Municipal Asset Management Plans

Transcription

1 Municipal Asset Management Plans AMCTO Webinar October 12, 2012 Agenda Introduction Municipal Infrastructure Investment Initiative Asset Management Scoping Asset Management Approaches State of Local Infrastructure Expected Levels of Service Asset Management Strategy MIII Timelines Questions 1 1

2 Introduction Watson & Associates Economists Ltd. Andrew Grunda Principal Dan Wilson Manger a firm of municipal economists, planners and accountants that has been in operation since With a municipal client base of more than 250 Ontario municipalities/utility commissions, the firm is recognized as a leader in the municipal finance/local government field. BluePlan Chris Hamel - President a firm providing niche specialty expertise in infrastructure planning and strategic advisory in the public municipal sector. The core services include master planning, asset management, strategic governance and operational advisory, program management, hydraulic analyses, and core water, wastewater and stormwater municipal engineering. 2 Introduction State of infrastructure FCM Infrastructure Report Card roads, water and wastewater - $172 billion for assets fair very poor Fewer than 40% of municipalities have longterm asset management plans In the future municipalities seeking funding must demonstrate how its proposed project fits within a detailed asset management plan Asset management requirements consistent with other provincial initiatives (e.g. Water Opportunities Act, 2010) 3 2

3 Municipal Infrastructure Investment Initiative August 2012 the Province initiated the Municipal Infrastructure Investment Initiative (MIII) Provides one-time funding to improve asset management planning in small municipalities and local service boards ($8.25 million) and consolidated service managers ($0.75 million) Eligible costs incurred after August 16, 2012 Program applicable for: Lower-tier municipalities 20,000 population or less Upper-tier/single tier 50,000 population or less Local service boards water/wastewater 4 Municipal Infrastructure Investment Initiative Province produced a document entitled Building Together: Guide for Municipal Asset Management Plans to assist in defining the components of an asset management plan Guide documents the components, information and analysis that are required to be included in a municipality s asset management plan under this initiative, including: Executive Summary/Introduction; State of Local Infrastructure; Desired Levels of Service; Asset Management Strategy; and 5 3

4 MIII Executive Summary Created after the plan is finalized Forms part of the Final Report and provides an overview of the asset management plan and methodology Summarize of each component of the asset management plan required under the guideline 6 MIII Introduction Summarizes How the goals of the Municipality are dependent on infrastructure Relationship between the asset management plan and other municipal planning and financial documents The purpose of the asset management plan Which infrastructure assets are included in the plan How many years the asset management plan covers How the asset management plan was developed How will the plan be evaluated and updated 7 4

5 MIII State of Local Infrastructure State of Local Infrastructure must include: List of asset types, sub-types including quantities, materials, and other similar asset attributes; Financial accounting valuation (i.e. historical cost, amortization, etc.) and replacement cost valuation for all assets; Asset age distribution and asset age as a proportion of expected useful life; Asset condition (good, fair, poor, etc) using standard engineering practices and analysis of inspection reports; Records of all assumptions incorporated into the asset inventory; and A data verification policy/condition assessment policy 8 MIII Expected Levels of Service Asset Management Plan must include: Performance measures, targets and timeframes illustrating defined levels of service; External trends or issues that may affect desired levels of service or the municipality s ability to meet them; and Show current performance relative to the targets established 9 5

6 MIII Asset Management Strategy Asset management strategy will provide the recommended course of actions required to maintain a sustainable asset position while delivering at the desired levels of service Strategy will ultimately result in a long term capital, operating and maintenance program designed to achieve the policy objectives, level of service measures and inform the financing strategy 10 MIII Asset Management Strategy Strategy must include planned actions for: Non-infrastructure solutions: decisions that can be made to reduce costs and/or extend expected useful life estimates; Maintenance activities: regularly scheduled activities to maintain existing useful life levels, or repairs needed due to unplanned events; Renewal/rehabilitation: significant repairs or maintenance planned to increase the useful life of assets; Replacement: complete replacement of assets, when renewal or rehabilitation is no longer an option; Disposal: disposing of assets when they either reach the end of their useful life or no longer contribute to providing services; and Expansion: given planned growth as outlined in the development charge background studies or expansion due to the introduction of new services 11 6

7 MIII Asset Management Strategy Strategy should include: Consideration for alternative procurement methods (e.g. municipal pooling) Risk assessment and response plan Requires options analysis based on scoring of total costs incorporating: Lifecycle costs Direct and indirect cost/benefit Risk assessment and cost 12 MIII must include: Annual expenditure forecasts broken down by: Non-infrastructure solutions; Maintenance activities; Renewal/rehabilitation activities; Replacement activities; Disposal activities; and Expansion activities Actual expenditures in the above named categories for the past 2 to 3 years A breakdown of annual revenues by source 13 7

8 MIII A discussion of key assumptions and alternate scenarios (where applicable) Identification of funding shortfall (in relation to financial requirements), if applicable, including how the impact will be managed 14 MIII Expression of Interest Expression of Interest (EOI) must be submitted to Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) by 5pm on October 22, 2012 Electronic submissions accepted EOI must include: EOI Form and attachments 2011 Financial Information Return (FIR) Declaration (Council resolution or letter) Municipal practice re EOI submission is varied 15 8

9 Municipal Asset Management Plans Many potential paths forward depending on the current state of Asset Management within your organization Potential Scope for Consideration: Education and Scoping Exercise Approach to the State of Infrastructure Approach to Level of Service Approach to the Asset Management Strategy 16 Asset Management Scoping Need to determine priorities and needs of your organization relative to asset management requirements Good reference material with MOI Toolkits Scoping exercise can consist of a high level review and gap analysis of current state of infrastructure management and planning Inventory Understanding of the condition of the assets Current short and long term plans Use of technology and management systems 17 9

10 Asset Management Scoping Discussion on opportunities for completing an Asset Management Plan Basics what do we have and in what shape is it in Focused we need more data on these parts of our system Optimization we have good base information, we need to better implement our plan moving forward What level of engineering is required what internal resources do we have available Discuss level of effort A, B, C, D levels of engineering and financial analysis 18 Asset Management Scoping Prepare asset management plan scoping document and recommendations Senior Management Team and Council Develop best value proposition for scope of work This exercise may be best suited for a high level general scope or detailed analysis to refine current plans Recommendation will provide Council with background understanding and better information to approve budget moving forward This will ensure funding from the MIII program and municipal budget is applied to the right areas 19 10

11 State of Local Infrastructure Asset inventories will generally be provided through the municipalities PSAB 3150 asset inventory, which provides accounting valuation (i.e. historical cost, amortization, etc.) Replacement cost valuation may be derived from indexed PSAB 3150 compliance data, actual capital costs, industry benchmark data Typical practices implement Estimated Service Life (ESL) to derive overall program Range in condition assessment can improve and optimize recommendations 20 State of Local Infrastructure Need to understand value in level of effort for condition assessment (reference scoping study) A high level, ESL based, generate basic program B slightly detailed, utilize detailed condition information where available, desktop information driven, cursory visual inspections, generate full program, some areas with better accuracy (condition A E) C detailed, incorporate field data, inspections and testing (some beyond visual), actual and/or typical deterioration, comprehensive program D full in-field inspection and performance testing, potential destructive testing, detailed deterioration curves, optimizing asset lifecycle, fully detailed and optimized programs 21 11

12 State of Local Infrastructure Facility Condition Assessment Example: # ITEM DESCRIPTION ARCHITECTURAL 1 SUB-STRUCTURE (Foundation Wall) 2 SUB-STRUCTURE (Roof Structure) 3 SUB-STRUCTURE (Load Bearing Walls) 4 SUB-STRUCTURE (Floors) 5 ROOF SYSTEM (Built up roof system) PRESENT AGE NORMAL LIFE REMAIN LIFE STATUS DESCRIPTION / OBSERVATION LIFE SPAN ANALYSIS Fair This asset group consists of the visible portions of the concrete The normal life expectancy for this asset is 75 years, this asset foundation walls. There were no visible defects in the foundation should function up to its anticipated life expectancy. walls. This asset was in good condition Good This asset group consists of steel columns, framing and steel The normal life expectancy for this asset is 75 years, this asset deck that forms the roof structure. There were no visible defects should function up to its anticipated life expectancy. in the roof structure. This asset was in good condition Good This asset group consists of the load bearing walls. There were The normal life expectancy for this asset is 75 years,, the no visible defects in the walls. This asset was in good condition. original building walls will continue to function beyond its life expectancy with regular maintenance Good This asset group consists of the concrete floor in the building. Floor finishes were not cracked therefore we assumed no cracks were in the concrete slab on grade floors and the second floor slab. This asset was in good condition. The normal life expectancy for this asset is 75 years, this asset should function up to its anticipated life expectancy Poor This asset group consists of a built up roofing system with The normal life expectancy for this asset is 28 years. A detailed ballast. There were visible defects at various locations, bitumen roof inspection complete with cost was being undertaken by the has leached through the gravel ballast, water had ponded on owner this year. We had not allowed for any action on this asset. the lower roof. This asset was in poor condition. 22 Expected Levels of Service Level of Service (LOS) measures to address and appropriately weight corporate, customer and technical perspectives Development of key performance indicators for each Corporate - continual water service to all customers, Customer - number of water main breaks per year Technical - MOE guidelines for water flow and pressure Need to relate LOS discussion with long term staffing/resource expectations Need to related LOS investment with rates what will community afford and be willing to pay 23 12

13 Expected Levels of Service Include policies and principles related to risk management, maintenance approach (constant, proactive or reactive), bundling, and timing with respect to the estimated service life (ESL) Establish asset management policies and principles to guide the refinement of the asset management plan with reference to municipal best practices 24 Expected Levels of Service Support level of service measures through municipal benchmarking, including: Benchmarking data, where available such as Ontario Municipal Benchmarking Initiative (OMBI). Asset management best practices from the International Infrastructure Management Manual (IIMM). Municipal Performance Measurement Program (MPMP). OGRA Municipal DataWorks

14 Asset Management Strategy Developing long-term capital, operating and maintenance program will require option development and evaluation Option evaluation may be determined based on different policy applications and level of service approaches Option evaluation should be an iterative approach with the financing strategy to optimize and balance the spending across the infrastructure classes and across the planning horizon 26 Asset Management Strategy Option evaluation should consider Lifecycle costing analysis: evaluating future costs over assets useful life, including indexing/inflationary adjustments Direct/indirect costs and benefits: including asset efficiencies gained, timing of capital needs, safety, environmental impacts, climate impacts, municipal wellbeing, amenity values, cultural value and municipal image Risk assessments for each option

15 Likelihood Likelihood 10/12/2012 Asset Management Strategy Risk assessment matrix by service/sub-service to inform asset management strategy and cost evaluation Consequence of an adverse effect from insignificantsignificant and likelihood of occurrence from rarealmost certain Fleet Services Consequence Insignificant Water Services Consequence Significant Almost Certain High Almost Certain Very High Likely Moderate Likely Very High Moderate Low Moderate Very High Unlikely Low Unlikely Very High Rare Low 28 Rare High Impact of Assessment Management Strategy Options Analysis Level A Level B Level C Level D

16 The financial strategy outlines the suggested approach of incorporating the asset management plan into the municipality s existing budgeting and long-term financial plan Asset management from a financial perspective projects the anticipated lifecycle costs of assets ensuring there is a funding strategy and plan in place to account for these costs over the longterm 30 Asset Management Strategy establishes options with consideration for: Health and safety Coupling timing of replacement works with legislated requirements Urban vs. rural spending priorities Locational and infrastructure sequencing (i.e. road, storm, water, sewer segment) Cost/benefit analysis (e.g. operational savings to reinvest in capital activities, alternative energy/solutions) Impacts on operational budget 31 16

17 Prepare annual forecast by required component, isolating operating and capital expenditures Asset Management Plan Activity Operating Expenditure Capital Expenditure Non-infrastructure solutions X X Maintenance activities X Renewal/rehabilitation activities Replacement activities Disposal activities Expansion activities X X X X 32 Recognition that plan must recognize expansion activities, incorporating Development Charge/Municipal Act Capital Charge policies Capital funding plan should incorporate annual funding sources from internal sources (e.g. reserves, reserve funds), fees and charges, use of debt, limited use of senior government funding 33 17

18 Measure reserve/reserve fund continuity and sustainability and impact on net levy/fee base When creating a plan that spans 20+ years, the slightest change in one variable can drastically change the outcome Capital inflation Operating Inflation Rate of Return on Investment Assessment Growth 34 In the situation of an infrastructure deficit or lifecycle replacement peak: Requires significantly higher levels of capital funding in the near term Municipality needs to balance use of debt with sufficiency of reserves and the ability to phase capital spending Use of debt will minimize initial rate impacts, however ultimately more expensive (i.e. interest costs) and potential debt capacity implications Ability to phase capital spending relative to risks and intergenerational equity 35 18

19 Replacement Cost (Inflated) 10/12/2012 Growth-related capital needs may suggest use of front-ending financing arrangements to mitigate interim financing costs on the municipality 36 $30,000,000 Scenario 1 Municipality with an Infrastructure Deficit $25,000,000 $20,000,000 $15,000,000 $10,000,000 Front Ending Challenge Current Funding Level Annual Funding Requirement $5,000,000 $ Year 37 19

20 Replacement Cost (Inflated) 10/12/2012 In the situation of relatively new infrastructure: Current funding levels are consistent with near term capital needs but lower than average annual capital funding levels over the forecast period Municipality needs to balance increasing contributions to reserve within acceptable anticipated debt financing levels Incorporating future growth-related needs into Development Charge bylaw will minimize need to future interim funding 38 $30,000,000 Scenario 2 Municipality with New Infrastructure $25,000,000 $20,000,000 Annual Funding Requirement Future Replacement of New Infrastructure $15,000,000 Current Funding Level $10,000,000 $5,000,000 $ Year 39 20

21 Net levy impact of asset management plan should be measured in context of service delivery and assessment growth, incorporating non-tax supported revenues (e.g. user fees) Net levy/rate-based impacts measure potential funding gap and anticipated asset management plan increases in funding and cost savings Decreasing Funding gap Required Funding Current Funding 41 21

22 Tax Rate Index (2009=100) 10/12/2012 Comparison of Tax Rate Impacts for Funding Scenarios 1,900 1,700 1,500 1,300 1, Year Scenario 1 - Life Cycle Needs Timing Scenario 2 - Phase-in Replacement Over 20 Years Scenario 3 - Phase-in Replacement Over 30 Years 42 MIII Timeline Preparation of EOI document Council declaration EOI submission October 22, 2012 Asset management scoping and RFP process Funding notification and contribution agreement by March 31, 2013 Preparation of Asset Management Plan Submit Final Report in accordance with the terms of the contribution agreement 43 22

23 QUESTIONS 44 Contact Information Chris Hamel - President of BluePlan Phone: chris.hamel@blueplan.ca Andrew Grunda Principal of Watson & Associates Economists Ltd. Phone: x229 grunda@watson-econ.ca Dan Wilson Manager at Watson & Associates Economists Ltd. Phone: x233 wilson@watson-econ.ca