developing asset management plans

Ed Archer, CMA

General Manager, Corporate Services

&

Blaine Parkin, P.Eng.

Director, Corporate Asset Management

Developing

Asset Management Plans

by

Focusing

on

Service

Introduction Module 1: Foundations of Asset Management Asset Management Principles

Module 2: Long Range Financial Planning Financial condition Financial Policies Long-range Financial Plan Service-based planning

Module 3: Bringing it all Together Asset Management planning Asset condition Capital budget prioritization

Growth

Regulation

Aging / Deteriorating Infrastructure

Public Expectation

Funding Levels

Budget Demands

Levels of Service

Sustainability

Focus on Short-term Issues

Strategic Planning not linked to Asset Planning

Segmented Organization - Silos

Reactive Approach

Risk???

Life-Cycle Analysis???

1. Understanding of the Risk Profile associated with

your Asset Portfolio and how it will change?

2. Business consequences of reducing capital

investment or maintenance budgets?

3. Are planned asset expenditures justified to

external stakeholders?

4. Which investment projects should be deferred

during periods of funding restraints?

5. Is appropriate asset data (knowledge) available to

support decision making?

6. Do your people have the right competencies and

capabilities?

The Institute of Asset Management

Multi-disciplinary – Crosses departmental and discipline

boundaries.

Systematic – rigorously applied in a structured

management system.

Systems-oriented – looking at assets in their systems

context.

Risk-based – incorporating risk into decision making.

Optimal – Seeking the best compromise between

conflicting objectives.

Sustainable – delivering optimal asset life-cycle value.

Integrated – The puzzle needs to work as a whole.

The Institute of Asset Management

Effective Asset Management:

Relies on sound data and judgment that considers

technical, operational and financial performance

Holistic discipline - Requires enterprise collaboration

Draws from business and financial management, but

also technical, engineering, operations and

maintenance.

Uses a long-term view to evaluate asset performance,

cost and community sustainability

Influences, and is influenced by, corporate financial

condition

Effective Asset Management:

Engages Council in a dialogue about services and

service levels

Recognizes and manages limited resources by

systematically establishing priorities

Minimize Total Cost of Ownership while

realizing maximum potential useful life

“Financial condition is a government’s financial health as assessed by its ability to meet its existing financial obligations both in respect of its service commitments to the public and financial commitments to creditors, employees and others.”

- Public Sector Accounting Board (PSAB)

Service and

Quality Levels Economic

Factors

Financial Policies

Government

Financial

Condition

Factors Influencing Financial

Condition

Degree to which we can maintain current

financial obligations and existing service

commitments without increasing the debt

or tax burden ◦ Financial assets-to-liabilities

◦ Net debt-to-total revenue

◦ Total debt per household

$349 $315 $277

$1,925

$3,225

$4,653

$5,676

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

0

0.5

1

1.5

2

2.5

2006 2007 2008 2009 2010 2011 2012*

Financial Assets:Liabilities Net Debt:Total Revenue

Debt per Household

* 2012 projected

Degree to which we can increase financial

resources to respond to rising

commitments by either expanding

revenues or increasing debt ◦ Debt charges-to-Total revenue

◦ Municipal taxes as a % of household income

◦ Total Municipal Revenue-to-Taxable Assessment

3.1% 3.1% 3.2% 3.2% 3.4% 3.5% 3.6%

0

0.02

0.04

0.06

0.08

2006 2007 2008 2009 2010 2011 2012*Debt Charges:Total Revenue

Municipal Taxes as a % of Household Income

Total Municipal Revenue:Total Assessment

* 2012 projected

Degree to which we are dependent on,

and therefore vulnerable to, sources of

funding outside our control ◦ Government Transfers-to-Total revenue

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

2006 2007 2008 2009 2010 2011 2012*

Government Transfers:Total Revenue

•2012 projected

Doing What Matters Most

Factors influencing plans and priorities ◦ Council’s Goals and Strategies ◦ Asset renewal and capacity management needs ◦ Growth management for annexed lands ◦ Employee survey feedback ◦ Accessibility for Ontarians with Disabilities Act

Operating cost changes ◦ Service Partner budget increases ◦ Negotiated wage adjustments ◦ Transit contract increase ◦ Increases in utilities, maintenance ◦ New facilities

Focusing on Service

An effective business plan that clearly and concisely explains: ◦ how a department plans to use the resources

under its control,

◦ the extent to which intended goals and objectives will be achieved and at what cost.

Financial information alone does not tell the whole story

For a complete picture of performance, you need a

multidimensional report that includes financial and non-

financial information

Citizens, Council and executives expect more and better

information about the results produced by municipal

programs and services, not just their cost

Operating Budget Service-Based Budget

Emphasis is on: Controlling money Producing a defined level of output

Basic reporting unit: Object code Process

Efficiency: Not measured Cost per unit of output

Effectiveness/Quality:

Not measured Performance Indicators

Explains the relationship between resources (costs), services and service

levels

◦ Groups activities/branches within the Operating Budget Application to

Workplan based on services

◦ Describes the impact of a change in resources on process volumes,

which should have a direct relationship to services and service levels

Align workplan processes and performance indicators

◦ Uses indicators to describe services where discretionary changes are

possible

◦ Clarify understanding about impacts/consequences of changes

27

Enterprise Services

Department

Services

Operating Budget

Workplan

•Service Groups

•Service levels

•Cost and quality indicators

•Categories (staff time + costs)

•Service Levels

•Service Quality

•Staff costs

•Non-staff costs

•Program Changes

•Staff Time for Processes

•Staff Time for Projects

Client Input/

Service Requests

Resource Allocation

& Capacity Planning

for Projects

In Year Requests

Work Plan

Project List

Resource Requirements

For Processes

Prioritize In Year

Requests

Process

Resource Requirements

Priorities

1

2

3

4

5

6

Waterline

Resource Availability

For projects

A – Define

Processes B – Identify

Projects

Prioritized List

Strategic Plan/

Dept. Priorities

Dept/Enterprise Service

Tag Category/Subcategory Tag

Process List

Dept/Enterprise Service

Tag

Project List

Enterprise Service Department Service Enterprise Service Department Service

Policy Development and Management Solid Waste Collection and Disposal

Data Management and Analysis Waste Reduction and Disposal

Capital Budget Suppression

Infrastructure Planning Prevention

Facility Development Training

Design and Construction Emergency PlanningBy-law Enforcement DispatchProsecution Services Taxation ServicesRegulatory Investigations Water and Wastewater Billiing

POA Reception

Communications Switchboard

Intergovernmental Affairs Governance Council Secretariate

Corporate Finance and Accounting Recreation Programs

Internal Audit Facility Operations - Recreation

Purchasing Facility Maintenance

Compensation Management Parks Park Maintenance

Recruitment Regulatory Inspection

Health and Safety Permit Application Processing

Labour and Employee Relations Regulatory Review (Building)

Employee Development and Support Long Range Planning

IT Application Delivery and Data Management Planning Application Processing

Infrastructure Tool Access (Data/voice) MarketingProfessional Legal Advice Business Development

Real Estate Services Facilitation

Driver and Technician Training Data Provision

Fleet Management Roads Surface Maintenance

Mail & Print Storm Water Management Storm Water Management

Records and Information Transit Transit

Facilities Operations - Corporate

Event Management

Culture Community Support

Culture

Asset Planning and Management

By-Laws & Regulations

Corporate Communications

Corporate Finance

Corporate Sustaining Services

Winter Control Winter Control

Environmental Operations

Fire & Emergency Services

General Public/Transaction Services

Leisure/Recreation

Permits & Inspections

Planning and Economic Development

Focusing on Service

Serv

ice L

evel

Efficiency

Highest

Lowest Highest

Accts. Payable

Accts. Receivable

Building

By-law Enforcement

Clerks

Culture Facilities

Fire

Leisure/Recreation

Parking

Parks

Planning

Human Res. Legal Svcs.

Purchasing

Roads

Transit

Winter Control

Waste Mgmt

Storm Water

Wastewater

Water

ICT

Focusing on Service

47% of the residential property tax bill funds City services

35% funds Service Partners (Barrie Police,

County of Simcoe, Barrie Public Library, GO Transit, Airport, Conservation Authorities, Tourism Barrie, RVH Expansion, Health Unit)

18% funds education

Education

City Services

Service Partners

Focusing on Service

72% of revenues from

property tax

Revenue from fees,

service charges

consistent with 2012

budget

72%

1% 7%

8%

4% 2% 2% 3% 1%

Property tax Corporate Revenues

Fees, Service Charges Reserves/Reserve Funds

Fines Interest & Investment Income

Licenses/Permits Other

Other Gov't Funding

Focusing on Service

New strategies to manage sustainability are required for 2012 and beyond ◦ Introduce an asset management charge to support

asset renewal funding requirements

◦ Increase contributions to reserves at least equivalent to annual amortization charges

◦ Limit or eliminate development charge discounts

◦ Continue developing our asset management strategy to ensure we maximize the useful lives of our assets and minimize their lifecycle costs

Focusing on Service

“…a place where people want to live and

work; it meets the needs of its citizens,

now and in the future. It is sensitive to the

environment and reaches for a higher

quality of life.”

Several influencing factors drive

assessments of financial condition: ◦ PS3150 – Tangible Capital Assets

◦ Assessment growth

◦ Community composition

◦ Organization growth and the form of local government

service delivery

◦ Community expectations about services and service

levels

CITY VISION

The City of Barrie will be progressive, diverse and prosperous with opportunities for all

citizens to build a healthy and vibrant community.

GOAL

Create a Vibrant and

Healthy City Centre

GOAL

Strengthen Barrie’s

Financial Condition

GOAL

Improve and Expand

Community Involvement and

City Interactions

GOAL

Manage Growth and

Protect the

Environment

GOAL

Direct and Manage

Economic Development

· Improve integration

between downtown and

the waterfront

· Actively promote the

downtown and

waterfront to our

residents and visitors

· Encourage a mix of land

uses in the downtown

· Enhance safety in the

downtown

STRATEGIES· Balance service

demands with financial

resources

· Develop affordable long

range plans that reflect

changes in our

community’s growth and/

or economy

· Diversify revenues

· Pursue innovation

through our Journey of

Excellence

STRATEGIES

· Develop a customer service

strategy and enhance

customer experiences

· Improve and enhance

communications with public

· Increase opportunities for

public input/feedback on City

initiatives

STRATEGIES· Complete secondary

plan for annexed lands

· Bring new employment

lands to market

· Explore partnerships for

joint servicing

arrangements

· Expand transportation

choices, including active

transportation

· Advance intensification

projects in accordance

with existing policies

STRATEGIES· Attract and promote sector

clustering

· Engage businesses,

institutions and all levels of

government to establish a

competitive local economy

· Establish Barrie as centre

of excellence in innovation

and entrepreneurship

· Develop Lake Simcoe

Regional Airport as an

employment hub

STRATEGIES

Action Items and Work Plans

STRATEGIC PLANNING

Business Plan and Budget

Strategic

Planning (a)

Annual

Planning (b)Performance

Reporting (d)

Measuring,

Monitoring and

Assessing

Results (c)

Learning and

Adjusting

Program

Delivery

Strategic

Plan

Mgmt.

Reports

Public

Performance

Reports

Individual Performance Evaluations

Other Performance

Data

Env. Scan/

Survey

Workplan

Budget

Indiv. PAs

Focusing on Service

Council’s Strategies

Corporate Sustaining Services, Service

Levels

Council

Business Plan (includes the Budget)

Capital Plan

Performance Plans

Program Changes

Council + Staff

Workplans Balanced Scorecards

Corp. Systems

Dept. Systems

Non-routine

data

Planning Data

Staff

Focusing on Service

SERVICE

PEOPLE

ASSETS

PROCESS

SYSTEMS

SERVICE

LEVEL OF SERVICE

ASSET

LEVEL OF PERFORMANCE

SERVICE

COSTS RISK

City of Barrie Assets = $3.0 Billion

◦ Infrastructure Assets = $2.1 Billion

◦ Road Assets = $1.0 Billion

◦ 30% constructed / assumed within last decade

Challenges

◦ Past Budget decisions

◦ Historic growth patterns

◦ Changes in financial reporting

◦ New Growth

Opportunities

◦ Sense of Urgency

◦ Time

◦ Changes in financial reporting

Past Approach

Reactive

No pressure to replace

Level of knowledge

New Approach

Started in late 2008

Corporate Approach

Demonstrate good stewardship over the City’s existing

assets to support services at desired levels

Additional capacity needs of the City are provided for in

a sustainable manner

Develop an optimal investment program

Produce a Capital Plan that is:

◦ Reliable and executable

◦ Addressing the City’s most critical needs

◦ Matched with available financial resources

◦ Aligned with advancing Council’s Strategic Goals

How everything works together...

Lifecycle AM

Processes & Practices

Strategic Asset

Management Planning

Framework

Elements of an AM System

What is the current state of my assets?

What is my required level of service?

Which assets are critical to sustain performance?

What are my best O&M and CIP investment strategies?

What is my best long term funding strategy?

Asset Register

◦ Asset Hierarchy

◦ Record Layout

Failure Modes

◦ Physical Mortality

◦ Capacity

◦ Level of Service

◦ Financial Efficiency

Residual Life

Lifecycle & Replacement Costs

Sustainable

Quality, Quantity, Reliability and Environmental

Standards

Customer Demand

Regulation

Monitor performance as changes occur

◦ Growth

◦ Regulatory requirements

◦ Technology improvements

Focus on Service

◦ Which assets are most critical to service delivery?

Uniformity in dealing with different assets

Integrated approach

Prioritization of investment to address critical assets first

Relationship: Risk Exposure – Funding Scenarios

Probability of Failure

◦ Asset Failure Modes

◦ Remaining Lives

Consequence of Failure

◦ How does the asset contribute to service delivery?

Optimized Decision Making

Plan Analysis

Identify Options

◦ Costs

◦ Benefits

◦ Timing

Apply Model

Sensitivity Analysis

Immediate needs

• Increased operating budget pressures:

– Unprecedented growth from 2001 - 2006

– Limited land supply for future growth

– High fixed costs, or costs growing at rate that exceeds inflation

– High reliance on the tax rate as a source of revenue combined

with significant pressure to control tax rate increases

– Aging infrastructure that requires replacement at the same

time as new infrastructure is required to support growth

– Reliance on debt financing, combined with

development charge discounts

– General economic conditions

Several factors influencing financial

condition require coordination and

cohesive planning if they are going to be

effectively managed.

• Council’s main contribution is a long-term vision

and a set of priorities

– Do our strategic priorities provide sufficient, appropriate

direction for building a long range financial plan?

– Have we costed our strategic priorities?

• Stick to the plan, once established

• Demand the annual Budget and Business Plan

reflect the strategies identified in the Long Range

Financial Plan

– Update plans regularly

O&M Investment

Balance preventive, predictive and corrective

maintenance

Reporting and recording O&M costs

Minimize overall lifecycle costs

Maintenance Strategies System Performance

Analysis of the causes of asset failure and develop

specific response plans

Develop guidelines for work management

Capital Investment

Identify alternative options

Develop lifecycle options (costs, benefits and timing)

Application of lifecycle cost model

Maintain Differently Refurbish, then Replace

Full economic costs and revenues associated with

service delivery

Absorb annual variations by using an average lifecycle

cost estimate

Holding account for the total demand in funds required

for service delivery

◦ Optimized renewal of existing assets

◦ Expectations for new assets

Full costs of asset services are allocated to and

recovered from users who receive benefits from the cost

Touches all parts of the organization

Clear connectivity: Strategic Plan to Daily activities

Higher performance levels

Lower Total Cost of Ownership

Greater consistency

Increased confidence and credibility

Optimized Decision Making:

◦ Costs

◦ Risks

◦ Performance

◦ Sustainability

Managing services, not just costs

It’s not about the assets

Success lies in collaboration

◦ Process

◦ Culture

Management approach drives data

requirements

QUESTIONS or COMMENTS

earcher@barrie.ca

bparkin@barrie.ca