Why PS 3150?

Gordon Sparks, Ph.D.,P.Eng

Presentation OutlinePresentation Outline Presentation Highlights Presentation Highlights

– The Points To RememberThe Points To Remember

PS 3150 – BackgroundPS 3150 – BackgroundPrepared by:Prepared by: Norm Snelgrove, CA Norm Snelgrove, CA

The Bigger PictureThe Bigger Picture– The Role of, and Relationships Between:The Role of, and Relationships Between:

Financial AccountingFinancial Accounting Asset ManagementAsset Management Financial PlanningFinancial Planning

Some Infrastructure Management ExamplesSome Infrastructure Management Examples

Summary & ConclusionsSummary & Conclusions

Presentation HighlightsPresentation Highlights

Why PS 3150?Why PS 3150?

The Infrastructure Deficit!The Infrastructure Deficit!

Fact # 1 --Fact # 1 --

many – maybe even most – municipalities many – maybe even most – municipalities do not have the financial resources – (that do not have the financial resources – (that is tax base) - that will be required to is tax base) - that will be required to maintain, repair and rehabilitate the maintain, repair and rehabilitate the infrastructure they own, going forward – infrastructure they own, going forward – without financial help from the Province without financial help from the Province and / or Feds!and / or Feds!

PS 3150 is a first step --PS 3150 is a first step --

Toward the assembly of some of the information Toward the assembly of some of the information required – namely --required – namely --

– inventory inventory – ageage– valuevalue

for a municipality to determine the amount and timing for a municipality to determine the amount and timing of the dollars required to maintain, repair & of the dollars required to maintain, repair & rehabilitate the infrastructure required to deliver the rehabilitate the infrastructure required to deliver the services upon which our standard of living will services upon which our standard of living will depend going forward.depend going forward.

There are 2 other parts --There are 2 other parts --

Part #2 – the Asset Management PlanPart #2 – the Asset Management Plan

Part #3 – the Long Term Financial PlanPart #3 – the Long Term Financial Plan

INVENTORY OF ASSETSAge – Value- (& Condition)

Financial Accounting

Asset Management

FinancialPlanning

Management ofInfrastructure for Service Delivery

The Bigger Picture

PS 3150

Part #2 – Part #2 – The Asset Management PlanThe Asset Management Plan

The Asset Management Plan --The Asset Management Plan --

determines the determines the amountamount and and timingtiming of of expendituresexpenditures required to required to sustainsustain your your community’s community’s infrastructure infrastructure (roads, sewer (roads, sewer and water systems, community center and water systems, community center etc,) going forward --- etc,) going forward ---

While While minimizing life cycle costsminimizing life cycle costs??

The Asset Management Plan --The Asset Management Plan --

Maximizes the “Bang for the Buck”Maximizes the “Bang for the Buck”

It is all about “Working Smarter” – Not It is all about “Working Smarter” – Not Harder!Harder!

Being “Proactive” in terms of maintenance Being “Proactive” in terms of maintenance as opposed to “Reactive”.as opposed to “Reactive”.

Fact # 2 --Fact # 2 --

It is possible to reduce the life cycle costs It is possible to reduce the life cycle costs associated with maintaining, repairing, and associated with maintaining, repairing, and rehabilitating infrastructure assets by 30% - rehabilitating infrastructure assets by 30% - 50% by taking a “Proactive” approach to 50% by taking a “Proactive” approach to maintaining your infrastructure.maintaining your infrastructure.

Fix it before it is broken - not after!Fix it before it is broken - not after!

Do the Right Thing @ the Right Time – Do the Right Thing @ the Right Time – Consistently!Consistently!

Part #3 – Part #3 – The Long Term Financial PlanThe Long Term Financial Plan

The Long Term Financial PlanThe Long Term Financial Plan

Presents the long term plan for where the Presents the long term plan for where the required financial resources will be required financial resources will be obtained.obtained.

INVENTORY OF ASSETSAge – Value- (& Condition)

Financial Accounting

Asset Management

FinancialPlanning

Management ofInfrastructure for Service Delivery

The Bigger Picture

Part #1 – PS 3150

Part #2 -Asset Management

Part#3 – Financial Plan

Part#1: PS 3150 Part#1: PS 3150 BackgroundBackground

Prepared by:Prepared by: Norm Snelgrove, CA Norm Snelgrove, CA

1717

The Public Sector Accounting Board The Public Sector Accounting Board (PSAB) has issued new standards that (PSAB) has issued new standards that will come into effect for fiscal years will come into effect for fiscal years starting January 1, 2009.starting January 1, 2009.

PSAB requires that local governments PSAB requires that local governments record their TCA on the statement of record their TCA on the statement of financial position (i.e. balance sheet) financial position (i.e. balance sheet) and amortize them over their useful and amortize them over their useful life.life.

Background - new rules

18

Why should municipalities do this?Why should municipalities do this?Lack of knowledge about the costs of using assets and fully maintaining them limits a council’s ability to:• make important financial

decisions, or • know if existing financing

policies are appropriate and adequate.

Background…But WHY?

19

Provides an inventory against which maintenance, renewals, replacement, financing and rate setting decisions can be evaluated

Starting point for evaluating the condition of infrastructure on a regular basis & highlighting changes in its condition over time

Background – the benefits

BENEFITS associated with having better information with regards to the stock of infrastructure:

2020

Background - more benefits

Provides an understanding of total service costs

Establishes full cost service fees and charges

Provides base to establish full cost budgets

Improves accountability for allocation and use of resources

21

For the past several years there has been continued discussion on the Canadian infrastructure deficit.

What’s the Infrastructure

Deficit?

Background - Infrastructure Deficit

22

It has been estimated that it would cost as much as $120 billion to upgrade all infrastructure assets in Canada to an acceptable condition.

It’s the concept that our federal, provincial and municipal assets are wearing out at a faster rate than they’re being replaced.

Background - Infrastructure Deficit

23

The goals of PS 3150 The goals of PS 3150 are to:are to:• Quantify the Quantify the

infrastructure deficit, infrastructure deficit, and and

• Permit municipalities Permit municipalities to develop capital to develop capital investment plans that investment plans that will allow them to will allow them to achieve and maintain achieve and maintain community community sustainability. sustainability.

Background - Infrastructure Deficit

24

Background - Infrastructure Deficit

In the past, all levels of government have tended to ignore asset replacement.

Why? …Keep tax rates down.

The result of this approach?

…a general deterioration of all capital assets (infrastructure) and government’s overall financial position.

The effect at the municipal level?

…pushing the financial implications of infrastructure replacement requirements on to future councils and taxpayers.

So Why PS 3150?So Why PS 3150?SUMMARYSUMMARY

Because –Because –– With the current approach the condition of Canada’s With the current approach the condition of Canada’s

overall infrastructure is deterioratingoverall infrastructure is deteriorating Unsustainable situation!Unsustainable situation!

– We are downloading the cost of repairing and We are downloading the cost of repairing and rehabilitating our public sector infrastructure, that rehabilitating our public sector infrastructure, that supports our quality of life, onto the next generations supports our quality of life, onto the next generations namely - our kids and grandkids!namely - our kids and grandkids!

It is time to get control of this situation!It is time to get control of this situation!

Part #2: The Bigger Picture

The Role of, and Relationships Between:

- Financial Accounting - Asset Management- Financial Planning

Unfortunate TruthUnfortunate Truth

You can not manage —You can not manage —

What you do not measure!What you do not measure!

The overall need is to:

Be able to provide estimates of the timing and amounts of funding municipalities will need to maintain, repair and replace their infrastructure today, and in the future.

You require the information and You require the information and analytical methods that will -analytical methods that will -

Enable you as the Administrators, to Enable you as the Administrators, to determine the minimum amount and determine the minimum amount and timing of the dollars required to sustain timing of the dollars required to sustain your communities going forward.your communities going forward.

This information will --This information will --

Enable your councils, with your support, Enable your councils, with your support, to establish funding priorities and plans for to establish funding priorities and plans for short and long term funding support for short and long term funding support for your communities infrastructure. your communities infrastructure.

This information is also needed to:

demonstrate to the provincial and federal levels of governments, the needs and priorities related to municipal infrastructure.

Make the case for financial support!

In short --In short --

with full details relating to the inventory of with full details relating to the inventory of infrastructure assets including:infrastructure assets including:– age, age, – value value – (and condition) –(and condition) –

municipalities will be able to make a much better municipalities will be able to make a much better case to the senior levels of government for case to the senior levels of government for financial help to support the infrastructure upon financial help to support the infrastructure upon which our quality of life depends.which our quality of life depends.

Clearly --Clearly -- from the information available -- from the information available --

Municipalities are going to need financial Municipalities are going to need financial help from Provincial and Federal levels of help from Provincial and Federal levels of government to support municipal government to support municipal infrastructure going forward.infrastructure going forward.

It is only reasonable that --It is only reasonable that --

Municipalities be able to: Municipalities be able to:

– First – demonstrate their need for money in a First – demonstrate their need for money in a clear, credible manner (auditable).clear, credible manner (auditable).

– Second – demonstrate that they are Second – demonstrate that they are managing the resources available “prudently”.managing the resources available “prudently”.

–Getting “value for money”Getting “value for money”

PS 3150 is --PS 3150 is --

The financial accounting part of the bigger The financial accounting part of the bigger management information puzzle.management information puzzle.

INVENTORY OF ASSETSAge – Value- (& Condition)

Financial Accounting

Asset Management

FinancialPlanning

Management ofInfrastructure for Service Delivery

The Bigger Picture

PS 3150 – First Step!

Financial Accounting-Financial Accounting-

Financial Accounting-Financial Accounting-

Accounts for historical transactionsAccounts for historical transactions

Asset Management --Asset Management --

Asset Management --Asset Management --

Management of the maintenance, repair, Management of the maintenance, repair, rehabilitation & replacement of rehabilitation & replacement of infrastructure assetsinfrastructure assets

proactive not reactive managementproactive not reactive management– Fix it before it is broke – save Big Bucks! Fix it before it is broke – save Big Bucks!

Asset Management --Asset Management --

Maximizes the “Bang for the Buck!Maximizes the “Bang for the Buck!

Doing the “Right Thing” at the “Right Doing the “Right Thing” at the “Right Time”, “Consistently”!Time”, “Consistently”!

Ensures you are operating in the “Sweet Ensures you are operating in the “Sweet Spot”.Spot”.

“The Sweet Spot”

“The “No Brainer”

Mai

nten

ance

Cos

ts $

/yr

Good Fair Poor Very Poor

Condition

“Sweet Spot”

Lower cost – Better Service

Cost to Maintain

Vs

Condition

Asset Management --Asset Management --

““Optimizes” –Optimizes” –– the “type” and “timing” of maintenance the “type” and “timing” of maintenance

activities so as to minimize the life cycle costs activities so as to minimize the life cycle costs of providing the desired level of service.of providing the desired level of service.

Demonstratably delivers –Demonstratably delivers –

--“Best Bang For The Buck”--“Best Bang For The Buck”

Financial ManagementFinancial Management

Financial Management is -- Financial Management is --

Planning for the financial future!Planning for the financial future!

Addresses the issue of --Addresses the issue of --

- “Financial Sustainability”- “Financial Sustainability”

Issues --Issues --

Financial Sustainability of Community!Financial Sustainability of Community!

The Infrastructure DeficitThe Infrastructure Deficit

Maximizing “Bang for the Buck Maximizing “Bang for the Buck – ““Value For Money”Value For Money”

Some ExamplesSome Examples

Roadway PavementsRoadway Pavements

Pavement PerformancePavement Performance & &

Life Cycle ManagementLife Cycle Management

In Short -- In Short --

You can reduce the cost of providing a You can reduce the cost of providing a paved road by 30% to 50% by –paved road by 30% to 50% by –– Doing the “Right Thing”, at the “Right Time” Doing the “Right Thing”, at the “Right Time”

“Consistently”.“Consistently”.

Proactive preventative maintenance vs Proactive preventative maintenance vs reactive maintenance!reactive maintenance!

Typical Profile of City PavementsTypical Profile of City Pavements

Pavements – Pavements –

---- many 40 to 60 years old ---- many 40 to 60 years old

Two peak periods ---The 1950s to late 60s. Followed by the early 1970s to mid 1980s.

The earlier peak is now nearing the end of its life

Pavements – 40 to 60 yrs old

Bridge ExampleBridge Example

One of 2100 Short – Span Bridges In Rural Saskatchewan

Most 40 to 60 years of Age - $500,000 to $1 million Each To Replace

Most will have to be replaced within next 20 yrs - > $1B = $50m/yr = 10% of Annual Provincial Highway Budget

Town of DalmenyTown of DalmenyProfile of Infrastructure Profile of Infrastructure

AssetsAssets

Summary of Dalmeny Road Summary of Dalmeny Road AssetsAssets

Road Construction Year by Type and Area

Year

Total Road Area = 132,242 m2

Roa

d Ar

ea (

m2)

Replacement Cost of Curb & Gutter = $ 1,248,181

Total Road Network Replacement Cost = $ 4,817,393

Year

Curb & Gutter Construction Year by Length

Curb

Len

gth

(m)

Summary of Dalmeny Water Main Summary of Dalmeny Water Main AssetsAssets

Water main Construction by Year

Year

Total of 12,856 m of water main

Total water main Replacement Cost = $ 2,776,253

Leng

th o

f Pi

pe (

m)

Summary of Dalmeny Sanitary Main Summary of Dalmeny Sanitary Main AssetsAssets

Sanitary sewer Construction by Year

Year

Total of 9,531 m of sanitary sewer

Total Sanitary sewer Replacement Cost = $ 2,293,322

Inst

alle

d Pi

pe (

m)

Dalmeny Summary 2007Dalmeny Summary 2007

$ 8,541,365

$ 1,382,796

$ 2,491,188

$ 3,631,931

$ 76,722$ 242,052

$(20

07)

Projected Financial NeedsProjected Financial Needs

Town of DalmenyTown of Dalmeny

Future InfrastructureFuture Infrastructure

Changing demandsChanging demands

Changing populationsChanging populations

Estimated Road Replacement Year by Area

Year

Toad

Are

a (m

2)

Year

Estimated Curb Replacement Year by Length

Curb

Len

gth

(m)

Forecasted Road Replacement Costs by YearForecasted Road Replacement Costs by Year(to current standard)(to current standard)

Year

$ 1,103,297

$ 1,230,986

$ 1,025,742

Estim

ated

Rep

lace

men

t Co

st (

$200

7)

Summary of Buckland Summary of Buckland Road & Bridge AssetsRoad & Bridge Assets

Road Construction Year by Class and Km

Year

Road Replacement Costs ($ 2008) by Class

Road Class

TotalNetwork ReplacementCost = $ 24,034,431

Rep

lace

men

t Co

st (

$200

8)

Bridge Construction by Year

Year

Total of 16 Bridges

Total Bridge ReplacementCost = $ 8,580,000

Num

ber

of B

ridge

s

RM of Buckland Summary 2008RM of Buckland Summary 2008

$ 10,182,941

$ 5,754,475$ 4,428,466

$ 35,339,808

$ 237,244

$ (2

008)

ExampleExample

RM of BucklandRM of Buckland- Bridges- Bridges

BridgesBridges

Bridge AssessmentsBridge Assessments– Remaining useful life?Remaining useful life?

– For illustration assume a 60 year lifeFor illustration assume a 60 year life

Bridge Replacement Cost ($ 2008) by YearBridge Replacement Cost ($ 2008) by Year

Year

In the next 10 years 9 bridges will reach the end of their useful lives

Rep

lace

men

t Co

st (

$200

8)

9 Bridges – replaced next 10 years9 Bridges – replaced next 10 years

The total replacement cost of these bridges is The total replacement cost of these bridges is $ 4,795,000$ 4,795,000 Current Total Budget for RM is $1.5m/yr Current Total Budget for RM is $1.5m/yr

- 10 years – total budget = $15 million- 10 years – total budget = $15 million

Bridge replacement as % of Total Annual BudgetBridge replacement as % of Total Annual Budget - $4.7m/$15m = 28% of total RM Budget!- $4.7m/$15m = 28% of total RM Budget!

- Really????? Now what ???- Really????? Now what ???

Mission of PS 3150 --Mission of PS 3150 --

• First step First step • Financial Accounts – Inventory – Age - Value Financial Accounts – Inventory – Age - Value

• Next StepsNext Steps• Asset Management PlanAsset Management Plan• Long Term Financial PlanLong Term Financial Plan

• Permit municipalities to develop capital Permit municipalities to develop capital investment plans that will allow them to investment plans that will allow them to achieve and maintain community achieve and maintain community sustainability. sustainability.

Questions?Questions?