kim$fowler$m.sc.,’mcip’ financial’costsof’ growth

Financial Costs of Growth for Municipalities

GFOA Conference May 30, 2012 Calgary, AB

Kim Fowler M.Sc., MCIP

Overview

Sustainability integration 4 main risks climate change, infrastructure replacement, aging population, First Nations Sustainability and Triple Bottom Line Accounting vs. Conventional Economic Costing What does climate change, change financially? Canadian municipal infrastructure liability and risk costs Practical case studies Sprawl versus Sustainability why?

May 30, 2012 www.SustainabilityMakesCents.com 2

Sustainability is the quality of a process or state allowing it to be maintained indefinitely. The principles of sustainability integrate three closely interlinked elements the Environment, Economy, and social Equity into a system that can be maintained in a healthy state indefinitely. Elements together often called E3 integration.

Sustainability Defined


June 11, 2012 www.SustainabilityMakesCents.com 4

VANOC Sustainability Group*

Only 47% of Canadians & 68% of BC have heard of sustainability 80% of Canadians rate sustainability as a top or high priority national goal 85% agree we need stricter laws and regulations to protect the environment 92% approve of mandatory standards requiring all new buildings and appliances to deliver 50% more energy efficiency within 10 years Most Canadians do not think individual actions will make a difference

* Survey by James Hoggan & Associates

Climate Change

Sustainability & Climate Change

The Canadian Council of Chief Executives stated

that sustainable development is "the most

fundamental challenge facing the world today,

and ... climate change represents the most

pressing and daunting issue" facing business,

government and the public.


The evidence shows that ignoring climate change will eventually damage economic growth. Our actions over the coming few decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century. And it will be difficult or impossible to reverse these changes. Tackling climate change is the pro-‐growth strategy for the longer term, and it can be done in a way that does not cap the aspirations for growth of rich or poor countries. The earlier effective action is taken, the less costly it will be.

-‐ Oct 30, 2006

Economics of Climate Change Lord Stern Review

DANGER Municipal Infrastructure

FCM, November 2007

Canadian municipalities own and maintain most of the infrastructure.

The infrastructure supports our economy and quality of life.

The majority of the infrastructure was built between 1950 and 1970 and is due for replacement.

The condition of the infrastructure is deteriorating and the cost of maintaining it is increasing.

The infrastructure deficit has increased from $12 billion (1985) to $123 billion (2007) within Canada.

May 30, 2012

www.SustainabilityMakesCents.com 9

Debt Financing & Community Expectations

Several generations raised on debt financing of major social benefits Debt reductions from 1990 have caused social concerns & downloading with 8 cents/$ of tax pie

paid) for them

Current funding

Capital funding gap

Historical expectation

Current service level


Infrastructure Deficit/Liability City of Victoria Case Study

$467 million capital infrastructure deficit ($1.74 billion replacement cost) 59% buildings are past their useful life (O & M 50%) Options to make up this deficit are:

Raise property taxes Find new sources of revenue Reduce or eliminate some infrastructure Reduce or eliminate services Seek private capital partnerships


Source: http://www.civicinfo.bc.ca/Library/Asset_Management/Presentations/Infrastructure_Review_and_Assessment_Model_Presentation-‐-‐Victoria-‐-‐May_2010.pdf

http://www.civicinfo.bc.ca/Library/Asset_Management/Presentations/Infrastructure_Review_and_Assessment_Model_Presentation--Victoria--May_2010.pdf






Water System -‐ Age Profile

0

10,000

20,000

30,000

40,000

50,000

60,000

Prior to1900

1900-1909

1910-1919

1920-1929

1930-1939

1940-1949

1950-1959

1960-1969

1970-1979

1980-1989

1990-1999

2000-2005

Year of Installation

Le

ng

th o

f Pip

e In

sta

lled

(m)









Storm Drain System -‐ Age Profile

010,00020,00030,00040,00050,00060,00070,000

Priorto

1900

1900-1909

1910-1919

1920-1929

1930-1939

1940-1949

1950-1959

1960-1969

1970-1979

1980-1989

1990-1999

2000-2007


Le

ng

th o

f P

ipe

In

sta

lled

(m)









Sewer System -‐ Age Profile

020,00040,00060,00080,000

100,000120,000

Priorto

1900

1900-1909

1910-1919

1920-1929

1930-1939

1940-1949

1950-1959

1960-1969

1970-1979

1980-1989

1990-1999

2000-2007


Le

ng

th o

f P

ipe

In

sta

lled

(m)










Current Funding Levels Compared to Necessary Levels

0

5

10

15

20

25

Buildings Water Drain Sewer Roads(paving

only)

Total

Fund

ing

(Mill

ions

of D

olla

rs 2

008)

Budgeted Annual FundingRequired Annual Funding









Source: Top Images from Internet 2008

Source: CaGBC

www.docksidegreen.ca

North

Port Coquitlam Sustainability Initiative

1. Strategic Plan & Official Community Plan 2. Annual departmental business plans 3. Triple Bottom Line Assessment matrix for annual budget requests 4. Sustainability Checklist for RZ and DP applications 5. Green building technology for City buildings 6. Green building & social housing incentive policy + social housing fund 7. Social planning study 8. Green roof regulation 9. Cash-‐in-‐lieu parking variance 10. City land sales project 11. Tree Bylaw 12. Potable water source control program


Europe 2020 Strategy Priorities & Targets

1. Smart growth: developing an economy based on knowledge and innovation

2. Sustainable growth: promoting a more resource efficient, greener and more competitive economy

3. Inclusive growth: fostering a high-‐employment economy delivering social and territorial cohesion

75 % of the population aged 20-‐64 should be employed 3% of the EU's GDP should be invested in R&D The "20/20/20" climate/energy targets should be met The share of early school leavers should be under 10% and at least 40% of the younger generation should have a tertiary degree 20 million less people should be at risk of poverty


Sustainability Challenges

Cheap plentiful resources (water, electricity, land, oil & gas) Social dream of SFD with white picket fence this is demand Inelastic response to commute times & elastic response to costs will be too late Development charges norm instead of full cost recovery Short term, non-‐integrated fiscal planning cycle 4 new major risks Social service and amenity cost externalities Assumption of continued growth Car dependent infrastructure Provincial planning legislation encourages sprawl over infill


Municipal Tools & Techniques

Alberta GFOA Conference May 30, 2012 Calgary, AB

Kim Fowler M.Sc., MCIP


Costs of Sprawl

The project of suburbia is the greatest misallocation of resources in the history of the world. America has squandered its wealth in a living arrangement that has no future.

-‐ James Howard Kunstler, The End of Suburbia


Benefits of Smart Growth


CMHC Tool for Costing Sustainable Community Planning: User Guide

Allows users to estimate major costs of community development, particularly those that change with different forms of development (e.g., linear infrastructure) and to compare alternative development scenarios. Geared -‐and revenues associated with the residential component of a development. Hard infrastructure, municipal services, private user costs, external costs and green infrastructure alternatives are 4 major categories.


Asset Management BC


Asset Management Principles

1. 2. Define its quality/level 3. Include O&M within life cycle 4. All infrastructure activities are

interdependent


Op & Maintenance Significance


Asset Management BC

Model AM Policy State of AM in BC report AM Self Assessment Tool & Road Map Workshops & Regional Presentations Web site, newsletter and partnerships

http://www.bcassetmanagement.ca


http://www.bcassetmanagement.ca/

Lynx Capital Planning & Management System

Infrastructure tool, based on full life cycle & triple bottom line analysis, is international standard compliant and fully scalable Developed in consultation with 4 universities (3 Canadian and 1 UK) Now finding partner municipalities for case studies to populate & web-‐base the tool


Key Issues

Addresses NPV issues & promotes renewable energy revenue $345 million wastewater treatment plant in BC -‐ correctly estimated at $1.1 billion in life cycle costs When 7 renewable technologies are included, the net total cost is $108 million in revenue for local government


Development Fees & Cost Charges

Full cost accounting and life cycle analysis Cost recovery of development fees &

Robin Hood incentives Complete application policy


Points Wt

Tot Soc Env Eco

4. Environmental Protection & Enhancement a) Lands

Does not intrude on ALR or designated open lands Protects riparian areas and other designated environmentally sensitive areas Provides for native species habitat restoration/improvement Redevelops environmentally contaminated site

None 0 Poor 1

Good - 2 to 3 Excellent 4

to 5

2

/10

b) Servicing Does not require extension of existing municipal infrastructure (roads, water, sewer)

Located in existing commercial and transportation nodes

None 0 Poor 1

Good - 2 to 3 Excellent 4 to

5

1

/5

c) Construction/Design Provides LEED certification (certified, silver, gold, platinum) or accepted green building

best practices (e.g. Built Green BC, Green Globes, UBC EAP for Housing)

None 0 Certified 2

Silver 3 Gold 4

Platinum - 5

4

/20

5. Social Equity

Contains elements of community pride and local character, such as public art Provides affordable space for needed community services Conducts public consultation, including documenting concerns & providing project visuals

None 0 Poor 1


5

2

/10

6. Economic Development

a) Employment Provides permanent employment opportunities Increases community opportunities for training, education, entertainment or recreation

None 0 Poor 1


5

1

/5

b) Diversification and Enhancement Net increase to property tax base Promotes diversification of the local economy via business type and size

Improves opportunities for new and existing businesses, incl. eco-industrial & value-added Developer demonstrates success with similar projects

None 0 Poor 1


5

1

/5

T RIPL E B O T T O M L IN E SU M M A RY Application Total

/35 ( %)

/35 ( %)

/35 ( %)

/105 ( %)

Social/Environmental/E conomic

Sustainability Checklist page 2

Area Factors CE-R

-N-19

3400

Bloc

k St. A

nne S

treet

CE-R

-N-20

Side

walks

- Mary

Hill

Road

CE-R

-N-21

Loca

l Area

Serv

ices

CP-P

-N-01

Ligh

ts-Ga

tes P

ark B

aseb

all Fi

eld

CS-I-N

-04 D

ocum

ent M

anag

emen

t Sys

tem

CS-I-N

-06 H

uman

Res

ource

Sys

tem

CS-I-N

-07 Fi

nanc

ial R

eport

ing

CS-I-N

-08 B

udge

t Rev

iew

CS-I-N

-09 C

lass t

o Cay

enta

Integ

ration

CS-I-N

-10 Te

mpes

t to C

ayen

ta Int

egrat

ion

A Strategic Plan Alignment

Mobility and Access, Protect Infrastructure, Complete Community, Safety, Customer Service, Strategic Alliances, Financial Stability, Strong Organization

B Financial/Economic Value

Increased revenues, cost savings/avoidance, productivity improvements, minimize risk , increase economic opportunities

Tangible benefits

C Social/Community Value

Improve Ee safety or morale, enhance citizen participation, strengthen neighbourhoods, improve service/image/decision making

Intangible benefits

D Environmental Value

Enhance natural areas/green space, reduce air emissions, encourage environmental stewardship, contribute to regional sustainability

E Risk Organizational change risk , tech risk , etc.

Liklihood of achievment'

Proposal score 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Scoring Rank on a scale of 1 to 10A the greater the alignment the higher the scoreBCD the greater the benefit the higher the scoreE the lower the risk the higher the score

20%

20%

20%

20%

20%

Decision Matrix for 2006 Operating & Capital Budget

Sustainable Infrastructure Options

Municipal Utilities core, profit centres and partnering P3s how to address risk and lack of capital Local Service Areas different areas, services and levels of service


Civic Engagement

Dockside example Municipal finance & AM Kitchen table sustainability Options, timing and frequency The great and the bad messages = trust Lobbying


Legal, Political & Administrative Issues

Professional codes of conduct & liability Municipal liability Political will opportunity/innovation Administrative leadership level of service, risk management and accountability

= Legacy



M IND

To L earn

G rowth & Development Use Me C reatively

H E A RT

To Love

Relationships Treat Me K indly

B O D Y

To L ive

Survival Pay M e F air ly

L E G A C Y

To serve human needs in creative ways

Adapted from The 8th Habit: F rom Effectiveness to Greatness by Stephen Covey

Spirit

Environmental

Socio-cultural Economic

W H O L E PE RSO N IN A W H O L E JO B IN A W H O L E O R G A NI Z AT I O N IN A W H O L E C O M M UNI T Y

Kim Fowler, M.Sc., MCIP, RPP Sustainability Planning & Integration Specialist

phone: (001*) 250-‐858-‐8905

email: [email protected]

www.SustainabilityMakesCents.com

Discussion

mailto:[email protected]

http://www.sustainabilitymakescents.com/

kim$fowler$m.sc.,’mcip’ financial’costsof’ growth

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