REQUEST FOR DIRECTION
DATE: December 11, 2017 Report No. EPW-17-062
TO: Laurie Hurst, Chief Administrative Officer
FROM: Jeff Miller, Director of Engineering and Public Works
SUBJECT:
Title
Asset Management Strategy
End
ESSENTIAL QUESTION:
How will asset management strategies be funded for various infrastructure types?
RECOMMENDATION:
Recommendation
That the Committee of the Whole receive Staff Report EPW-17-062 for information, provide any additional direction to staff as the COTW considers advisable, and direct staff to continue to develop condition indexes for the asset categories and in turn determine what funding contribution would be necessary to address asset management.
Body
BACKGROUND:
The Township is a mixture of infrastructure types that provide the foundation for services to its residents. There are four main types of infrastructure:
v Linear
o This infrastructure is commonly composed of pieces of infrastructure that form networks to provide a service and run the length and depth of the Township.
o Typical examples are: road network, sidewalk network, storm network, sanitary network.
v Vertical
o This infrastructure is located in specific locations and provides a service for that location or is a central location for staff to work from.
o Typical examples are: buildings (i.e. Municipal Hall), intersection lights, street furniture, bus shelters, street lighting, pump stations.
v Mobile
o This infrastructure consists of vehicles and equipment that allow staff to carry out maintenance, repairs, replacement or new construction of infrastructure.
o Typical examples are: construction vehicles, fire vehicles, backup generators.
v Natural
o This is existing natural assets that provide a service that otherwise would have to be provided through engineered solutions.
o Typical examples are: maintenance of the foreshore so that a dike is not required.
The infrastructure components within each general category have different and varying lifespans. Useful life is typically defined as the time the asset can be utilized for the intended service for which it was designed. At the end of the component’s useful life it will need to be replaced with a component of a similar nature or one that has an upgraded capacity. These useful life spans vary in time from three years (i.e. computers) to 60 years (i.e. storm mains). This is the breakdown of useful life for various major assets:
v Roads - 35 years
v Sewers - 54 years
v Drains - 60 years
v Sidewalk - 45 years
v Signals/Lighting - 25 years
v Parks Infrastructure - 25 years
v Buildings - 28 years
By utilizing an asset management system, the Township will be prepared to determine financial resources to manage operation, maintenance, renewal and new construction of the various pieces of infrastructure in the asset management registry.
Through an infrastructure component’s lifespan, a number of types of activities will be carried out on it. Some allow the component to continue to function while others increase its capacity. These activities are defined as follows:
v Operations (OPS)
o Regular activities to provide a service such as public health, safety and amenity.
o Examples: street sweeping, grass mowing, street lighting, staffing, heating.
v Maintenance (MTN)
o Actions necessary for retaining an asset as near as practicable to an appropriate service condition.
o Includes regular on going, day to day work necessary to keep assets operating.
o Examples: road patching, trip hazards, pump maintenance, plant maintenance.
v Renewal/Replacement (RR)
o Replacing the existing service capacity with the same service condition.
o Examples: collection main line replacement, service replacement, pump replacement, sidewalk replacement.
v Upgrade/New (UN)
o Adding new or upgrading existing assets.
o Examples: Increasing the size of collection mains, adding oil/water/grit separators, adding low impact developments (i.e. rain gardens), and new sidewalk.
Funding for these activities comes from a number of sources. These sources are:
v Capital Project Reserve Fund
o Provides funding for RR and UN type of projects
o Contribution to Reserve each year = $1,285,000
v Infrastructure and Revitalization Reserve Fund
o Provides funding for RR and UN type of projects
o Contribution to Reserve each year = $273,000
v Community Works
o Provides funding for MTN, RR and UN type of projects
o Contribution to Fund each year = $736,000
v Machinery and Equipment Reserve Fund
o Provides funding for RR and UN type projects
o Contribution to Fund each year = $491,000
v Taxation
o Provides funding to OPS and MTN type activities
v Grants
o Provides funding to RR and UN type of projects
o External sources generally require some level of matching contribution from the Township
o Funding is generally from Capital Project Reserve Fund or Infrastructure and Revitalization Reserve Fund
v Debt
o Provides funding to RR and UN type of projects
o External source provides funds that will be paid back over a set period of time
o Paid back funds are generally funded from the Capital Project Reserve Fund
ISSUES:
The Township has initiated the process of creating and maintaining asset management plans. Through this work various indicators will be reviewed and utilized to evaluate the asset. These indicators include: level of service, criticality, condition and risk. This evaluation will be utilized to assist in determining scheduling and to determine funding requirements for OPS, MTN, RR and UN activities.
Based on the work to date the asset registry value has been broken down into the following values:
v Linear
o Roads $121,000,000
o Sanitary $56,000,000
o Storm $67,000,000
o Sidewalk $20,000,000
Total $264,000,000
v Vertical
o Signals/Lighting $5,000,000
o Parks $35,000,000
o Buildings $145,000,000
Total $185,000,000
v Total value of linear and vertical: $449,000,000
With respect to the mobile category, these assets are replaced under the Machinery and Equipment Reserve Fund. This reserve receives contribution levels that allow for the replacement of the various components in a timely manner and does not require further discussion at this time.
The Township does not currently possess any infrastructure that would fall under the natural category. As assets are added to the inventory, asset management plans will be developed for up keep and replacement. This category does not require further discussion at this time.
Utilizing information from Tangible Capital Assets, the useful life was calculated as follows:
v Linear
o Roads - 38% utilized (22 of 35 years remaining)
o Sewers - 54% utilized (25 of 54 years remaining)
o Drains - 49% utilized (31 of 60 years remaining)
o Sidewalk - 53% utilized (21 of 45 years remaining)
v Vertical
o Signals/Lighting - 77% utilized (5 of 25 years remaining)
o Parks Infrastructure - 32% utilized (17 of 25 years remaining)
o Buildings - 55% utilized (13 of 28 years remaining)
v Aggregate total of useful life for all assets: 46% utilized
As the assets near the end of their useful life, they will have to be replaced. Funding for this work will come from one of the various sources discussed earlier. In order to have sufficient funding to replace the entire asset over its life, the following annual contributions would be required:
v Linear
o Roads $3,500,000
o Sewers $1,100,000
o Drains $1,100,000
o Sidewalk $500,000
Total $6,200,000
v Vertical
o Signal/Lighting $70,000
o Parks Infrastructure $1,400,000
o Buildings $5,200,000
Total $6,670,000
v Total:
o Total annual contribution required $12,870,000
o 2017 actual contribution $2,258,000
o Difference $10,612,000
In order to keep the assets operational, a philosophy will need to be developed on how to approach the various activities that will need to be funded to carry out operations, maintenance, renewal/replacement, new/upgrade. Possible philosophies are:
v Status quo
o Under this philosophy, contributions to the various reserves and operational line items will be maintained at current levels.
o This will not result in increased taxation from current levels.
o The Township will remain largely in a reactive position when it comes to renewal/replacement, new/upgrade projects with funding being achieved by reserves, grant or debt funding.
o When renewal/replacement or new/upgrade projects are undertaken it will most likely be at the end of the operation life span.
o Operations and maintenance activities will also remain at current levels which for a number of line items will remain in a reactive position.
o An example of operations/maintenance activities would be asphalt road surfaces.
§ Current operations/maintenance/capital budget = $710,000 (includes labour, vehicles, materials)
§ Operations and maintenance activities focused on:
• Line painting - all painted line markings
• Crack sealing - seal from 1 to 1.5 km of road network
o Approximately 1 % of the network
• Surface repair - fill potholes, mill and overlay, rebuild of 1,500 square metres or 375 metres
o Approximately 0.7% of the network
§ Current major maintenance/minor capital budget
• Utilized for major maintenance such as mill and overlay or rebuild.
• Approximately 900 square meters or 225 metres
o Approximately 0.4% of the network
v Increase Operations and Maintenance Activities Funding
o Under this philosophy, contributions to the operational/maintenance line items would increase from current levels.
o This will result in an increase in taxation in order to cover the cost of either internal or external forces carrying out the work.
o By following this course of action, the life of the asset may be extended beyond its projected life.
o At the end of the new life span, the asset will still need to be replaced.
o The Township would be moving away from being in a reactive position to a more proactive one.
o Renewal/replacement, new/upgrade activities would still require funding from either reserves, grant or debt funding, and would still be at the end of the life span of the asset.
o An example of this philosophy would be to increase the operations/
maintenance activities for asphalt road surfaces. For this report, a value of 3 times the current level was utilized for comparison purposes.
§ Upgraded operations/maintenance budget = $2,130,000
§ Operations and maintenance activities focused on
• Line painting - all painted line markings
• Crack sealing - seal from 3 km of road network
o Approximately 5 % of the network
• Surface repair - fill potholes, mill and overlay, rebuild of 7,500 square metres or 2,000 metres
o Approximately 3.6% of the network
§ Increase the major maintenance/minor capital budget
• Utilized for major maintenance such as mill and overlay or rebuild.
• Approximately 2,700 square meters or 675 metres
o Approximately 1% of the network
v Increase yearly contributions to Reserves
o Under this philosophy, contributions to the various reserves will be increased.
o This will result in an increase in taxation from current levels.
o By following this philosophy, the Township will start to develop reserve levels that are able to support a number of renewal/replacement, new/upgrade activities.
o The undertaking of these activities would be based on the condition of the asset.
o By undertaking the correct activity at the proper time, the lifespan of the asset will be greatly enhanced.
o This philosophy would also see an increase in operational funding (see previous example) that would increase the number of operational and maintenance activities that would extend the useful life of the various assets.
ALTERNATIVES:
1. That the COTW receive Staff Report EPW-17-062 for information, provide any additional direction to staff as the COTW considers advisable, and direct staff to continue to develop condition indexes for the asset categories and in turn determine what funding contribution would be necessary to address asset management.
2. That the COTW provide alternative direction to staff.
3. That the COTW request further information from staff.