ASSET MANAGEMENT PLANS: GETTING YOU PREPARED ROMA Conference

Transcription

1 ASSET MANAGEMENT PLANS: GETTING YOU PREPARED 2019 ROMA Conference January 28, 2019

2 What is Asset Management? Coordinated activity of municipal staff and elected officials to provide sustainable levels of service to the community 2

3 Why Does Asset Management Matter? Optimize the use of limited resources Be resilient to changing realities Maintain the public s trust Asset management supports you in identifying infrastructure investment priorities by managing risks that threaten delivery of service, and demonstrating stewardship of assets and finances. 3

4 Provincial Asset Management Requirements Municipal Asset Management Planning Regulation (O. Reg. 588/17) Strategic Policy Core Infrastructure All Infrastructure Financial Strategy Annual Review Defines Role of Council Integration with Financial Planning Alignment with Official Plan and Master Plans Community Engagement Coordination with Other Municipalities Climate Change Mitigation & Resiliency All Other Infrastructure Assets Identify what you own Identify Current Service Levels Identify Costs to Maintain Current Service Levels Council to Conduct Annual Review: Plan Implementation progress Strategy to Address any Challenges Core Infrastructure Assets Identify what you own Identify Current Service Levels Identify Costs to Maintain Current Service Levels Establish Future Service Levels based on Sustainability & Affordability Determine Future Priority Investment Activities Develop a Financial Strategy 4

5 Agenda Current Status and Progress Made in Asset Management in Rural Ontario AMO Federal Gas Tax Team What You Need to Know Regarding the Regulation and Asset Management from a Staff Perspective Asset Management Ontario Asset Management Financing Strategies and Alignment with Capital Budget Municipal Finance Officers Association 5

6 ASSET MANAGEMENT PLANS: CURRENT STATUS AND PROGRESS MADE Sal Zafar

7 Federal Gas Tax Asset Management Requirements Municipalities required to demonstrate progress on asset management: Developing asset management plans Using these plans to guide infrastructure investment decisions; and Using federal Gas Tax funds to address priority projects identified in plans 7

8 Federal Gas Tax Asset Management Outcomes All municipalities receiving federal Gas Tax funds administered by AMO: Submitted a copy of their most recent plans 442 existing asset management plans reviewed to identify knowledge and data gaps, and to inform existing capacity building programs Plans developed by two broad category of consulting firms: 8

9 Fiscal Capacity and Infrastructure Intensity Fiscal Capacity per household Thousands $2,400 $2,000 $1,600 $1,200 $800 $400 Average Infrastructure Intensity = $78,000 per household Replacement value of local infrastructure is a lot more than previously estimated Average Fiscal Capacity = $405,000 per household $0 $0 $30 $75 $150 $225 $300 $375 $450 $525 $600 Thousands Infrastructure Intensity per household Central (49) Eastern (94) GTA (25) North-Eastern (86) North-Western (28) South-Western (103) Infrastructure Intensity = Replacement cost of infrastructure assets per household Fiscal Capacity = Average taxable assessment per household 9

10 Fiscal Capacity and Infrastructure Intensity Fiscal Capacity per household Thousands $2,400 $2,000 $1,600 $1,200 $800 $400 21% 48% Average Infrastructure Intensity = $78,000 per household 8% 23% Average Fiscal Capacity = $405,000 per household $0 $0 $75 $150 $225 $300 $375 $450 $525 $600 Thousands Infrastructure Intensity per household Central (49) Eastern (94) GTA (25) North-Eastern (86) North-Western (28) South-Western (103) 70% of the municipalities have less fiscal capacity than the average 30% of the municipalities own more infrastructure assets than the average 10

11 Fiscal Capacity and Infrastructure Intensity Northern Ontario municipalities have the lowest fiscal capacity to fund their existing infrastructure 9

12 State of Infrastructure Assets Assets provide services that contribute to our quality of life 3

13 What s should be in a AMP? Investment in local infrastructure need to be prioritized 13

14 Identifying Priority Projects in AMPs Very few municipalities identified priority projects in their AMP Quality of Asset Management Plans End of useful life Regular inspections Prioritize high risk assets Typical value metrics: Reputation Reliability Health & Safety Cost Savings Financial Sustainability Environment Interdependency Community Attachment Regulatory Compliance Strategic Objectives Asset Management Maturity Source: The Institute of Asset Management (IAM) 14

15 Where Municipalities Need Most Help? Developing AM policy in alignment with the Strategic Plan Ensures acceptability of asset management plan s recommendations by Council Estimating asset whole life cycle costs Acquisition, maintenance, rehabilitation, replacement, disposal costs as well as environmental and social costs Developing comprehensive asset specific risk models Requires proactive monitoring to identity likelihood and consequences of asset failure Identifying current and target levels of service (weakest area) Requires Council participation 15

16 Service Delivery Review Do you know if you are spending too much, or too little, on your infrastructure to deliver services? Are you struggling to understand community expectations and what tax payers are willing to pay for? Is your investment in new infrastructure versus maintaining old infrastructure balanced? Are you missing key pieces of information to identify priorities? Costs, Risks, Benefits, Consequences 16

17 How to Successfully Implement Asset Management? Local governments that successfully implement asset management have: Staff and elected officials who understand the need for and benefits of asset management. Clarity on community expectations and corporate priorities, and their alignment with asset management objectives. Required data on costs, risks and performance to support decision making Culture that encourages teamwork and integration across departments, throughout the organization. 17

18 Role of Council in Fostering AM Culture Council can set strategic direction for staff based on Asset Management fundamentals of: Leadership Alignment Value Assurance 18

19 Current Activities Monitoring federal Gas Tax funded projects and other provincial/federal initiatives on AM Sponsored research on AM progress made since 2013, and on municipal infrastructure investment and financial sustainability Contributed to policy toolkits, repository of AM resources, including products developed under FCM s MAMP Engaged AMONTario to help rural municipalities improve existing asset management systems (policies, strategies and plans) in 2019 Incorporating asset management and financial sustainability principles into training courses for new Councillors 19

20 A S S E T M A N A G E M E N T O N T A R I O Asset Management Planning for Municipal Infrastructure Supporting Communities of Practice, Developing Tools & Solutions

21 AGENDA Regulatory Requirements Through a Community of Practice Lens CoP: Why They Are Vital for Municipal Asset Management The Regulatory Challenge: Complexity of Asset Management + Diversity of Municipal Circumstances Regulatory Big Picture O. Reg. 588/17: Overview of Requirements What We ve Seen Tools Developed Through AMONTario Community of Practice Sessions 21

22 AM Requirements: a Community of Practice Lens Purpose of this talk is to discuss AM requirements from the perspective of municipal staff. At AMONTario, we call this perspective a community of practice lens because we promote the development of solutions to municipalities shared challenges through the sharing of experiences and best practices. Staff perspectives provide insights about on the ground challenges that your municipality may be facing and that may affect elected officials decision-making. 22

23 Communities of Practice: Vital for Municipal AM CoP model facilitates the sharing of information and experiences to accelerate learning and adoption of best practices. AMONTario s approach is to gather municipal practitioners from different backgrounds; meet in different regions; and share a structured, continuous improvement journey. By sharing experiences and best practices, staff gain insights into solutions for their own municipalities challenges and a more nuanced understanding of asset management. 23

24 AM Challenges & Diversity of Circumstances Asset Management (AM): Cuts across functions; Affects diverse stakeholders; Requires planning for different time horizons; Has policy, data management, organizational culture, & lifecycle management impacts. In addition, AM capacity & practices vary significantly across municipalities. 24

25 Big Picture Objective Strengthen organizational cultures so that the lifecycle management of assets is integrated with prudent financial management. This maximizes the value on investments and return on taxpayers dollars. It s hard to regulate organizational culture and so the progressively more comprehensive requirements can be met in stages. 25

26 O. Reg. 588/17: Overview of Requirements Strategic Asset Management Policy (by July 1, 2019) Requires municipalities to outline commitments to best practices and continuous improvement Asset Management Plan: Phase 2 (by January 1, 2023) Asset Management Plan: Phase 1 (by January 1, 2021) For core assets: Inventory of assets Current levels of service measured by standard metrics Costs to maintain levels of service Would build out the Phase 1 plan to include all assets Asset Management Plan: Phase 3 (by January 1, 2024) Additional Information Municipalities under 25,000 not required to discuss detailed risk analysis or growth. Plans would be updated every 5 years; annual progress update given to council. Would build on Phase 1 and 2 by adding: Proposed levels of service Lifecycle management strategy Financial strategy 26

27 What We ve Seen: Strategic AM Policy Requirements Observations Council adopt a Strategic Asset Management Policy by July 1, 2019 that: Defines Role of Council Integrates AM with Financial Planning Aligns AM with Official Plan & Master Plans Commits the municipality to: o o o Community Engagement Coordination with Other Municipalities Climate Change Mitigation & Resiliency Most municipalities are in the process of meeting the requirements. Focus is now to use the policy as a blueprint to shift their culture to an effective, collaborative AM practice. For smaller municipalities, many Policies have been drafted by consultants. Municipal councils hard decisions: Potential need to increase Reserves or Tax Rates to fund lifecycle management of assets; Costs associated with Climate Change Mitigation. Templates available from MFOA and FCM. 27

28 What We ve Seen: Asset Management Plans Requirements Develop an Asset Management Plan for: Core infrastructure by July 1, All other infrastructure by July 1, Core Infrastructure includes Water, Wastewater, Roads, Bridges, & Culverts. All Other Infrastructure Assets include Buildings, Parks, Recreational Facilities, Fire & Emergency Service Assets. AM Plans must: Identify what you own Identify Current Levels of Service (LOS) Identify Costs to Maintain Current Service Levels Observations Many municipalities asset management plans were prepared by external consultants between as a condition for receiving infrastructure funding. At most municipalities, they are not actively being used to guide asset replacement or repair decisions. Municipalities are challenged with determining Levels of Service (LOS) and associated Risk Impacts. Regulation stipulates Core Infrastructure LOS, but these are insufficient for many municipalities. Municipalities are also challenged with coordinating data collection & analysis across departments (e.g., Finance & Public Works). 28

29 Looking Ahead to 2024 and 2025 Requirements By July 1, 2024, municipalities must Establish future service levels based on sustainability & affordability; Specify future asset performance measures for the next 10 years; Develop a financial strategy and lifecycle management strategy By July 1, 2025 and annually thereafter, Council to conduct Annual Review of progress towards achieving Asset Management Plan, identify factors impeding progress, and outline strategy to address challenges. Observations Some municipalities have not begun the process of thinking about proposed levels of service and performance measures for the different asset categories. Some municipalities have long-range financial plans, but often these are not closely integrated with lifecycle management needs. Many municipalities have not identified long-term funding strategies to match their priority asset management investments. 29

30 Tools Developed Through AMONTario Community of Practice Sessions Prioritize asset risks across four factors: financial, physical asset, environmental, & reputational. Risk Impact Assessment Tool Developing Levels of Service Addresses LOS (current & proposed) requirements in AMPs for 2021, 2023, & 2024 plans. Municipal Metrics Catalog Lifecycle Costing Catalog of performance measures to assist decisions on Level of Service (LOS) metrics. Integrates asset lifecycle costing with long-range financial planning as per 2024 requirement. 30

31 ASSET MANAGEMENT FINANCIAL STRATEGIES AND ALIGNMENT WITH CAPITAL BUDGET Donna Herridge, Executive Director

32 Agenda Overview of Asset Management Tools and Resources Key Findings 32

33 Asset Management Planning Definition Asset management planning is the process of making the best possible decisions regarding the building, operating, maintaining, renewing, replacing and disposing of infrastructure assets. The objective is to maximize benefits, manage risk, and provide satisfactory levels of service to the public in a sustainable manner. Asset management requires a thorough understanding of the characteristics and condition of infrastructure assets, as well as the service levels expected from them. It also involves setting strategic priorities to optimize decisionmaking about when and how to proceed with investments. Finally, it requires the development of a Financial Plan, which is the most critical step in putting the Plan into action. - Building Together Guide 33

34 Grammar Lesson. 34

35 Financing Strategies Financial Strategy - O. Reg. 588/17 Asset management plans must include: 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. 35

36 Capital Financing Strategies Continuum Pay As You Go Drawing Down Reserves 3 rd Party Contributions Some combination thereof 100% Debt Financing 36

37 Pay as you Go Saving all funds in advance of building or acquiring the asset Great discipline and patience Forgoing many needs in the meantime May be more costly in the long run Implications of forgone service Inflationary impacts on project costs 37

38 Intergenerational equity 100% Debt Financing Spreads costs among taxpayers consuming it Involves paying for asset with interest Debt is expensive e.g., Debt at 5% over 15 years is approximately 45% more expensive Provincial limits on the total amount of debt Annual Repayment Limit (ARL) Annual debt servicing payments (principle and interest) cannot exceed 25% of own source revenue 38

39 Drawing Down Reserve Funds Established via tax based funding Lifecycle contributions each year to fund replacements Not very adaptable may tie decision makers to past priorities 39

40 IMPACT Tax Rate Increase!!!! 40

41 Infrastructure Gap Whose municipality has an infrastructure gap? Whose municipality has funded the gap? 41

42 Managing the Infrastructure Gap Additional funding to close the Gap Asset Requirements Available Funding Managing the risk of not funding all projects/needs 42

43 Tools & Resources AMP It Up 2.0 Program Direct support Funded by MOI & MFOA Experts will review your plan Our teams have finance and engineering expertise Identify gaps Develop next steps work plan that you can manage with the resources you have 43

44 AMP It Up 2.0 Eligibility Timelines Available to municipalities with populations less than 25,000 that did not participate in AMP 1.0 Eligible municipalities will receive invite to participate in phased approach (based on population size) Phase 1 Phase 2 Phase 3 Population <= 5,000 Group 1 Intake: Now Group 2 Intake: December 2018 Population <= 10,000 Intake: April 2019 Population <= 25,000 Intake: August

45 Strategic Asset Management Policy 45

46 Success Indicator On-line 93 municipalities Mix of general and asset specific questions Average questions = 475 Interesting Observations 1. Introduction 2. AM Policies and Procedures 3. State of Local Infrastructure 4. Levels of Service 5. Lifecycle Strategy 6. Financing Strategy 7. Making AM Operational 8. Continuous Improvements and Updates 9. AM Tools 10. Internal Governance and Ownership 11. Council Approval and Support 12. Public Engagement and Communication 46

47 AM is about People. AM Planning is an ongoing process Plan is snap shot of a point in time **Important** Processes and decisions around assets are more important Poor AM plan AND poor AM planning Good AM Plan but poor AM planning Good AM planning but poor plan Good AM Plan AND Good AM planning 47

48 AM A Step Along the Way Fiscal Sustainability Long Term Financial Planning AMP TCA 48

49 Finally AM is an intricate part of defining our communities AM is interdisciplinary Operationalizing AM involves people working together Evolving Process 49

50 Questions? Sal Zafar Federal Gas Tax Team, AMO Sam Sidawi Chair, Asset Management Ontario Donna Herridge Executive Director, MFOA 50