Asset Management Planning Tools and Resources. AMCTO 2015 Conference. Chris Terech Ministry of Municipal Affairs and Housing

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1 Asset Management Planning Tools and Resources AMCTO 2015 Conference Chris Terech Ministry of Municipal Affairs and Housing

2 Contents Tips for moving along the AMP continuum Tools and Resources Assessing your AMP using the checklist Infrastructure report card Financing mechanisms Shared services Debt User fees Development charges Alternative Financing and Procurement Ministry of Municipal Affairs and Housing 2

3 An Asset Management Plan Describes: the characteristics and condition of infrastructure assets their expected levels of service planned actions to achieve levels of service financing strategies to implement the planned actions Ministry of Municipal Affairs and Housing 3

4 Approximately 96% of municipalities in Ontario have developed asset management plans (AMPs). Majority Have AMPs Ministry of Municipal Affairs and Housing 4

5 Where Are Municipalities Now? 426 municipalities say they have AMPs, 320 have made their AMPs public either on line or in the office Of the public AMPs, more than 166 include assets beyond the 4 key assets Municipalities reporting in Sept survey taking steps toward using AMPs to help with decision making, but progress is slow and challenging, and most municipalities feel they are in need of support 3/4 survey respondents said their AMPs linked to other tools, but these are generally financial + road plans. Most have not integrated AMPs with land use or strategic planning. Early leaders in Appendix D. All municipalities have AMPs All AMPs are complete All municipalities use their AMPs to make infrastructure decisions All AMPs are linked to municipal financial, strategic and land use plans Ministry of Municipal Affairs and Housing 5

6 Observations from Review of AMP s Follow the Guide: AMP Evaluations for grant programs are based on the Building Together guidebook. The guidebook indicates that AMP s should incorporate four components: State of Local Infrastructure Desired Levels of Service Asset Management Strategy Financing Strategy Ministry of Municipal Affairs and Housing 6

7 State of Local Infrastructure In the majority of plans that were reviewed, the State of Local Infrastructure section was the most complete section. Listing assets and their values is just the start. A comprehensive plan incorporates the condition of those assets as well as a plan for managing, verifying and updating asset data. Ministry of Municipal Affairs and Housing 7

8 Desired Levels of Service Progress in incorporating desired levels of service have lagged behind other sections in many AMP s. The desired levels of service section identifies performance measures through current and target values associated with each measure. For example: Performance Measure Current Target Number of breaks per 100km of water main per year Ministry of Municipal Affairs and Housing 8

9 Asset Management Strategy Many plans don t link their asset management strategy with their desired levels of service. It is important to incorporate how maintenance activities help achieve target performance measures outlined in the Desired Levels of Service section. Ministry of Municipal Affairs and Housing 9

10 Financing Strategy Financing strategies should consider all available local financing tools. Debt, user fees, property taxes, partnerships etc Financing strategies should detail which activities will be prioritized. Important to recognize that the activities being funded have a significant impact on the community. Ministry of Municipal Affairs and Housing 10

11 Uncertain if Your Plan is Comprehensive Enough? Ministry of Municipal Affairs and Housing 11

12 Sample Of AM Tools AM checklist Infrastructure report card primer and template Long-term Financial Planning model template and user guide Ministry of Municipal Affairs and Housing 12

13 Sample Of AM Resources AM case studies Tip sheets: Reporting to council Regulation 284/09 Integrating AM into long-term planning Budgeting for AM Council decision-making Questions and answers Ministry of Municipal Affairs and Housing 13

14 Assess if Your Plan is Comprehensive 1. AMP Integration 2. AMP Governance 3. Council Support 4. Inventory 5. Asset Age and Consumption Rate 6) Condition 7) Levels of Service 8) Budgeting 9) Finance Policies 10) Future Actions Ministry of Municipal Affairs and Housing 14

15 Comprehensive Levels of Service Means: Current and desired levels are documented. Capital and operating cost estimates exist for moving from the current to the desired levels. Meet legislative requirements. Were determined with inputs by residents. Approved and adopted by council. Departments understand their roles. There is a plan to keep service level metrics current. Capital forecast and desired levels are linked. Ministry of Municipal Affairs and Housing 15

16 AMP Comprehensive Budgeting Means: Assets with the longest life set the time frame. Plan for the backlog. Sound cost estimates. Prioritization system. Impacts on ratepayers. Various revenue sources. Ministry of Municipal Affairs and Housing 16

17 If It s Not In The Budget It Doesn t Exist Ministry of Municipal Affairs and Housing 17

18 AMP Comprehensive Finance Policies Means: Debt management Long-term financial planning policies Reserve policies Expenditures Revenues User fees Financial reporting Investments Internal control and risk management Ministry of Municipal Affairs and Housing 18

19 Understanding The Full Story When It Comes To Financing Options Ministry of Municipal Affairs and Housing 19

20 You Have A Comprehensive Plan Now How Do You Fund It? Shared services Debt User fees and special tax levies Development charges Alternative financing and procurement Ministry of Municipal Affairs and Housing 20

21 Shared Services A national scan was conducted in 2013 by Muniscope (Canada s national resource on municipal issues) Shared service agreements are increasingly an important tool for Canadian municipalities. Ministry of Municipal Affairs and Housing 21

22 Shared Services Can Help With: Cost savings from economies of scale. Service enhancements and expansions. Access to specialists, skilled labour and/or better quality equipment. Tapping into new revenue streams that require many users or inputs. Seamless service integration across a region. Ministry of Municipal Affairs and Housing 22

23 How Communities of Different Sizes Can Benefit Allows smaller communities to deliver services at certain levels or costs otherwise not attainable. Despite their size and complexity, a number of larger communities share services. Ministry of Municipal Affairs and Housing 23

24 Shared Services Guide & Case Studies Shared services guide and in-depth analysis of five municipal case studies. Ministry of Municipal Affairs and Housing 24

25 # of Municipalities Debt Annual Repayment Limit Trends % of ARL Room Used % of ARL Used Ministry of Municipal Affairs and Housing 25

26 # of Municipalities ARL Consumption % of ARL Room Used 332 municipalities used less than 30% of their ARL room in 2014 % of ARL Used Ministry of Municipal Affairs and Housing 26

27 User Fees Range of choices in deciding on the services for which to charge a fee, the amount of the fee, the basis for calculating the fee, and who will pay the fee. Examples of fees charged by municipalities include: Licensing fees Permit fees Service fees such as: water, garbage collection, transit, recreation and special police enforcement. Special tax levy Thunder Bay Ministry of Municipal Affairs and Housing 27

28 Development Charges DCs are fees imposed by municipalities on developers. DCs do not pay for operating costs or for the future repair, rehabilitation or replacement of infrastructure. In 2013, 205 municipalities in Ontario collected DCs. Ministry of Municipal Affairs and Housing 28

29 Alternative Financing and Procurement A model that transfers the risk of project cost increases and scheduling delays through private and public expertise. Emphasizes building partnerships and creating innovative solutions. Infrastructure Ontario offers assistance with financing, planning, procurement and project management. Ministry of Municipal Affairs and Housing 29

30 Where Are Municipalities Now? 426 municipalities say they have AMPs, 320 have made their AMPs public either on line or in the office Of the public AMPs, more than 166 include assets beyond the 4 key assets Municipalities reporting in Sept survey taking steps toward using AMPs to help with decision making, but progress is slow and challenging, and most municipalities feel they are in need of support 3/4 survey respondents said their AMPs linked to other tools, but these are generally financial + road plans. Most have not integrated AMPs with land use or strategic planning. Early leaders in Appendix D. All municipalities have AMPs All AMPs are complete All municipalities use their AMPs to make infrastructure decisions All AMPs are linked to municipal financial, strategic and land use plans Ministry of Municipal Affairs and Housing 30

31 Questions? Chris Terech, Manager Financial Analysis and Reporting Unit Municipal Finance Policy Branch Ministry of Municipal Affairs and Housing (416) Ministry of Municipal Affairs and Housing 31

32 Click to edit Master title style Infrastructure Ontario s Loan Program Affordable financing in support of infrastructure renewal Gavin Maitland & Catherine Barr 1

33 Click About to Infrastructure edit Master title Ontario style Crown agency of the Ontario Government focused on renewing and maintaining the province s infrastructure Successful track record in using an entrepreneurial approach to deliver public services with private sector expertise Driven to provide value for money and exceptional service to our customers Five lines of business: Commercial Projects: Identifying and leveraging private sector partnerships and investments to generate revenue, reduce costs and create efficiencies within the public sector Realty Planning & Development: managing the Province s property portfolio Real Estate Management: managing ministry/provincial client real estate portfolios through the oversight of service provider Lending: lending to broader public sector entities in Ontario through the Province s access to the capital markets Major Projects: delivering Ontario s larger and more complex public sector infrastructure 2

34 Click to edit Master title style The Loan Program Affordable long-term financing solutions to help renew public infrastructure and deliver value to customers and residents across Ontario 3

35 Click Background to edit Master title style Prior to the creation of the Loan Program, only municipalities that were rated could access the capital markets for long-term financing up to 30 yrs. 15 to 20 of 444 municipalities Remainder were left to finance long term assets with short term debt Commercial bank interest rates are higher than capital markets rates and typically only offer terms 10 years or less More efficient financing + up to 30 yr terms/amortizations = more capital renewal capacity Provincial government need for a sustainable source of efficient long-tern financing in support of policies and programs 4

36 Click Funding to edit Considerations Master title style The cost of deferring the project Rise in operations and maintenance costs Lost opportunity costs May limit the opportunity for growth Will population or industrial growth be limited without the new infrastructure? Project financing Time to raise or save the required capital Ability and cost of servicing loans Impact of construction cost increases Uncertain economic conditions 5

37 Click No CDS to edit Debenture Master Charges title style Organizations that issue debentures via the capital markets will be impacted by changes to fees charged by the Clearing and Depository Services (CDS) that will significantly increase the cost of issuing debentures. Traditionally, the fees have been covered by the investment dealers but going forward, organizations will be responsible for most of the new fees. Infrastructure Ontario does not require CDS fees to be paid for debentures there will be no extra charges for Loan Program clients. Depending on the size of debenture, the savings could be substantial. 6

38 Click The Loan to edit Program Master title style Affordable long-term financing solutions to help renew public infrastructure and deliver value to customers and residents across Ontario Efficient access to the Capital markets IO leverages the strength of the its good credit rating and passes savings along to its borrowers No need to be rated Short-term construction loans and long-term take-out financing Two kinds of long-term rates Serial and Amortizer No additional fees and no need to renegotiate 7

39 Click Eligible to Applicants edit Master title style The following broader public sector organizations are eligible for Loan Program financing: Municipalities Municipal corporations (electricity distribution, power generation, transit) Universities and affiliated colleges Housing providers (social, affordable, co-operative, supportive) Aboriginal health access centres Community health and social service hubs (non-profit) Hospices (non-profit) Local services boards Long-term care homes (non-profit) Professional arts training facilities (non-profit) Sports and recreation organizations (non-profit) 8

40 Click Eligible to Projects edit Master title style Most depreciable capital expenditures are eligible for affordable, longterm financing, including: New construction, renovations and retrofits Water, wastewater and waste management Roads, bridges and public transportation Municipal housing and long-term care projects Ambulances, fire trucks, transit vehicles, snow ploughs, and other rolling stock Accessibility and energy efficiency projects Local police, fire, admin and recreation facilities Equipment, systems and asset management tools Land and facility acquisition Municipal Local Improvement programs 9

41 Click Municipal to edit Local Master Improvement title style Programs IO loans may also be used to support municipally-managed local improvement projects that are funded by Local Improvement Charges (LIC) Municipalities manage the LIC program within their jurisdiction and are responsible for lending funds to private landowners Municipality sets the requirements for the local improvement program IO does not lend directly to private landowners Examples of local improvement projects financed by a LIC: Upgrades to home heating, ventilation and cooling systems Installation of energy efficient windows and doors Upgrades to home hot water systems Improvements to insulation and weatherproofing Private landowners who benefit from the improvements have the LIC added to their property taxes each year until their portion of the improvement costs have been paid down 10

42 Click Financing to edit for Master Local Improvement title style Programs 11

43 Click to edit Master title style AFP Project Delivery More than 75 AFP projects worth $35 billion brought to market in Ontario since

44 Click Alternative to edit Financing Master title and style Procurement (AFP) AFP is an alternative to the Traditional project delivery model Uses private expertise and financing to rebuild infrastructure Allows dialogue with bidders and more robust, innovative and informed bids Encourages on time and on budget project delivery, and payment after construction is complete Ensures value for money The AFP model will: Transfer design, build, operation and maintenance risk to Project Co. Provide another level of due diligence by Project Co lender Require no payment until substantial completion Include provisions in the Project Agreement that allow for sharing of future innovations and costs 13

45 Click What to Makes edit Master a Good title Municipal style AFP Project Capital cost of >$40M Project has a robust operations and/or maintenance component Project is complex and includes risks that the public sector might not be best to assume Examples: Bundled road/bridge projects Water or wastewater treatment-plant and pipes Arena Recreation centres Solid waste management Organic disposal and recycling Multi-use buildings/facilities 14

46 Click to edit Master title style How IO Raises Funds 15

47 Click Providing to edit Access Master to Capital title style Markets CAPITAL MARKETS Short /Long-Term Money Capital Market Bonds Rating Agencies $$$ Eligible Borrowing Pool (Municipalities, non-profit long-term care, universities etc.) 16

48 Click Flexible to edit Terms Master title style Offered in both a short-term flexible (construction) rate and long-term fixed rate terms up to 30 years Extra long terms are typically not available from traditional lenders or capital markets Terms are designed to match useful life of the asset Rates are the same for all borrowers, within each client sector 17

49 Click Serial to & edit Amortizer Master Loans title style SERIAL LOAN 10 years, $1,000,000, Semi-annual Payments Savings Serial Loan: Constructed to pay equal principal amounts every 6 months with interest computed on the declining balance AMORTIZER LOAN 10 years, $1,000,000, Semi-annual Payments Amortizer Loan: Constructed to pay equal total payments every 6 months, interest component decreases while principal component increases over the term 18

50 Click Affordable to edit Rates Master title style Affordable long-term rates No additional fees and no need to renegotiate Borrowing pool aggregates the infrastructure needs of many borrowers, from unrated to AAA Ready to build, or already building? Our construction financing is the most affordable way to manage your short-term cash needs Two kinds of long-term rates Serial and Amortizer 19

51 Click Loan to Program edit Master Summary title style Rates are the same for all borrowers, within each sector All capital expenditures are eligible Hassle-free access to capital markets No need to be rated, no minimum / no maximum Affordable all-in blended rates No additional transaction fees or commissions Longer terms than generally available elsewhere One month construction loans and 5 to 30 year take-out financing Online application Dedicated knowledgeable staff 20

52 Click Loan to Program edit Master Portfolio title style IO has received applications for more than $8.6 billion in loans from public sector clients all over Ontario Supporting over 2,100 infrastructure renewal projects Over $6 billion in affordable financing has been advanced Approved and Executed - As of July,

53 Click Loan to Program edit Master In Action title style Township of Wollaston Highway rehabilitation Loan Value: $688 thousand Horton Township Upgrades to the arena and the municipal office Loan Value: $300 thousand 22

54 Click Loan to Program edit Master In Action title style City of Timmins A state-of-the-art Police building and Regional Dispatch Centre for the city s policing and emergency dispatch services Loan Value: $10.3 million South Huron Two construction projects to improve waterlines, sewage, and wastewater infrastructure Loan Value: $18.1 million 23

55 Click Contact to edit us today! Master title style Northern Ontario Gavin Maitland Client Relationship Officer Phone: Eastern Ontario Robert Keene Senior Relationship Manager Phone: Southwestern Ontario Anthony Pizans Senior Relationship Manager Phone: Central Ontario Catherine Barr Senior Relationship Manager Phone:

56 Click Contact to edit us today! Master title style Northern Ontario Gavin Maitland Client Relationship Officer Phone: Eastern Ontario Robert Keene Senior Relationship Manager Phone: Southwestern Ontario Anthony Pizans Senior Relationship Manager Phone: Central Ontario Catherine Barr Senior Relationship Manager Phone:

57 Infrastructure Funding: Dedicated Tax Levy AMCTO 2015 Conference Presented By: Moira Gallagher, CPA, CMA Budget and Planning Accountant / Financial Analyst Jana Roy, CPA, CA Capital Asset Accountant / Financial Analyst City of Thunder Bay

58 Today s Agenda Dedicated Tax Levy: Enhanced Infrastructure Renewal Program (EIRP) Introduction to Council/Public Progress made to date Plan going forward

59 Enhanced Infrastructure Renewal Program (EIRP) A dedicated incremental increase to the municipal tax levy to address the infrastructure deficit Capital renewal & replacement of existing assets

60 Enhanced Infrastructure Renewal Specific asset categories: Program (EIRP) Pavement Rehabilitation Road Network Improvements Bridges & Culverts Streetlights Sidewalks Storm Sewers Parks Facilities

61 Introduction to Council / Public Role of Water Financial Plan Requirement to be self-sustaining Role of Asset Management Plans

62 Thunder Bay - Infrastructure Deficit Estimates of annual funding shortfall = $16.8 million (as originally presented in 2011) (millions) Pavement Rehabilitation $6.0 Road Network Improvements $3.0 Storm Sewers $1.8 Bridges $0.7 Facilities $3.3 Parks $2.0

63 Tax Supported Assets Replacement Cost, Historical Cost and Net Book Value December 31, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,000 - Roads & Sidewalks Bridges Storm Sewer Facilities Other Assets Replacement Cost (in 2014 Dollars) Historical Cost Net Book Value

64 Strategic Plan Directions Thunder Bay s capital financing capacity will be increased and the annual infrastructure deficit will be reduced. ACTIONS 11.1 (a) Administration to quantify the infrastructure deficit by asset category using tangible capital asset data, which will result in a more refined estimate of the infrastructure deficit (c) Presentation of enhanced infrastructure funding options for consideration by Council in the annual budget process (f) Refine the City s long-term debt strategy.

65 Introduction to Council / Public Enhanced Infrastructure Renewal first included in 2011 budget Budget Directions Report Status Quo $2.5M EIRP Increases $4.2M EIRP Increases

66 Public Information Session Historical capital spending trends Property taxes compared to peer Municipalities Annual infrastructure deficit Link between EIRP and annual infrastructure deficit EIRP scenarios

67 Citizen Survey by Ipsos Reid Random telephone 400 residents 90% supported infrastructure spending Highest priority: roads / street maintenance 63% supportive of some level of EIRP 43% supported $2.5M 18% supported $4.2M

68 Asset Management Plan Combined, updated and refined Infrastructure Report Card developed Financing strategy

69 Thousands 20,000 Infrastructure Deficit 15,000 10,000 5,000 - (5,000) Roads Sidewalks Bridges / Culverts Water Wastewater Storm Sewer Facilities Fleet (10,000) Average Annual Requirement Available Funding Surplus/(Deficit)

70 8.00% Municipal Tax Levy % Change How Spent 6.00% 4.00% 2.00% 0.00% -2.00% Net Operating Budget Increase % of Levy Capital (including EIRP) % of Levy

71 Millions 35.0 Tax Supported Capital Financing Capital out of Revenue Annual Debenture Enhanced Infrastructure Renewal Program Total

72 2015 Budget EIRP Total Approved: $8.4M Enhancements to: Pavement Rehabilitation 4.7 Storm Water Management 2.0 Facilities 1.1 Parks 0.6

73 2015 Citizen Survey Results

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76 Plan going forward Refine Asset Management Plan Continue EIRP Other funding opportunities Long term projections

77 Questions?