Agenda Item # Page # BACKGROUND

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1 Agenda Item # Page # 1 TO: FROM: SUBJECT: CHAIR AND MEMBERS ENVIRONMENT 8 TRANSPORTATION COMMITTEE MEETING ON JANUARY 28,2008 PETER W. STEBLIN, P. Eng GENERAL MANAGER OF ENVIRONMENTAL & ENGINEERING SERVICES & ClTY ENGINEER INFRASTRUCTURE DEFICIT I RECOMMENDATION I1 That, on the recommendation of the General Manager of Environmental and Engineering Services and City Engineer this report regarding London s infrastructure deficit BE RECEIVED for information. It PREVIOUS REPORTS PERTINENT TO THIS MATTER 1 Wastewater & Treatment - 20 Year Sewer System Plan Background - Report to Environment & Transpottation Committee, Sept 26,2005 Water Distribution System Needs Study Update Final Report Project No. EW Report to Environment & Transportation Committee, Aug. 30, BACKGROUND As a result of the watermain break at Dundas and Wellington administration was asked to review and provide a report with respect to the overall state of London s infrastructure. On November 19, 2007 a presentation was made to Council highlighting the various funding gaps and illustrating the methods employed to mitigate these issues by each of the infrastructure service areas (Water, Sewer, Roads). That presentation is attached as Appendix A. Also in November the Federation of Canadian Municipalities (FCM) released Danger Ahead: The Coming Collapse of Canada s Municipal Infrastructure, a report indicating that the infrastructure deficit for Canada could be as high as $123 billion. In response to this report Council requested that staff quantify the portion of this national infrastructure.deficit that would be attributable to the City of London. RATIONALIZATION Additional estimates of this deficit have been previously provided by other expert groups. One such study, The Civil Infrastructure Systems, Technology Roadmap included contributions from various engineering and research organization including: The Canadian Society for Civil Engineering, the Canadian Council of Professional Engineers, the Canadian Public Works Association and the National Research Council of Canada. Estimates from this source do not directly correlate to the FCM report due to timing of the estimates and the infrastructure elements that each included. The following table compares the sources and summarizes the inclusions seeking to rationalize the timing differences between the studies.

2 Agenda Item # Page # 2 Comparing Sources (Reasonability) lnfrastructure Deficit ($ billions) The Canadian Council for Public-Private Partnerships 2002 Federation of Canadian Municipalities 2003 Federation of Canadian Municipalities 2007 Water & Wastewater $ 31 Transportation $ 16 $ 21 ultural, Social, & Community & ecreational Infrastructure $ 40 I NIA I NIA I [Comparable Subtotal 1 $50 I $54 I $92 I baste Management I N/A I $ 1 I $ 8 I Transit NIA $ 5 $ 23 Total $ 50 $ 60 $123 It should be noted that the FCM report also discussed the new infrastructure needs of municipalities. This was estimated to be in the order of $1 15 billion. This report does not seek to identify those growth and system improvement needs but to clarify the lifecycle needs of existing infrastructure. It is the conclusion of staff that the findings of these two studies are consistent and comparable and that the following analysis could reasonably be based on the data provided in the FCM study. METHODOLOGY It is important to note that estimates of this nature are built upon various assumptions, consolidated data and generalizations in terns of inflationary and growth impacts. With that in mind staff has attempted to quantify the City s infrastructure deficit to date using three different methods to determine a range of possible values. The range of London s deficit based upon the three methods employed is $825 to $920 million. Population-based London represents approximately 1% of the total population of Canada. Under the assumption that infrastructure needs and funding gaps are distributed across the country roughly in the same way that population is distributed then approximately $1.23 billion of the total deficit described by the FCM report would be attributable to London. For the grouping of infrastructure this report focuses on (Water, Sewer, Roads, Facilities) the corresponding amount would be $920 million. Various Condition Studies andlor Needs Analysis Under the heading of Asset Management studies are undertaken by the various infrastructure groups to determine the current state of their assets and the funds required to bring that state to an acceptable and affordable standard. The sources and the corresponding infrastructure gaps are highlighted in the graph and table below.

3 Agenda Item # Page # 3 Various Needs Analysis and Condition Assessments Total Water, Wastewater, Roads & Facilities Total $825 million t3 Water Wastewater Roads Faci I i ties Category Water Sewer Roads Facilities $ million I 250 Primary Source (Condition Studies andlor Needs Analysis) Water Distribution System Needs Study Update (2004), R.V. Anderson Associates Limited Current detail analysis of pending pipe projects combined with an updated estimate of treatment renewal needs based on the Wastewater Plan Completion and Bill 175 Requirements (2005) Earthtech Pavement Management System completed by consultant (Stanted and staff Life cycle building component condition analysis completed by consultant (Ameresco) and staff 20 Year Infrastructure Gap In the November 19' presentation Council was provided with an annual infrastructure gap for each of the service areas being reviewed. A very simple way to calculate this deficit is to take this gap and accumulate it for the past 20 years. This assumes that in 2008 dollars the gap has remained substantially constant for that period of time. However, in the early part of the past twenty years the gap may actually have been larger as funding has been increased in the recent past in some areas, for instance Sewer. No attempt has been made to capture the backlog created by the lesser funding in those early years. Using that methodology London's infrastructure deficit would be approximately $825 million.

4 ~ Agenda item # Page # 4 Future Outlook In the past few years some progress has been made to close the annual funding gap in the Water and Sewer areas. Long term plans are in place for both utilities and although the backlog is significant at present sustainability is achievable if we stay the course with the long term plans. Plans for future capital spending begin to address the gap for the Roads area as well. Again the backlog is significant and the roads system is not keeping up. More work is required to ensure that this funding continues to increase as planned or more quickly. Condition assessments identify significant capital needs for our facility operations. Maintenance and upgrades to our aging structures are vital to the well being of our community. CONCLUSIONS Based on these three methods of calculation London s share of the national infrastructure deficit is in the range of $825 to $920 million. There is no question that senior government funding would be of significant assistance to reduce this deficit and to avoid significant pressure on rates and tax increases. PREPARED BY: REGOMMENDED BY: L RICK BROWN DIVISION MANAGER ADMINISTRATIVE PETER W. STEBLIN, P. Eng I SERVICES GENERAL MANAGER OF ENVIRONMENTAL ENVIRONMENTAL & ENGINEERING & ENGINEERING SERVICES & SFRVICFS CITY FNGINFFR Appendix A - State of the Infrastructure Presentation November 19, 2007

5 CITY OF LONDON STATE OF THE INFRASTRUCTURE Building Canada Fund Replaces earlier programs $33 Billion over $ Billions Municipal GST Rebate $ 5.8 Gas Tax Fund $1 1.8 Building Canada Fund $ 8.8.Pu.blic-Private Partnership Fund $ 1.3 eeways and Border Crossings Fund $ 2.1., 1

6 .... FEDERAL PRO Building Canada Fund: City of London GST Rebate: $4.6 million (2007) Gas Tax Fund: $8.7 million in 2007 increasing to $10.9 million in 2008 and continuing at $21.9 million annually for $50 million for HELP Clean Water: conditional on framework '. agreement and provincial and municipal matching funds PROVINCIAL PROGRAMS Gas Tax for Transit: $1 1.2 million in 2007 decreasing to $8.8 million in 2008 Move Ontario-one year program 2006: $1 3 million OMPF: Ontario Municipal Partnership Fund: $14 million annually Up-load of ODSP and ODB phased in over four years estimated to save $14 to $28 million annually when fully.. ',implemented in 201 I 2

7 Federal MC National Transit Strategy Asking $2 Billion dollars annually I u r Ci t ies-ou r Future Long term predictable funding that grows with the economy to address the municipal infrastructure deficit estimated,at $60 - $1 00 Billion sting the eq,uivalent of one cent of GST - $5 Billion,....,,,.,. FEDERALIPROVINCIAL STRATEGIES Provincial AM0 $3 Billion gap campaign to address downloaded provincial costs to free up program spending for municipal priorities Reform of Development Charges Act to reduce statutory discounts and exemptions. \ Request for provincial share of HELP Clean Water 3

8 CANADA INFRASTRUCTURE INVESTMENT DEFICIT The municipal infrastructure gap as a percentage of national GDP has grown from 2.7% in 1984 to 5.0% in The municipal infrastructure gap is growing by $2 billion per year and the federal gas fax (when fully mature) will provide $2 billion per year. This only stabilizes the gap at roughly.;.,,..,..,. ;,...,',,..,.., :The Canadian Council for Public-Private Partnership 4

9 INFRASTRUCTURE ISSUES - PERSONAL HISTORY P. STEBLIN First Canadian Infrastructure Study 1984 Chaired InfraGuide Committee published numerous best practices spoken at numerous conferencedevents stantial experience on infrastructure issues GOOD INFRASTRUCTURE MANAGEMENT PRINCIPLES Good knowledge & appreciation Stable - predictable funding sources Avoid boomlbust expenditures Federallprovincial assistance required ion & ultimate cost 5

10 STRATEGIC PLAN One of Council's strategic priorities is: 1 nf ra structure Ftenawl~ I and Expansion MONITORING AND Benchmarking against other cornmun ities Annual reporting through report cards Measure our work through many systems (National Water Wastewater Benchmarking Initiative, OMBI, MPMP) 6

11 LONDON'S WATER INFRASTRUCTURE LONDON'S WATER INFRASTRUCTURE PLAN Independent funding - user rates Water Distribution Needs Analysis (Council Approved 2004) ~ej:l,:received 2007),.

12 --r_- c+na~~*> LONDON S WATER INFRASTRUCTURE PLAN 20 Year Plan adds $500,00O/year (1% Incr) Plan can be accelerated if funding available 20 yr+lo yr plan = further 1% incr. annually ati0.n may-be a requirement pending MANY COMPETING NEEDS FOR FUNDING 9 Infrastructure Repla cemen VReha bilita tion 9 System Improvements...r.owt h/ex pa ns i o n 8

13 Condition Assessment Factors Pipe age Break history Corrosion & soil type Materials Fire flow Pressure Critical customers Related road & sewer construction I MANY INFRAST RE-INVESTMENT PROGRAMS REQUIRED Main replacement Lead & lead loan program Main clean & reline Cathodic protection Abandon wells Meter replacement 9

14 2007 REPLACEMEN $30 - WATER LIFE CYCLE FUNDING $25. I II I I I rn.... $ 8 I 10

15 LONDON'S SEWER INFRASTRUCTURE SEWER INFRASTRUCTURE PLAN Independent funding - user rates Significant work and investment required 9 Significant historical debt istoric underfunding & aging infrastructure 11

16 -..--*. MANY COMPETING NEEDS FOR FUNDING 9 Infrastructure ReplacementLRehabilitation P System Improvements Adelaide Street - downstream sanitarj 12

17 MANY INFRASTR RE-INVESTMENT PROGRAMS REQUIRED 2007 REPLACEME 13

18 $40 $30 $25 $20 $15 $40 $5 $0 m Infrastructure Needs-_] I LONDON'S ROAD INFRASTRUCTURE 14

19 CIRAsA LONDON S ROAD INFRASTRUCTURE PLAN Long range plan not finalized Road Expenditures closely tied to tax rate Federal Gas Tax significantly helping -.I crwrrr,$ MANY COMPETING NEEDS FOR FUNDING 9 Infrastructure Replacemen VReha bilita tion 9 System Improvements 15

20 Condition Assessment Factors Pavement Age Pavement & Condition Survey Structural Condition Survey Ontario Worst Road Survey Complaints RE-INVESTMENT PROGRAMS REQUIRED 16

21 ,,,, 2007 REPLACEME ROADS LIFE CYCLE FUNDING 17

22 DS - LIFE CYCLE An nu a I budget s h o rtf al I s I,growing in f ras t r u ct u re condition deficit Life Cycle Replacement (Pavement Only) Should Be Main 25 Yr 40 Yr Local 35 Yr 100 Yr. 25 year cycle $20 M/yr vs Is WATER & SEWER Rate supported Good long range plans Historic under funding (sewer worse than water) Current plan closes gap ROADS term plan not finalized 18

23 ATE OF THE INFRA Significant funding gap - Failures inevitable important to minimize Damage resulting from catastrophic failures have significant economic & social impact enior Government Assistance intain London's Advantage 19