Asset Management Planning:

Legislation & Integration

June 14, 2017

AMCTO Conference Dan Wilson, Director

Watson & Associates Economists Ltd.

Val Sequeira, Director of Corporate Services/Treasurer

Town of Gravenhurst

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

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ASSET MANAGEMENT

INTRODUCTION

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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

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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.

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INFRASTRUCTURE FOR JOBS

AND PROSPERITY ACT &

DRAFT REGULATION

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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

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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

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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

http://www.moi.gov.on.ca/en/infrastructure/building_together_mis/plan.asp

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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

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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

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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

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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

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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

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Draft RegulationMunicipal 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

Why are proposed LOS appropriate? How they differ? 14

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

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Draft RegulationMunicipal 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 analysis16

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

shortfalls17

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

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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

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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, 2017

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ASSET MANAGEMENT

INTEGRATION

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Asset Management Process

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Policies and Strategies

Integration

Continuous Improvements,

Updates & Monitoring

Tools (Software)

Internal Governance and

Ownership

Council Approval and

Support

Public Engagement and

Communication

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Asset Register

Asset Listing

Condition Assessments

Risk Assessments

Performance Ratings

Criticality & Capacity

Component Replacement Value

Component Useful Live

Historical Cost Valuation

Capital Budget

Component Life Cycle Profile

Strategic LOS

Customer Expectations

Technical LOS

Long Term Plan (20 Years)

Financial Strategy

PSAB 3150 Reporting

Asset Register Integration

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Maintenance Mgmt

LOS Integration

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Services

Customer Expectations

Customer (Strategic) LOS

Technical LOS

Strategic Plan?

Departmental

Strategies?

Asset Capacity,

Functionality?

Operational

Procedures?

Other

Documents?

AM Integration

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High-level decisions on Levels of Service

Outputs generated from the Asset Management Process

Input from Community drives:decisions regarding Levels of Service, Risk, Scenarios, Financial Analysis and

Preferred Approach

OrganizationalStrategic Plan

Rehabilitation, Renewal & Replacement

Expansion

Secondary PlansOfficial Plan

Master PlansEnvironmental Assessments

Staff Reports Other

Asset Management Plan

Budget Long-term ForecastDevelopment

Charge Background Study

User Fee Rate Studies

Budget Integration

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Strategic AM

Policies

Assets

AM Strategy

LOS

Financial Strategy

Operating Budget

Capital Budget

Long-term Forecast

Reserves & Reserve Funds

Debt Projections

Other Revenues

AM Process

Budget

Process

GIS Integration

The

Town of Gravenhurst

Experience

June 14, 2017

AMCTO Annual Conference

Deerhurst Resort, Huntsville, Ontario

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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

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• 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

Asset Management

Long Term Financial Sustainability Plan

Where We Came From

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• 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

Asset Management

Long Term Financial Sustainability Plan

An Asset Management Plan Is Important!

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• 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;

• a 20 year projection of costs for “appropriate” management

of assets; and;

• a recommended financial strategy to pay for the plan.

Asset Management

Long Term Financial Sustainability Plan

What Was Done

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• 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

Asset Management

Long Term Financial Sustainability Plan

What We Learned

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• 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

Asset Management

Long Term Financial Sustainability Plan

Managing Our Assets

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• 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

Asset Management

Long Term Financial Sustainability Plan

Financing The Plan

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• 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

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Asset Management

Long Term Financial Sustainability Plan

Moving Towards Financial Sustainability

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Financial Goals/Constraints 2017 2027 2037

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”

• 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

• Council approval of the recommendations in the report

provided direction to staff to implement the plan

Asset Management

Long Term Financial Sustainability Plan

A Significant Milestone

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• 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

Asset Management

Long Term Financial Sustainability Plan

Moving Forward

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