable condition. As in previous budgets, Administration will do all it can to find the optimum balance of investment between poor and fair condition assets in order to minimize long term costs and address current risk. During the next set of slides, I will unpack how funding will be distributed throughout the asset base, the extent of the reductions to the RIMS ideal budget, and some of the systemic improvements Administration is undertaking in managing the renewal budget.

43 PROGRAM AREAS OPEN SPACES Traffic Signals Street lighting Transit Priority Signal Pedestrian Signals ITS Overhead Sign Structures Public Transit LRT (bricks & mortar) Park and Ride Transit/LRT Centres Bus Stops Goods Movement Interchanges Rail Crossings Safety Minor Arterials Major Arterials Soft Landscaping Environmental Trees Shrub & Flower Beds Roadway Landscaping Active Modes River Valley System Main Streets Complete Streets Bike Pedestrian Bridges & Structures Bridges & Culverts Noise Walls Retaining Walls Guardrails Auxiliary Stairs Land Remediation Slope Stability Erosion Repairs Snow Storage Facilities Trails Staircases River Access Roads Parking Lots Neighborhoods LRT Park and Ride Transit Priority Transit/LRT Centres Parks Parking Lots Roads / Trails Utilities Site Amenities Sportsfields Artificial Turf Open Spaces / Facilities Stormwater Facilities Cemeteries Golf Courses Valley Zoo Fort Edmonton Fleet and Equipment Partner NPDP Renewal Service Delivery Transit/LRT Centres ECO Stations Recreation Centres Arenas / Aquatic Facilities Seniors / Community Cultural Centres Information Technology Safety and Security Service Support Fire Stations Police Stations Emergency Management Fleet Garages Service Yards Waste Facilities Admin Offices & Operational Centres Training Centres Transit Garages Public Transit Bus Fleet Transit Communications & Signals LRV Fleet Specialized Equipment TRANSPORTATION FACILITIES Traffic Systems Financial and Corporate Services Financial Strategies & Budget The groupings of assets shown on this slide represent the service areas we considered as we allocated the renewal dollars. This approach was taken to not only reflect how we are managing our assets and provide service to citizens, but to also achieve the best value for our investment dollar. Currently, within Integrated Infrastructure Services, assets are supported in three main categories; Transportation, Open Spaces, and Facilities. Other areas within the City are responsible for the asset management needs of Specialized Equipment assets such as Fleet, Equipment, Information Technology, and Transit rolling stock. As we continuously improve, the categorization of assets may be adjusted to improve their 43

44 management and improve transparency to Council and the Public. Renewal projects are prioritized within the program to achieve the best results for the city overall. This is done by building a priority list of renewal actions, then parsing and optimizing these actions into an effective program of projects. Individual asset current condition, while important to prioritization, is not the only consideration when a renewal project is considered. Administration looks at several factors to determine renewal priorities, such as: the long term plans for the asset, the asset s impact on level of service, the consequence of failure, and the capacity for the capital investment to reduce or avoid future operational costs. Once a broad prioritization of projects has been developed, Administration applies a strategic filter to the list, optimizing the projects within the program. This optimization considers factors such as: timing of adjacent or connected projects, geographic alignment of the work, financial effectiveness, strategic alignment,

45 and the assets functional adequacy and availability of additional growth funding As renewal projects develop, information on scope, scheduling, and cost are further refined, producing a better picture of how the project impacts the overall development of the renewal program. Throughout the fiscal cycle, as projects advance and change from the original assumptions, the program is adjusted to accommodate these changes. Some projects will come in under expected costs and some over expected costs. Some projects will advance slower than planned, which will impact when expenditures will be made, and some new projects will emerge as high priority for the reasons mentioned earlier. In consequence, one project might be placed on hold, rescheduled, or phased to make room for another project. Managing our infrastructure at a program level allows us to be dynamic, in that we can adjust based on asset needs, availability of funding, and project readiness. Further information on some of these individual programs can be found in Attachment 1 of the report in front of you. Detailed lists of the prioritized projects can be found in Appendix A for each proposed renewal composite, a first in a proposed Capital Budget.

46 RENEWAL PROFILE FUNDING ALLOCATION COMPARED TO IDEAL RIMS ALLOCATION SCENARIO Financial and Corporate Services Financial Strategies & Budget As mentioned, we completed a number of different scenarios to find the optimal funding levels to support the reinvestment needs of our infrastructure. Administration is recommending today what was referred to as Scenario 1 in the CIO, which is a reduction to 91% of the recommended ideal investment as allocated by RIMS for assets funded with MSI and PAYG. Taking into account constrained funding, unconstrained, and previous commitments, the graph shown in this slide depicts the percentage of funding levels relative to the ideal, that Administration is recommending for the program areas. You will note there are disproportionate deficits in funding for technology equipment, transit, police, and library 46

47 renewal. The deficits in those categories are due to the reduction to 91%, as well as a recalculation of the RIMS allocation due to better data becoming available after the CIO was produced for police and transit, indicated by the grey area. Further to that, in the transit program a further reduction was applied, indicated in green, to compensate for the increase in transit renewal spending in the Capital cycle due to the PTIF program. Edmonton Public Library elected to not use a portion of the RIMS allocation of MSI and PAYG as they have other dedicated sources of funding. With respect to Technology Equipment, the top down RIMS approach was modified to one where the proposed investment in technology renewal was built project by project. The RIMS allocation model is not as easily applicable to technology assets as the rapid advancement of technology requires a unique investment approach. As can be seen, assets that have dedicated, constrained funding are proposed to receive their full allocation, as indicated in yellow on this graph. The bridge renewal program was also funded to the full RIMS allocation as this category was deemed of the highest priority relative to the others.

48 PROGRAM MANAGEMENT Asset Renewal is managed as a program to maximize value to the City Renewal activities are prioritized and then optimized to build a full renewal program for the fiscal cycle The program is continually reviewed and adjusted to accommodate emerging priorities (cost, schedule, scope) while retaining the parameters of the program allocation. Financial and Corporate Services Financial Strategies & Budget The last graph I would like to draw your attention to is the dollar breakdown of the recommended allocation per program area. Similar to the previous graph, which displayed the percentage of the program which would be funded, this graph provides a clear picture of the relative dollar values assigned to program areas. That concludes our presentation of the renewal program, Mr. McNabb will now walk Council through the next steps of the Capital Budget process. 23

49 CAPITAL BUDGET NEXT STEPS Councillors written questions - Nov 1 Administration responses to written questions - Nov 9 Non-statutory public hearing - Nov 15 Presentations from Civic Agencies - Nov 28 Council Deliberations - Nov / Dec 3-7,12,14 Operating Budget - Released Nov 1 and presented Nov 7 Financial and Corporate Services Financial Strategies & Budget Looking forward to next steps in the Capital Budget process after today: Councillor written questions on the proposed capital budget are due to the Office of the City Clerk by 4 pm on Nov 1 Administration will then provide responses to the written questions by 4 pm on Nov 9. On Nov 15 there will be a non-statutory public hearing to allow the public to present and provide input on the proposed Capital and Operating budgets Civic agency presentations on both the Capital and Operating budgets will occur on Nov 28 After which Council will begin deliberations And with that I will return the presentation back to Ms. Cochrane for closing remarks. 24

50 CITY BUILDING Financial and Corporate Services Financial Strategies & Budget CLOSING REMARKS - CITY MANAGER We ve just bombarded you with a lot of detail. But allow me to remind you of the City-building story. As this slide shows, each one of our Departments plays a critical role in bringing Edmonton to life: Building on your vision, Urban Form imagines the City we will become. Integrated Infrastructure Services builds that City. City Operations maintains your investments and operates our City infrastructure for the good of all Edmontonians. Citizen Services brings these spaces to life by animating through programs and services, the spaces and places 25

51 that we have built. These are the foundations of City building. Our other Departments and functions are enablers of successful, integrated and accountable civic stewardship. Corporate Strategic Development Branch translates the hopes and dreams of Edmontonians into a City Plan and cascading strategies to stay the course. Financial and Corporate Services ensures that our resources are properly deployed today and for the future. Employee Services creates the conditions for our 14 thousand staff to be successful as they do the important work of serving almost a million Edmontonians. Communications and Engagement is, in many respects, the connective tissue across the entire corporation that tells our story internally to staff and externally to those we serve. When all of these components work harmoniously together, we are truly doing our best work. This Capital Budget is filled with the roads, bridges, sidewalks,

52 that you will be considering in a few weeks brings our City structures to life. Together, these Budgets are not just building a City, they are building a future. It can be easy to lose sight of these things, so in closing we wanted to share a short video on what we believe is the Capital Budget. And then we re available to answer any questions you may have today. Thank-you.

53 Questions? Financial and Corporate Services Financial Strategies & Budget