Asset Management Planning: Legislation & Integration

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1 Asset Management Planning: Legislation & Integration AMCTO Conference Dan Wilson, Director Watson & Associates Economists Ltd. Val Sequeira, Director of Corporate Services/Treasurer Town of Gravenhurst June 14, 2017

2 Agenda 1. Asset Management Introduction 2. Infrastructure for Jobs and Prosperity Act (IJPA) Draft Regulation 3. Asset Management Integration 4. The Town of Gravenhurst Experience 5. Questions/Comments 1

3 AMCTO Conference ASSET MANAGEMENT INTRODUCTION 2

4 Asset Management the set of planned actions that will enable the assets to provide the desired level of service in a sustainable way, while managing risk, at the lowest lifecycle cost Balancing lifecycle costs and levels of service 3

5 Asset Management in Ontario Recent push in asset management: Started with PSAB 3150 Moving towards being a requirement. Federal Gas Tax Agreements (Canada wide) Asset Management Frameworks (Canada wide) Provincial Funding (Ontario) Development Charges (Ontario) IJPA & Draft Regulation (Ontario) Great internal tool for infrastructure planning & identifying capital priorities. 4

6 AMCTO Conference INFRASTRUCTURE FOR JOBS AND PROSPERITY ACT & DRAFT REGULATION 5

7 Infrastructure for Jobs and Prosperity Act (IJPA) Proclaimed on May 1, 2016 Authority for the Province to regulate municipal asset management planning Purpose: Implement best practices Provide a degree of consistency AND flexibility Support collaboration between municipalities and with the Province 6

8 Draft Regulation Overview Asset Management planning is essential Need effective plans to take are of infrastructure Need to better understand infrastructure needs Foundation of improving long-term sustainability Federal, Provincial, Municipal governments need to work together Phased implementation Building on the 2012 asset management guide 7

9 2012 Ontario Building Together Guide Guide documents the components, information and analysis that are required to be included in an asset management plan 1. Executive Summary 2. Introduction 3. State of Local Infrastructure 4. Expected Levels of Service 5. Asset Management Strategy 6. Financing Strategy 8

10 Draft Regulation Strategic Asset Management Policy Develop & adopt by January 1, 2019 Review and update every 5 years Content: Which municipal goals/plans/policies the AM Plan would support (i.e. official plan, strategic plan, ) How the AM Plan would affect the development of the budget and any long-term financial plans Approach to continuous improvement and adoption of best practices 9

11 Draft Regulation Strategic Asset Management Policy Principles that would guide AM Planning Including principles from section 3 of IJPA A commitment to consider: Actions that may be required to address risks/vulnerabilities that may be caused by climate change Mitigating approaches to climate change (such as greenhouse gas emission reduction goals/targets) Disaster planning (with any required contingency funding) Process to ensure that AM Planning would be aligned with Ontario s land use planning framework 10

12 Draft Regulation Strategic Asset Management Policy Capitalization thresholds used for the AM Plan, and how this compares to the municipality s TCA policy Commitment to coordinate planning between interrelated assets with separate ownership structures (i.e. collaborative opportunities) Identify who is responsible for AM Planning, including an executive lead and how Council is involved Commitment to provide opportunities for public input 11

13 Draft Regulation Municipal Asset Management Plans 3 phases: Phase 1 core infrastructure, by Jan 1, 2020 Phase 2 all assets by Jan 1, 2021 Phase 3 further details on all assets by Jan 1, 2022 Additional requirements for municipalities above 25,000 population Core infrastructure: roads, bridges, culverts, water, wastewater, storm 12

14 Draft Regulation Municipal Asset Management Plans Inventory Analysis Phase 1 & 2: Summarize by asset class (type, quantity, replacement value, average age) Approach to condition assessments (industry accepted engineering practices) Summarize condition information Phase 3: Update inventory from phase 1 & 2 13

15 Draft Regulation Municipal Asset Management Plans Levels of Service (LOS) Phase 1 & 2: Current LOS Community vs technical (for core infrastructure) Performance measures Cost to sustain current LOS Lifecycle costs, and assumptions regarding future growth Phase 3: Proposed LOS Community vs technical (for core infrastructure) Performance measures Outlined each year for a 10-year period 14 Why are proposed LOS appropriate? How they differ?

16 Draft Regulation Municipal Asset Management Plans Lifecycle Management Strategy (LMS) Phase 1 & 2: Municipalities over 25,000 population Estimated costs to service growth Lifecycle costs required for new construction, and upgraded capacity (including extension of services) GGH growth demands must conform to Growth Plan for GGH Analyze links between providing LOS, costs and impact on growth Encouraged for smaller municipalities 15

17 Draft Regulation Municipal Asset Management Plans Lifecycle Management Strategy (LMS) Phase 3: Outline lifecycle management strategies needed to maintain proposed LOS and manage risk Consideration of full lifecycle costs Options examined by the municipality to reduce overall lifecycle costs Green infrastructure Non-infrastructure solutions Demand management Conservation measures Summary of lifecycle activities for 10 year period, aligned with LOS analysis 16

18 Draft Regulation Municipal Asset Management Plans Financing Strategy Phase 3: Align with proposed LOS Estimated capital forecast (lifecycle costs) Revenue dedicated to capital financing Capital reserve contributions/withdrawals Debt service payments Municipalities over 25,000 population Financing Strategy to service growth (revenues, costs) Encouraged for smaller municipalities Outline ongoing funding shortfalls, and how to address shortfalls 17

19 Draft Regulation Municipal Asset Management Plans Risk Analysis Phase 3: Municipalities over 25,000 population Overview of risks associated with the AM Plan Ways the AM Plan could fail to provide proposed LOS Actions proposed in response to the risks Encouraged for smaller municipalities 18

20 Draft Regulation Other Update the AM plan at least every 5 years after Jan 1, 2022 Approval In writing by a licensed engineering practitioner and the executive lead Annual Progress Update to Council starting in 2021 Post strategic AM policy and AM plan on the municipality s website Copies available to the public Reporting to the Province Actuals every year, projections at least every 5 years 19

21 Draft Regulation Other Recognition of the linkages between this regulation and Safe Drinking Water Act, 2002 Development Charges Act, 1997 Support from the Province: Training, support team, resources, sample documents The regulation was posted May 25, 2017 and is going through a 60 day public review Submit comments/questions by July 24,

22 AMCTO Conference ASSET MANAGEMENT INTEGRATION 21

23 22 Asset Management Process Policies and Strategies Integration Continuous Improvements, Updates & Monitoring Tools (Software) Internal Governance and Ownership Council Approval and Support Public Engagement and Communication 22

24 Asset Register Integration Customer Expectations Strategic LOS Technical LOS Component Replacement Value Asset Listing Component Useful Live Component Life Cycle Profile Historical Cost Valuation Asset Register Condition Assessments Maintenance Mgmt Performance Ratings Risk Assessments Capital Budget Criticality & Capacity Long Term Plan (20 Years) Financial Strategy PSAB 3150 Reporting 23

25 LOS Integration Strategic Plan? Departmental Strategies? Asset Capacity, Functionality? Operational Procedures? Other Documents? Services Customer Expectations Customer (Strategic) LOS Technical LOS 24

26 AM Integration High-level decisions on Levels of Service Organizational Strategic Plan Rehabilitation, Renewal & Replacement Expansion Input from Community drives: decisions regarding Levels of Service, Risk, Scenarios, Financial Analysis and Preferred Approach Official Plan Master Plans Secondary Plans Environmental Assessments Staff Reports Other Outputs generated from the Asset Management Process Asset Management Plan Budget Long-term Forecast Development Charge Background Study User Fee Rate Studies 25

27 Budget Integration Strategic AM Policies AM Strategy Financial Strategy Assets LOS Budget Process AM Process Operating Budget Capital Budget Long-term Forecast Reserves & Reserve Funds Debt Projections Other Revenues 26

28 GIS Integration

29 The Town of Gravenhurst Experience AMCTO Annual Conference Deerhurst Resort, Huntsville, Ontario June 14,

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31 Asset Management Long Term Financial Sustainability Plan Agenda Where We Came From An Asset Management Plan Is Important! What Was Done What We Learned Managing Our Assets Financing The Plan Moving Forward 30

32 Asset Management Long Term Financial Sustainability Plan Where We Came From Historical investment in maintaining/replacing/repairing assets low Significant commitments to new facilities further redirected resources away from asset management Resultant impact over the past three years: Asset deterioration required significant capital investment to replace/repair Emergencies related to facilities exceeded the norm Newer facilities also had structural problems 31

33 Asset Management Long Term Financial Sustainability Plan An Asset Management Plan Is Important! Prudent stewardship of assets ensures safe and seamless service delivery Provincial/Federal requirement of all municipalities for access to capital related grants Timely investment in asset management actually saves money in the long term Without a plan, the infrastructure deficit will worsen requiring drastic service decisions 32

34 An inventory of all Town assets; broken out into appropriate components; with an assessment of current asset condition/remaining life; an estimation of potential for asset failure/breakdown; the risk associated with asset failure/breakdown; estimated costs to replace assets; Asset Management Long Term Financial Sustainability Plan What Was Done a 20 year projection of costs for appropriate management of assets; and; a recommended financial strategy to pay for the plan. 33

35 Asset Management Long Term Financial Sustainability Plan What We Learned Historical investment in asset management had not kept pace with need so a significant infrastructure deficit exists The Town had a wide range of assets, some in good shape, others that required urgent attention Without an increase in resources in the immediate future (years 1-5) the infrastructure deficit will worsen Storm sewers, roads and bridges required the most urgent attention in the short term 34

36 Asset Management Long Term Financial Sustainability Plan Managing Our Assets The data gathered through this process will form the basis for the 2018 Capital Budget & Multi-Year Plan Projects will have to be prioritized based on potential risk and liability as the optimal scenario is not affordable Recommended operating/maintenance activities will be included in future operating budgets After years of reacting to emergencies and crises the Town now has a forward-looking plan to manage assets 35

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38 Asset Management Long Term Financial Sustainability Plan Financing The Plan Asset management has taken a back seat to other corporate priorities over the years Since 2016 Council has made a focused effort to increase investment in capital. It has made a difference, but the infrastructure deficit is still growing Developing a plan to finance the asset management plan requires due consideration of reserves, debt balances, and the impact on the tax rate 37

39 Analysis includes the following: Smoothing of impact of the 20 Year Asset Management Plan Maintenance/studies recommended by consultants Inflationary increase to operating budget of 2% a year Assumes no new revenues/projections for additional future grants Assessment growth projection of 0.5% per year After 8 years: Tax increases drop to inflation Capital reserves start to grow and become self-sustaining External debt starts to fall while internal debt is manageable The infrastructure deficit trend reverses Asset Management Long Term Financial Sustainability Plan Financing Considerations 38

40 Asset Management Long Term Financial Sustainability Plan Moving Towards Financial Sustainability Financial Goals/Constraints Reserve balances should not fall below zero Maximize use of Community Reinvestment Reserve Fund to finance capital in perpetuity Grow Capital Reserve Funds so Asset Management Program is fiscally sustainable in future Minimal external debt Manage external debt balances down Balance need with ability-to-pay 39

41 The Asset Management Long Term Financial Sustainability Plan is a comprehensive inventory of Town assets and lays out a path to prudent stewardship of these assets The financing plan provides a framework to work with while allowing for some flexibility subject to: Successful grant applications More aggressive assessment growth Review of asset data, capital project costing and priority Asset Management Long Term Financial Sustainability Plan A Significant Milestone Council approval of the recommendations in the report provided direction to staff to implement the plan 40

42 Asset Management Long Term Financial Sustainability Plan Moving Forward Integration into the organization: Implement a new capital budgeting system Develop a related Capital Budget & Multi-Year Plan Update Capital Asset Accounting Keep asset management plan current. Look to put into a system. Prioritize financing for capital as a strategic investment Create awareness/demonstrate that responsible asset management enables service delivery and enhances customer service 41

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