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Developing asset management plans

  1. 1. Developing Asset Management Plans by Focusing on Service Ed Archer, CMA General Manager, Corporate Services & Blaine Parkin, P.Eng. Director, Corporate Asset Management
  2. 2. 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
  3. 3.  Growth  Regulation  Aging / Deteriorating Infrastructure  Public Expectation  Funding Levels  Budget Demands  Levels of Service  Sustainability
  4. 4.  Focus on Short-term Issues  Strategic Planning not linked to Asset Planning  Segmented Organization - Silos  Reactive Approach  Risk???  Life-Cycle Analysis???
  5. 5. 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
  6. 6.  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
  7. 7. 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
  8. 8. 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
  9. 9. “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)
  10. 10. Factors Influencing Financial Condition Financial Policies Government Financial Condition Service and Economic Quality Levels Factors
  11. 11.  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
  12. 12. 2.5 $5,676 $6,000 2 $4,653 $5,000 $4,000 1.5 $3,225 $3,000 1 $1,925 $2,000 0.5 $1,000 $349 $315 $277 0 $0 2006 2007 2008 2009 2010 2011 2012* Financial Assets:Liabilities Net Debt:Total Revenue Debt per Household * 2012 projected
  13. 13.  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
  14. 14. 0.08 0.06 3.6% 0.04 3.1% 3.1% 3.2% 3.2% 3.4% 3.5% 0.02 0 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
  15. 15.  Degree to which we are dependent on, and therefore vulnerable to, sources of funding outside our control ◦ Government Transfers-to-Total revenue
  16. 16. 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2006 2007 2008 2009 2010 2011 2012* Government Transfers:Total Revenue •2012 projected
  17. 17. Doing What Matters Most
  18. 18.  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
  19. 19.  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.
  20. 20.  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
  21. 21. 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 :
  22. 22.  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
  23. 23. •Service Groups Enterprise Services •Service levels •Cost and quality indicators Department •Categories (staff time + costs) •Service Levels Services •Service Quality •Staff costs Operating Budget •Non-staff costs •Program Changes Workplan •Staff Time for Processes •Staff Time for Projects
  24. 24. A – Define Processes B – Identify Dept/Enterprise Service Projects Tag Category/Subcategory Tag Client Input/ Strategic Plan/ Process List In Year Requests Service Requests Dept. Priorities Dept/Enterprise Service Resource Requirements Tag For Processes Project List Resource Availability Prioritize In Year Prioritized List Requests For projects Resource Allocation & Capacity Planning Priorities for Projects 1 2 3 4 Waterline Process Project List 5 Resource Requirements 6 Work Plan
  25. 25. Enterprise Service Department Service Enterprise Service Department Service Asset Planning and Management Policy Development and Management Environmental Operations Solid Waste Collection and Disposal Data Management and Analysis Waste Reduction and Disposal Capital Budget Fire & Emergency Services Suppression Infrastructure Planning Prevention Facility Development Training Design and Construction Emergency Planning By-Laws & Regulations By-law Enforcement Dispatch Prosecution Services Taxation Services General Public/Transaction Services Regulatory Investigations Water and Wastewater Billiing POA Reception Corporate Communications Communications Switchboard Intergovernmental Affairs Governance Council Secretariate Corporate Finance Corporate Finance and Accounting Leisure/Recreation Recreation Programs Internal Audit Facility Operations - Recreation Corporate Sustaining Services Purchasing Facility Maintenance Compensation Management Parks Park Maintenance Recruitment Permits & Inspections Regulatory Inspection Health and Safety Permit Application Processing Labour and Employee Relations Regulatory Review (Building) Employee Development and Support Planning and Economic Development Range Planning Long IT Application Delivery and Data Management Planning Application Processing Infrastructure Tool Access (Data/voice) Marketing Professional 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 Winter Control Winter Control Culture Event Management Culture Community Support Focusing on Service
  26. 26. Highest Parking Clerks Parks Leisure/Recreation Service Level By-law Enforcement Building ICT Waste Mgmt Purchasing Planning Facilities Human Res. Legal Svcs. Wastewater Culture Winter Fire Control Water Roads Accts. Payable Storm Water Accts. Receivable Transit Lowest Highest Efficiency Focusing on Service
  27. 27.  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, Education Conservation Authorities, Tourism Barrie, RVH Expansion, Health Unit) City Services  18% funds education Service Partners Focusing on Service
  28. 28. 72%  72% of revenues from 8% property tax  1% 7% Revenue from fees, 1% 3% 2% 2% 4% service charges consistent with 2012 Property tax Corporate Revenues Fees, Service Charges Reserves/Reserve Funds budget Fines Licenses/Permits Interest & Investment Income Other Other Gov't Funding Focusing on Service
  29. 29.  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
  30. 30. “…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.”
  31. 31.  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
  32. 32. STRATEGIC PLANNING 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 GOAL GOAL GOAL GOAL Improve and Expand Manage Growth and Create a Vibrant and Strengthen Barrie’s Direct and Manage Community Involvement and Protect the Healthy City Centre Financial Condition Economic Development City Interactions Environment STRATEGIES STRATEGIES STRATEGIES STRATEGIES STRATEGIES · Improve integration · Balance service · Develop a customer service · Complete secondary · Attract and promote sector between downtown and demands with financial strategy and enhance plan for annexed lands clustering the waterfront resources customer experiences · Bring new employment · Engage businesses, · Actively promote the · Develop affordable long · Improve and enhance lands to market institutions and all levels of downtown and range plans that reflect communications with public · Explore partnerships for government to establish a waterfront to our changes in our · Increase opportunities for joint servicing competitive local economy residents and visitors community’s growth and/ public input/feedback on City arrangements · Establish Barrie as centre · Encourage a mix of land or economy initiatives · Expand transportation of excellence in innovation uses in the downtown · Diversify revenues choices, including active and entrepreneurship · Enhance safety in the · Pursue innovation transportation · Develop Lake Simcoe downtown through our Journey of · Advance intensification Regional Airport as an Excellence projects in accordance employment hub with existing policies Business Plan and Budget Action Items and Work Plans
  33. 33. Public Performance Strategic Reports Plan Individual Strategic Performance Planning (a) Evaluations Env. Scan/ Survey Learning and Adjusting Annual Performance Planning (b) Reporting (d) Program Workplan Delivery Measuring, Monitoring and Budget Mgmt. Assessing Results (c) Other Reports Performance Data Indiv. PAs Focusing on Service
  34. 34. Council’s Corporate Sustaining Council Strategies Services, Service Levels Business Plan (includes the Budget) Council + Capital Performance Program Staff Plan Plans Changes Workplans Balanced Scorecards Staff Corp. Dept. Non- Planning Systems Systems routine Data data Focusing on Service
  38. 38.  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
  39. 39. Past Approach New Approach  Reactive  Started in late 2008  No pressure to replace  Corporate Approach  Level of knowledge
  40. 40.  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
  41. 41. How everything works together...
  42. 42. Elements Lifecycle of an AM AM System Processes & Practices Strategic Asset Management Planning Framework
  43. 43.  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?
  44. 44.  Asset Register ◦ Asset Hierarchy ◦ Record Layout  Failure Modes ◦ Physical Mortality ◦ Capacity ◦ Level of Service ◦ Financial Efficiency  Residual Life  Lifecycle & Replacement Costs
  45. 45.  Sustainable  Quality, Quantity, Reliability and Environmental Standards  Customer Demand  Regulation  Monitor performance as changes occur ◦ Growth ◦ Regulatory requirements ◦ Technology improvements
  46. 46.  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
  47. 47.  Probability of Failure ◦ Asset Failure Modes ◦ Remaining Lives  Consequence of Failure ◦ How does the asset contribute to service delivery?
  48. 48.  Optimized Decision Making  Plan Analysis  Identify Options ◦ Costs ◦ Benefits ◦ Timing  Apply Model  Sensitivity Analysis
  49. 49. 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
  50. 50. Several factors influencing financial condition require coordination and cohesive planning if they are going to be effectively managed.
  51. 51. • 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
  52. 52. 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
  53. 53. Capital Investment  Identify alternative options  Develop lifecycle options (costs, benefits and timing)  Application of lifecycle cost model
  54. 54. Maintain Differently Refurbish, then Replace
  55. 55.  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
  56. 56.  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
  57. 57.  Managing services, not just costs  It’s not about the assets  Success lies in collaboration ◦ Process ◦ Culture  Management approach drives data requirements