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Asset Management Plan
2016 - 2025
Project No. 16-320
+++++++
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Limitations and Disclosure
This document has been prepared by Infrastructure Solutions Inc. ("ISI") for the
exclusive use of the Township of Athens (the "Client"). The information, opinions,
recommendations, conclusions and/or analysis contained within this document are
based upon observations and information made available to ISI as at the time of the
preparation of the document. Any information provided to ISI by the Client on any third
party is assumed to be correct.
The information, opinions, recommendations, conclusions and/or analysis contained
within this document are given based upon observations made by ISI and using
generally accepted professional judgment and principles. Any use which a third party
makes of this document, or any reliance or decisions or actions taken by any such third
party based upon this document are the sole responsibility of any such third party and
ISI accepts no responsibility, liability or risk for any damages, loss, or claims, if any,
suffered by any such third party or any related party of such third party as a result of
any reliance, or decisions made or actions taken, based upon this document.
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TABLE OF CONTENTS
1
EXECUTIVE SUMMARY ...................................................................................................................... 3
2
HISTORICAL OVERVIEW .................................................................................................................... 4
3
OUR METHODOLOGY ......................................................................................................................... 5
3.1
ISI ROAD MAINTENANCE SURVEY ............................................................................................................ 6
4
SOTI REPORT ...................................................................................................................................... 8
5
INVENTORY AND THE VALUATION OF ASSETS (SOTI) ................................................................. 9
5.1
ROADS ................................................................................................................................................. 10
5.2
BRIDGE AND LARGE CULVERT ............................................................................................................... 17
5.3
SIDEWALKS .......................................................................................................................................... 18
5.4
SOTI CONCLUSION ............................................................................................................................... 18
6
NON-LINEAR ASSET TYPES ............................................................................................................ 19
6.1
BUILDINGS ........................................................................................................................................... 19
6.2
VEHICLES ............................................................................................................................................. 20
6.3
RECREATION ........................................................................................................................................ 20
6.4
EQUIPMENT .......................................................................................................................................... 21
7
CAPITAL PLAN .................................................................................................................................. 21
7.1
BACKGROUND ...................................................................................................................................... 21
7.2
OVERVIEW ............................................................................................................................................ 22
7.3
METHODOLOGY .................................................................................................................................... 23
8
ASSET MANAGEMENT PLAN RESULTS ........................................................................................ 25
9
LEVELS OF SERVICE ....................................................................................................................... 27
9.1
OVERVIEW ............................................................................................................................................ 27
9.2
METHODOLOGY .................................................................................................................................... 27
9.3
LEVELS OF SERVICE PROCESS .............................................................................................................. 28
9.4
OPERATING PERFORMANCE INDICATOR EXAMPLE ................................................................................... 29
10
FINANCIAL PROJECTIONS .............................................................................................................. 30
10.1
CONSUMER PRICE INDEX: OUR PERSPECTIVE ......................................................................................... 31
10.2
MUNICIPAL COST INDEX ........................................................................................................................ 32
10.3
FINANCIAL STRATEGY ASSUMPTIONS ..................................................................................................... 32
10.4
FUNDING REQUIREMENTS ...................................................................................................................... 33
10.5
FINANCIAL STRATEGIES - THE INFRASTRUCTURE GAP ............................................................................ 34
11
RECOMMENDATIONS ....................................................................................................................... 38
11.1
SOTI RECOMMENDATIONS .................................................................................................................... 38
11.2
CAPITAL PLAN RECOMMENDATIONS ....................................................................................................... 39
11.3
LEVEL OF SERVICE RECOMMENDATIONS ................................................................................................ 40
11.4
FINANCIAL STRATEGY RECOMMENDATIONS ............................................................................................ 40
12
CONCLUSION .................................................................................................................................... 41
APPENDIX A - DETAILED LIST OF CAPITAL PROJECTS .......................................................................................... 42
APPENDIX B - ASSET USEFUL LIFE .................................................................................................................... 43
APPENDIX C - MUNICIPAL COST INDEX ............................................................................................................... 44
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1 EXECUTIVE SUMMARY
The Township of Athens is undertaking a detailed evaluation of all its existing infrastructure in
order to update a long-term Asset Management Plan, put the Township in a position to receive
the Federal Gas Tax Fund and other grants, and build a fully implementable program for its
residents which aims to further strengthen municipal asset management practices.
Asset management planning requires that the most cost effective and realistic decisions are
made regarding the building, operating, maintaining, renewing, replacing and disposing of
infrastructure assets. The prime goal of the Asset Management Plan is to maximize benefits,
manage risk, and offer satisfactory, safe and sustainable service levels to the public. Asset
management planning requires that the Township has an in-depth understanding of the
characteristics and condition of infrastructure assets, as well as the service levels they are
expected to meet. Asset management planning also involves strategic prioritization and
optimization to obtain the best decision-making concerning the timing and utilization of
investments, which includes a comprehensive and achievable financial strategy.
Infrastructure Solutions Inc. was well supported by Athens' staff to accumulate the Township's
geometric and condition assessment data, where available. We based the Asset Management
Plan on all asset types and their current replacement costs. Asset lifespans, condition and project
requirements were determined by engineering assessments and degradation curves. Where
condition assessments were unavailable, ISI applied an age-based analysis. Our objective was
to build a practical asset management plan based on optimizing the capital spend and taking
corrective action to address the Township's infrastructure deficit.
The Township's infrastructure deficit is defined as the added investment that would be required
to maintain a Township's infrastructure at appropriate service levels and in a good state of repair
today. Based on our calculations, Athens' current (as of 2016) infrastructure deficit is in the range
of $2.02 million. To completely remove the infrastructure deficit over the next 10 years, the
Township would need to make an average annual capital investment of $460,158 which is
significant given the Township's current financial capability.
The greatest portion of the infrastructure deficit (70%) is with the road network. We have analyzed
the road network in detail with the objective of optimizing how capital is expended. Independent
of the deficit, we have reviewed the Township's current/projected capital contributions in relation
to its current/projected needs. The Township is currently contributing $205,628 per annum to its
capital program but has a requirement to contribute $258,051 per annum. Without corrective
action, the infrastructure deficit will continue to grow. As highlighted in the SOTI Report within
this document, the Township's major linear asset, roads, are generally in good condition. The
bridge and large culvert are in good condition, while the sidewalks are in poor condition.
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2 HISTORICAL OVERVIEW
Municipal infrastructure is the foundation that the daily life of Canadians is built upon. The strength
of this foundation enables our communities and local businesses to grow and it ensures that
Canadians have a high quality of life. Municipalities own the core infrastructure assets that are
critical to the quality of life of Canadians and the competitiveness of our country. Almost 60% of
Canada's core public infrastructure is owned and maintained by municipal governments.
According to survey results, the total value of core municipal infrastructure assets is estimated at
$1.1 trillion dollars or about $80,000 per household.
The delivery of essential public services is reliant on a strong foundation of municipal
infrastructure. This foundation enables our communities and local businesses to grow and
ensures Canadians can lead safe and healthy lives. The Township of Athens is not alone in
dealing with an infrastructure deficit. According to the Canadian Infrastructure Report Card
(CIRC), one-third of our Canadian municipal infrastructure is in fair, poor or very poor condition,
increasing the risk of service disruption. Assets in fair, poor and very poor conditions represent
a call for action. Survey results demonstrate that roads, municipal buildings, sport and recreation
facilities and public transit are the asset classes most in need of attention. Figure 1 provides a
summary of the physical condition ratings for all municipal asset categories across the country.
Figure 1: Physical Condition Ratings by Asset Category
Increasing reinvestment rates will stop the deterioration of municipal infrastructure. The 2016
CIRC report found that rates of reinvestment are lower than targets recommended by asset
management practitioners. The rate can vary based on factors such as the age of the
infrastructure, the level of service and risk tolerance. The values provided are based on the
experience of municipal asset management practitioners and are intended to be informative in
nature. Roads and sidewalks, storm water, and sport and recreation infrastructure presented the
largest gaps in terms of current and target rates of reinvestment. Figure 2 demonstrate the gap
between current and target reinvestment levels. Continuing down this path will result in a gradual
decline of physical condition levels that will impact municipal services. When contrasted with
target reinvestment rates it becomes clear that current levels of reinvestment in municipal
infrastructure are inadequate.
3%
3%
2%
5%
1%
5%
5%
2%
9%
8%
5%
9%
3%
12%
14%
15%
17%
24%
16%
23%
22%
28%
27%
26%
35%
26%
33%
37%
57%
33%
36%
34%
36%
39%
44%
26%
17%
22%
18%
23%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Potable
Water
Wastewater
Stormwater
Roads
Bridges
Buildings
Sport & Rec. Public Transit
Very Poor
Poor
Fair
Good
Very Good
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Target Reinvestment Rates vs Current Reinvestment Rate
Infrastructure
Lower Target
Reinvestment Rate
Upper Target
Reinvestment Rate
Current
Reinvestment Rate
Roads and Sidewalks
2.0%
3.0%
1.1%
Bridges and Culverts
1.0%
1.5%
0.8%
Buildings
17.0%
2.5%
1.7%
Sport and Recreation
1.7%
2.5%
1.3%
Figure 2: Target Reinvestment Rates vs. Current Reinvestment Rate
3 OUR METHODOLOGY
Infrastructure Solutions is an "accountineering" company, half civil engineers, half financial
planners. Building an implementable Asset Management Plan requires both civil engineering and
financial planning expertise. Working with smaller municipalities is our only business. We
understand that every municipality is unique with its objectives and priorities, so our analytical
process involves feedback from Public Works and Treasury. Our objective is to build asset
management plans that are practical and implementable. Our intention is to deliver a plan that
Athens can manage and that its Council and community can embrace.
Under the MIII program in 2013 - 2014, we wrote 60 Asset Management Plans, primarily focused
on identifying the infrastructure deficit and required capital contribution. We got frustrated telling
Councils that they had big deficits, an over-taxed population, and no hope of getting their
infrastructure deficits under control without provincial or federal grants. Since 2014, to promote
municipal self-sufficiency, we have been building capital planning and optimization tools to
maximize the positive impact of municipal spending.
We have been supported in our efforts to build capital planning tools by the Ontario Centers of
Excellence (OCE) and NSERC grants through the Civil Engineering department at the University
of Waterloo. Our "Better Capital Planning" workshop was delivered at the Municipal Finance
Officer's Annual Conference (Collingwood, ON) in Sept. 2015, and the Ministry of Municipal
Affairs' Northern Treasurer's Forum in (Sudbury, ON) in Oct. 2015. Most recently, we presented
road maintenance, rehabilitation, and reconstruction strategies at the Municipal Engineers
Association (MEA) AGM. ReNew Canada (Nov. 2016 issue) magazine and Municipal World
magazine (Dec. 2016 issue) published articles about our development of capital planning tools
for smaller municipalities.
To enhance our capital planning tools and maximize the accuracy of our long-range projections,
we developed a comprehensive Municipal Cost Index (MCI) based on a micro-analysis of
municipal costs. It includes a weighting of the expenditure categories and the inflation factor used
for each municipal component. We match an appropriate inflator to the types of expenditures in
each budget category.
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3.1
ISI ROAD MAINTENANCE SURVEY
This year, Infrastructure Solutions Inc. conducted the most comprehensive Canadian survey of
municipal road maintenance practices ever undertaken. The 171 survey participants represented
45,000 km of paved road, 15% of Canada's population, and a wide range of municipalities by
region and population. The survey was designed to identify the extent to which municipalities
apply preventive maintenance treatments, to attain practical observations about treatment options
and lifecycle gains, and clarify user perceptions about what constitutes best road maintenance
practices. The results are truly disturbing.
The survey established that 98% of respondents perceive preventive maintenance as an
important and cost-effective approach to extend the service life of their pavements and to save
the municipality significant capital investment in the long run. The survey further establishes that
a majority of the municipalities do not apply preventive maintenance treatments (Figure 3) and
have a widely-varied understanding of when these treatments should be applied.
Figure 3: Current Application of Preventive Maintenance Across Canadian Municipalities
Respondents were asked what percentage of their municipality they believe is currently being
maintained according to best practices. Figure 4 shows the survey's cumulative response on the
application of chip seal, micro-surfacing, and slurry seal to paved roads. For every major surface
treatment type, less than 20% of municipal road networks are maintained in accordance with what
respondents believe to be best practice.
Figure 4: Application of Preventive Treatments According to Best Practices
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This contradiction between the clearly appreciated benefits of preventive maintenance and the
inadequate application of preventive treatments in practice has deep roots. Municipalities may be
overly reactive to community requests. Councils surely follow the advice of Roads Needs Studies,
where engineering companies recommend repairing worst roads first for safety and other
reasons, assuming an unlimited municipal budget. Deteriorated water or wastewater lines might
necessitate road reconstruction for line replacement and take precedence over maintenance.
Smaller municipalities often use Excel or simplistic pavement management programs which
typically recommend projects based on a simple ranking process. Finally, many municipalities
still operate on an ad hoc basis, arbitrarily selecting roads which need rehabilitation or
reconstruction work without undertaking any analytical process whatsoever. Whatever the
circumstance, tax dollars are being poured into pot holes unnecessarily.
Our capital planning tool provides a robust decision-making process, identifies the best possible
course of action, and considers both the short-term needs and the long-term goals of a
municipality. It includes an advanced decision-making process called optimization or prescriptive
modeling, which is the most powerful and effective way of finding the best possible solution to a
decision-making problem. A capital planning tool with optimization capability can maximize the
overall performance of a network in terms of physical condition (or any other criteria) over a multi-
year analysis horizon and provides municipalities with the best possible course of action in terms
of timing and selection of different maintenance, rehabilitation, or reconstruction treatments
considering all municipal goals and constraints. The improvements achieved through an
optimized solution, which inevitably highlights the critical importance of preventive maintenance,
can be translated into substantial savings and increased socio-economic benefit (Figure 5).
Figure 5: Optimized vs. Conventional Capital Planning
Combining advanced optimization capabilities with robust engineering models and socio-
economic consideration provides municipalities with a fully implementable and defensible road
network capital plan. The analytical models used in the system are flexible, able to adjust to
regional variances and reflect the behavior of assets verified through a rigorous engineering
analysis.
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4 SOTI REPORT
This State of the Infrastructure (SOTI) assessment is based on an analysis of the replacement,
rehabilitation, and maintenance requirements of the Township's asset inventory and its current
condition. Infrastructure Solutions has been contracted to assist the Township in analyzing the
State of the Infrastructure Report (SOTI) and the assembly of a Capital Plan as the initial
components of a comprehensive Asset Management Plan. We include a Report Card on the
current state of the major linear assets within the Township. The Capital Plan provides both a
high-level assessment of projected Capital expenses and a detailed future project by project
costing for the Township's review and confirmation. Our objective is to give the Township the
analytical tools and information necessary to implement a comprehensive and cohesive asset
management program. We have determined that the Township has a significant backlog of assets
in need of betterment or replacement.
Dealing with aging infrastructure requires that the Township assesses the long-term capital
project requirements and establish the funding of high-priority projects in an efficient, timely and
cost-effective manner. With our engineering analysis and project identification, the Township
can monitor, track and manage infrastructure assets to ensure that policy makers obtain sufficient
funding in order to maintain, at a minimum, and potentially enhance future service levels. Through
capital budgeting, the Township of Athens can plan the future operating budget expenses and
reserve funds to manage its financial position over a long-term period. Capital planning provides
the core information needed for the Council's planning and fiscal policies.
The Report Card produced within the SOTI has been developed to provide an easily understood
reference that can be regularly updated to document investment gaps and the progress that the
Township is making towards sustainability. The SOTI and associated analysis are strategic
documents that identify trends and highlight possible issues involved in delivering services and
maintaining the assets for those services. The SOTI will also assist in the development of more
detailed tactical and operational plans aimed at identifying expenditures needed to provide
service in a cost-effective, sustainable manner.
Encapsulated within this report ISI presents the Township's State of the Infrastructure report
(SOTI), and a description of our methodology. The final Capital Plan contains a more detailed
asset data and calculation process. The direction of this project was influenced by the Township's
requirement for an Asset Management Plan and the work of the National Guide for Sustainable
Municipal Infrastructure. In November 2003, the National Guide to Sustainable Municipal
Infrastructure published a Best Practice for Municipal Infrastructure Asset Management. It stated
that the framework for an asset management plan can be described in terms of seven questions:
1. What do you have and where is it? (Inventory and Location)
2. What is it worth? (Costs/Replacement Rates)
3. What are its condition and expected remaining service life? (Condition and Capability)
4. What is the service level expectation and what needs to be done? (Capital & Operating
Plans)
5. When do you need to do it? (Capital and Operating Plans)
6. How much will it cost and what is the acceptable level of risk? (Short/Long-term
Financial Plan)
7. How do you ensure long-term affordability? (Short- and Long-term Financial Plan)
This report answers these questions.
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5 INVENTORY AND THE VALUATION OF ASSETS (SOTI)
The aim of this section of the report is to provide an overview of the State of the Infrastructure
(SOTI) by an analysis of the available data on the condition and/or age of the Township's assets.
The SOTI requirements are restricted to linear assets only. Within the Capital Plan, ISI has
included other critical asset types in its analysis for the Township's review. The grouping of these
assets and asset replacements were taken from the PSAB files provided by the Township, and
the current replacement value of the assets is comprised of these factors:
- Value of all the existing assets
- New assets
- Adjustments in unit costs based on improved knowledge and inflationary impacts
- Based on the TCA Policy, a $5.000 capital threshold limit is used and any assets
below the threshold have not been accounted for in the capital plan.
For the purpose of the Asset Management Plan report, we have grouped the assets as follows:
Linear Assets:
- Roads - Surface Treated and Gravel
- Structures - Bridge and Culvert
- Sidewalks
Non-linear assets have been dealt with in the Capital Plan:
- Buildings
- Vehicles
- Equipment
- Recreation
Assets Type
Replacement Cost
Roads
15,317,288
Bridge & Culvert
900,046
Buildings
6,271,369
Vehicles
881,390
Sidewalks
382,682
Recreation
58,498
Equipment
129,638
Total
23,940,912
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Figure 6: Asset Replacement Cost by Category
5.1
ROADS
The Township of Athens has a total of 73.98 km of roads. Athens has gravel (G/S) and hot mix
asphalt (HCB) roads.
ROAD GEOMETRICS
Road Surface Types
The following summarizes the road surface types within the Township:
Surface Type
Length (km)
Percentage
Gravel
33.20
44.87
Hot Mix Asphalt
40.78
55.13
64%
4%
26%
4% 2%
0.2% 0.5%
Asset Replacement Cost - 2016
Roads
Bridges
Buildings
Vehicles
Sidewalks
Recreation
Equipment
Total Replacement Cost $ 23.94 million
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Figure 7: Road Surface Types by Section Length
Condition-Based Analysis for Roads
The state of the infrastructure for roads is based upon a hybrid age/condition based analysis. For
the Township PCI conditions were not available, so the PCI's were estimated based on treatment
history and the use of degradation curves. Only the paved (HCB) roads were analyzed, no
treatment history or conditions were available for the gravel roads.
The following summarizes the Network Pavement Condition Index (PCI) weighted by section
length:
Surface Type
Weighted PCI
Hot Mix Asphalt
72.26
Figure 8: Network Road Condition
Note: Percentages are calculated based upon the section length of each road type
The strategies for rehabilitation/reconstruction for roads are suggested in Appendix A, the
detailed capital planning report for the Township.
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OPTIMIZED CAPITAL PLANNING RESULTS
This section provides an overall summary of the optimized capital planning results for the paved
road network of the Township of Athens. The analysis is only focused on the hot mix asphalt
roads (HCB) with a total length of 40.8 km (excluding gravel roads). The road network
optimization analysis covers the period from 2017 - 2026, but due to the variance with the plan
period only the amounts up to 2025 are considered for the CIP in this Asset Management Plan.
Budget Policy Scenarios
Optimization analysis is conducted to suggest an adequate level of spending to properly preserve
the road network. Accordingly, several scenarios were analyzed. Scenario 1 is the recommended
budget level, as suggested by the Township. For Scenario 2, a target analysis was performed to
establish the funding level required to maintain the current performance level of the paved roads
at a PCI of 72 over the next 10 years. We also included a Do Nothing Scenario 3, to show the
network performance if no capital funds are spent on the road network.
The following budget scenarios have been used in the optimization analysis:
Road Budget Scenarios
Year
Scenario 1
Scenario 2
Scenario 3
2017
$250,000
$170,000
$0
2018
$250,000
$170,000
$0
2019
$250,000
$170,000
$0
2020
$250,000
$170,000
$0
2021
$250,000
$170,000
$0
2022
$250,000
$170,000
$0
2023
$250,000
$170,000
$0
2024
$250,000
$170,000
$0
2025
$250,000
$170,000
$0
2026
$250,000
$170,000
$0
Total
$2,500,000
$1,700,000
$0
The optimization objective is to maximize the network overall performance considering municipal
budget limits. The 'Network Overall Performance' represents the network performance
considering network pavement condition index (PCI) in addition to any available macro and micro
policy factors, for example functional classes, surface types, roadside environments, traffic,
service types, and socio-economic considerations, as set by the municipality where applicable.
The network overall performance has a numerical value between 0 and 100, with 100
representing the best possible performance and 0 representing the worst possible performance.
The results also report the 'Network Physical Performance' based on a weighted average PCI by
sections' length. The network physical performance is further divided into different functional
classes, if applicable, to better investigate the impact of budget policies on different classes of
roads considering their relative importance.
Available Treatments and their Associated Costs
ISI's comprehensive list of pavement maintenance/rehabilitation/reconstruction treatments, cost
database, and decision tree have been used in the analysis to determine feasible treatments and
their associated cost in the optimization analysis. To predict future pavement condition, a series
of degradation curves, developed by ISI in collaboration with Golder Associates, has been used
for different classes of roads considering surface type, subgrade strength, functional classes, and
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traffic data. The detailed list of applied treatments and their associated cost can be found in
Appendix A.
Network Optimization Results
Optimization analysis has been performed to produce a workable capital plan considering
municipal budgetary constraints while maximizing network overall performance to achieve the
highest possible investment efficiency. The recommended capital expenditure (CapEx) over the
capital plan under each budget scenario is shown in the table below.
Figure 9 shows a comparison between different budget scenarios in terms of network overall
performance. In comparison with ranking or prioritization solutions, depending on the utilized
ranking method, the optimization shows 15% to 30% added performance on average. The current
overall performance of the network has been determined at 72.3. Using the recommended
budgeting strategy Scenario 1, over the next 10 years, the performance of the network is improved
to a PCI of 79.5 overall, which is a very good network condition. For the lower budget Scenario 2,
the current level of performance is maintained with a PCI of 72, while the zero budget Scenario 3
yields a PCI of 52 at the end of plan, which brings the overall network down to borderline poor
condition.
Figure 9: Scenario Comparison - Overall Network Performance
Figure 10 shows the condition status of the network at each year for each budget scenario. As
shown in this figure, 21.7% of the network is in poor, 20.7% in fair, and 11.9% in good, and 45.8%
in excellent condition at the beginning of the plan. For Scenario 1 at the end of the plan 3.1% of
the network will be in poor condition, 12.2% in fair, 27.5% in good, and 57.2% of the paved roads
0
10
20
30
40
50
60
70
80
90
100
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Network Overall Performance
Scenario 1
Scenario 2
Scenario 3
2017
2018
2019
2020
2021
2022
2023
2024
2025
1
$249,976
$248,713
$249,868
$247,170
$248,860
$247,427
$245,621
$237,853
$249,450
2
$169,894
$167,457
$165,865
$167,941
$169,906
$163,628
$163,299
$165,011
$168,653
3
$0
$0
$0
$0
$0
$0
$0
$0
$0
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will be in excellent condition. For the lower budget Scenario 2, after 10 years 15.1% will be in poor
and 15.6% in fair condition, while 15.2% will be in good and 54.1% in excellent condition. For the
zero budget Scenario 3 at the end of plan 54.2% of the paved roads will be in poor condition,
12.1% in fair, 14.3% in good, and 19.4% in excellent condition, a significant degradation of the
network performance.
Network Condition Distribution - Budget Scenario 1
Network Condition Distribution - Budget Scenario 2
Network Condition Distribution - Budget Scenario 3
Figure 10: Scenario Comparison - Annual Network Condition Status
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Paved road infrastructure deficit is estimated $1,412,160 in the beginning of the plan. Figure 11
shows the deficit projections under each budget scenario. With the recommended budget
Scenario 1 the projected deficit is estimated to be $194,925 at the end of the plan, showing a 79%
reduction. With Scenario 2, the deficit is estimated at $1,423,315, practically unchanged from the
beginning of the plan, while with Scenario 3 the end of plan deficit is estimated at $4,265,135,
which is 3 times the original deficit.
Road Infrastructure Deficit Projection for Different Budget Scenarios
Figure 11: Scenario Comparison - Infrastructure Deficit Projection
RECOMMENDED PROJECTS
The road replacement costs are based on contractor costs for the region that have been indexed
based on our "Municipal Cost Index". ISI used numerous deterioration curves built into its road
network capital planning and optimization software to make recommendations on Athens' road
network capital plan. These results are captured in Appendix A.
GRAVEL ROADS
The gravel road expenses are treated as operating expenses and are not included in the Capital
Plan.
Lifecycle Activities - Loosetop (Unpaved)
We are only dealing with paved roads in this Capital Plan. Gravel road expenses are being
captured as operating expenses, and inserting them into the Capital Plan would be a redundant
entry. Our only concern is that the Township establishes whether it is allocating sufficient funds
in its Operating Budget to cover the gravel road expenses. The OGRA strategy for gravel roads
is to re-gravel roads 75 mm every 3 to 5 years depending on the AADT. Every Township we work
with does annual maintenance rather than a 5-year resurfacing to 75 mm Granular A.
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Scenario 1
Scenario 2
Scenario 3
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Timing
Activity
Activity Quantity
Class of Road
4
5
6
Annual
Grading
Dust suppression
Ditching
Culvert cleaning
Safety devices
8 x per year
4t per kilometer
1 x per year
as required
6 x per year
4t per kilometer
1 x per year
as required
6 x per year
4t per kilometer
1 x per year
as required
3 years
75mm Granular A
All roads
All roads
5 years
75mm Granular A
All roads
6 years
75mm Granular A
Spot repairs
Drainage replacement
All roads
10%
12%
All roads
10%
12%
10 years
75mm Granular A
Spot repairs
Drainage replacement
All roads
10%
12%
Figure 12: Gravel Road Maintenance Strategy (OGRA)
To Pave or Not To Pave Gravel
Paved roads provide improvement over gravel in ways that are hard to quantify with dollars,
including improved winter surfaces, improved safety with better signage and delineation, a safer
surface with higher skid resistance, a smoother surface that increases user satisfaction and
reduces vehicle maintenance costs, redistribution of traffic away from gravel roads, and an
increased tax base on adjacent property. Like everything else, maintenance costs for both paved
and unpaved roads are rising. Reduced funding and resources require more efficient use of
available money.
The decision on when to pave a gravel road is not easy, but an increase in traffic does lead to an
increase in maintenance costs, especially for gravel roads. This is due to more lost gravel due to
wear, and an increased need for blading and smoothing of the road surface.
Figure 13: Economics of Upgrading an Aggregate Road
(The Minnesota Local Road Research Board, 2005)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
0-49
50-74
75-99
100-124
125-149
150-199
200-249
250-300
301-999
1000-up
Maintenance Cost/Mile
ADT Range
Maintenance of Paved and Gravel Roads
Bituminous
Gravel
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Traffic is a primary factor in deciding to pave or not to pave. Gravel road maintenance costs per
mile appear to increase considerably after an ADT level of 200 vehicles/day. Paved roads are
most cost-effective at ADT levels above 150 vehicles/day. Informed decisions can be made based
on traffic data, local construction and maintenance costs, and area growth values to determine if
and when a roadway should be paved.
5.2
BRIDGE AND LARGE CULVERT
This group comprises:
- Bridge - There is 1 bridge (Beales Mills) in the inventory
- Large Culvert - There is 1 large culvert (Elbe Creek) in the inventory
The most current bridge inspection was completed for the Township in 2013 by Genivar. The
recommended repairs and rehabilitation requirements for the next 10 years have been incorporated
in the Capital Plan
Bridge Condition Index
Condition assessment was provided to ISI by the Township, and the Bridge Condition Index (BCI)
was calculated based on the consultant's report and condition assessments. Deterioration curves
were used to determine the 2016 condition of these assets. The MTO Bridge Condition Index rating
is provided by the Ontario Ministry of Transportation which describes maintenance requirements
within each range as follows:
Good: BCI Range 70 - 100: It is usually not required to perform any maintenance work within the
next five years
Fair:
BCI Range 60 - 69: Maintenance work is usually required within the next five years
Poor: BCI Less than 60: Maintenance work is usually required within one year
Figure 14: Bridge & Culvert Condition Rating
The conditions of the Township's bridge and culvert are good.
71
72
0
10
20
30
40
50
60
70
80
90
100
Beales Mills Bridge
Elbe Creek Culvert
BCI (Bridge Condition Index)
Bridge & Culvert Conditions Analysis - 2016
Poor <60
Fair 60-69
Good 70-100
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5.3
SIDEWALKS
The state of the infrastructure (SOTI) for sidewalks is done based upon age based analysis due to
non-availability of conditions.
This group comprises:
- Sidewalks
- Walkway (Elgin St. to Layng Dr.)
Figure 15: Sidewalks Condition Rating
The average condition of the Township's sidewalks is poor.
5.4
SOTI CONCLUSION
Asset
Group
Overall
Condition
Rating
Rating
Range
(Conditions)
Comments
Roads
A
A
Good
70 to 100
Condition rating based on a hybrid
age/condition-based analysis
B
Fair
50 to 69
C
Poor
0 to 49
Range (in
Years)
Sidewalks
C
A
Good
0 To 15 Years
Condition rating based on age-
based analysis
B
Fair
16 To 30
Years
C
Poor
> 31+ Years
Range
(Conditions)
Bridge &
Culvert
A
A
Good
70 to 100
Condition rating based on bridge
inspection reports
B
Fair
60 to 69
C
Poor
0 to 59
Figure 16: Linear Asset Condition Rating Report Card
3
83
0
10
20
30
40
50
60
70
80
90
Sidewalk Walkway
Sidewalks Average Useful Life Analysis - 2016
Good 0 to 15
years
Fair 16 to 30
years
Poor 31+ years
3,333 m2
180 m2
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As highlighted in the Report Card above, the current state of the linear infrastructure, based on
available condition rating analysis, presents a picture of the Township's linear assets. The
condition analysis according to the asset type is as follows:
-
Paved roads are in good condition
-
Bridge & culvert are in good condition
-
Sidewalks are in poor condition
The Township should continue to be proactive in their strategies, so as to extend asset useful life
and avoid major rehabilitation/reconstruction or replacement costs.
6 NON-LINEAR ASSET TYPES
6.1
BUILDINGS
This group comprises of buildings like the Township office, fire hall, Centre '76 arena, etc. The
replacement cost of the buildings is taken from historical cost, inflated to 2016, and 2016
insurance documents provided by the Township and HST of 1.76% is added to the base costs.
For the Township's facilities, ISI conducted an age-based analysis to determined condition
assessments to maintain the current portfolio. All recommended projects as per the study are
placed in Appendix A.
Figure 17: Buildings Condition Rating
91
47
31
0
10
20
30
40
50
60
70
80
90
100
Buildings
Buildings % of Remaining Service Life (RSL) Analysis - 2016
Good 61%-100%
Fair 41%-60%
Poor < 41%
Salt Shed
Cent. Park Canteen
Centre '76 Arena
Township Office
Fire Hall
Public Works Garage
Library
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6.2
VEHICLES
The vehicle group comprises of fire rescue. pumper & tanker trucks, works trucks, Zamboni, etc.
The replacement cost is calculated using the Township's PSAB report for 2015, and in the case
of the costs not provided, the historical costs have been indexed using the CPI and Municipal
Cost Index and added 1.76% HST to the costs. Further review and discussion with the Township
are required to ascertain the accuracy of the Township's vehicle requirements.
Figure 18: Vehicles Condition Rating
6.3
RECREATION
The recreation group comprises of playground structures. The replacement cost is calculated
using the Township's PSAB report for 2015, and in the case of the costs not provided, the
historical costs have been indexed using the CPI and Municipal Cost Index and added 1.76%
HST to the costs.
78
50
18
0
10
20
30
40
50
60
70
80
90
100
Vehicles
Vehicles % of Remaining Service Life (RSL) Analysis - 2016
Good 61%-100%
Fair 41%-60%
Poor < 41%
2005 Chev Recue #1
1990 GMC Pumper
1993 GMC Tanker #2
2007 International Pumper #1
Zamboni
Ice Rescue Boat
2014 GMC Sierra 3/4 ton
2015 Chev Dump
2008 Ford Rescue #2
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Figure 19: Recreation Condition Rating
6.4
EQUIPMENT
The equipment group comprises of fire pagers/radio & bunker gear, office & IT equipment, etc.
The replacement cost is calculated using historical costs that have been indexed using the CPI
and Municipal Cost Index and added 1.76% HST to the costs. Further review and discussion with
the Township are required to ascertain the accuracy of the Township's equipment requirements.
Figure 20: Equipment Condition Rating
7 CAPITAL PLAN
7.1
BACKGROUND
Managing the Township's capital assets requires an assessment of the long-term capital project
requirements and the establishment of the funding for high-priority projects in an efficient, timely
80
40
0
10
20
30
40
50
60
70
80
90
100
Recreation Areas
Recreation Areas % of Remaining Service Life (RSL) Analysis - 2016
Good 61%-100%
Fair 41%-60%
Poor < 41%
Playground - Memorial Park
Playground - Centennial Park
87
40
0
10
20
30
40
50
60
70
80
90
100
Equipment
Equipment % of Remaining Service Life (RSL) Analysis - 2016
Good 61%-100%
Fair 41%-60%
Poor < 41%
Great Plains - IT Equiment
Server - IT Equipment
Fire Dept Pager/Radio
Fire Dept Bunker Gear
Office Printer
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and cost-effective manner. As a result of this analysis, the Township will be able to more effectively
monitor, track and manage infrastructure assets, to ensure that policy makers obtain sufficient
funding in order to maintain, at a minimum, and potentially enhance future service levels. Through
capital planning, the Township of Athens can plan the future operating budget expenses and
reserve funds to manage the financial position over a long-term period. Capital planning also
provides the core information needed for implementing the Council's planning and fiscal policies.
An Asset Management Plan provides many benefits including:
- A systematic evaluation of all potential projects at the same time.
- The ability to stabilize the debt and consolidate projects to reduce borrowing costs.
- To serve as a public relations and economic development tool.
- A focus on preserving a municipal government's infrastructure while ensuring the efficient
use of public funds.
- An opportunity to foster cooperation among departments and the general public regarding
the Township's priorities.
7.2
OVERVIEW
The Capital Plan, an integral part of an Asset Management Plan, is a blueprint for planning a
community's capital expenditures and is one of the most important responsibilities of local
government officials. It coordinates community planning, financial capacity, and physical
development. It is a tool to assess the long-term capital project requirements of a Township and
to establish funding of high-priority projects in a timely and cost-effective fashion. The development
of a Capital Plan is intended to ensure that policy makers are responsible to residents and
businesses of the community with respect to the expenditure of public funds. It also promotes the
provision of continuous efficient services.
The Capital Plan provides a detailed understanding of anticipated investments into tangible capital
assets. These assets include basic facilities, services, and installations needed for the functioning
of the community. The development of a CIP that will ensure sound fiscal and capital planning
requires effective leadership and the involvement and cooperation of all municipal departments. A
complete, properly developed CIP has the following benefits:
- Facilitates coordination between capital needs and the operating budgets
- Enhances the community's credit rating, control of its tax rate, and avoids sudden changes
in its debt service requirements
- Identifies the most economical means of financing capital projects
- Increases opportunities for obtaining federal and provincial aid
- Relates public facilities to other public and private development and redevelopment
policies and plans
- Focuses attention on community objectives and fiscal capacity
- Keeps the public informed about future needs and projects
- Encourages careful project planning and design to avoid costly mistakes and help a
community reach desired goals
A municipal government must take care of two key responsibilities in managing its infrastructure:
- The first major responsibility is the maintenance and repair of existing infrastructure. Given
the high cost to replace linear assets and the fact that they are essential to providing
programs and services to the public, it is extremely important that regular maintenance
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and periodic refurbishments be done to keep facilities and other assets in good working
condition for as long as possible.
- The second major responsibility that municipal governments have is to plan and construct
new community infrastructure. This involves several steps including deciding what
services are to be provided, identifying community needs, careful planning, determining
priority investments, figuring out how to finance projects and good management to ensure
projects are completed on time and on budget.
Although the Capital Plan is generally maintained separately from the operating budget, they do
work in unison since the debt charges on funds borrowed for capital expenditures become expense
items in the annual operating budget. In addition, operating and maintenance costs of capital
assets have an impact on the operating budget. In order to have a realistic, workable Capital Plan,
therefore, it is necessary to estimate the effect that debt service and operating costs will have on
future tax rates. In this way, non-essential capital expenditures will not be undertaken at the
expense of pending essential capital projects and the Township will thus be in a better position to
control future debt levels.
7.3
METHODOLOGY
The Township of Athens' Capital Plan addresses infrastructure deficiencies and future capital
expenditures. It includes existing service infrastructure not meeting engineering standards, the
cost of renovation or replacement of infrastructure which has exceeded its service life and which
as a consequence, is not meeting required service standards. Provision is required to renovate or
replace previously constructed infrastructure when it reaches the end of its service life. These costs
do not include on-going operational and regular maintenance (which typically represent the
greatest cost component of a facility's service life, for example). Unless informed by the Township,
requirements such as investments required to support industrial, commercial and residential
development in accordance with the growth projections required to serve the community and social
needs as well as supply the increasing population and to service to the boundaries of new
subdivisions have not been analyzed.
The Township's Capital Plan includes:
- Development of parameters for each asset class
- Development of rehabilitation and replacement unit costs
- Identifying the asset types to be included in the Capital Plan and determining and
confirming the components of each asset class
- Identification of services to be provided and the capital expenditures to be incurred
- Determination of secondary cost estimates of capital expenditures (consideration of cost
elements such as remoteness of the Township, land, architect/engineering fees,
construction, legal fees, taxes, etc.). The non-rebatable portion of HST at 1.76% has been
applied, for example
- Determination of the time periods over which the asset is to be constructed or acquired
and the costs prorated accordingly
The methodology used for building this Capital Plan was to:
1) Determine the "unconstrained" rate of capital expenditure (assuming an unlimited budget).
A constrained rate of capital expenditure is provided in the final report.
2) Identify the Township's current infrastructure deficit.
3) Determine the Township's future requirements
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4) Prepare a report detailing the capital required for each asset class based on current
rehabilitation and replacement unit costs
5) Establish the cost of maintaining existing infrastructure while addressing the infrastructure
deficit.
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8 ASSET MANAGEMENT PLAN RESULTS
The Township's Infrastructure Deficit has been determined to be about $2.0 million. "Infrastructure
Deficit", as defined by Public Sector Accounting Board*, "is the added investment that would be
required to maintain a municipality's infrastructure at appropriate service levels and in a good
state of repair". The Infrastructure Deficit by asset category is shown in Figure 21.
Figure 21: 2016 Infrastructure Deficit by Asset Category
Like most other local governments in this province, Athens is struggling with aging infrastructure
and constrained budgets. Upon completion of the collection of all the pertinent data, the capital
plan was generated, broken down by asset class for the years 2016 to 2025 (with HST and
without inflationary factor), was developed. Inflation will be incorporated in the financial analysis.
The results are as follows:
$0
$0
$0
$215,905
$18,629
$1,412,160
$374,382
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
Buildings
Recreation
Equipment
Vehicles
Bridges & Culverts
Roads
Sidewalks
2016 Infrastructure Deficit
Total Infrastructure Deficit $2.02 million
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Timeframe
Year
Capital Projects (Incl. HST)
Year 2016-2025
2016
-
2017
249,976
2018
268,438
2019
291,956
2020
247,170
2021
380,271
2022
247,427
2023
265,347
2024
318,405
2025
260,919
Total
2,529,909
Figure 22: Summary of Capital Plan 2016-2025
A detailed project-by-project breakdown of this Capital Plan and all proposed or consultant's/study
recommended projects are included in the capital project list in Appendix A.
Timeframe
Year
Roads
Sidewalks
Bridges and
Culverts
Buildings Recreation
Vehicles
Equipment
2016
$0
$0
$0
$0
$0
$0
$0
2017
$249,976
$0
$0
$0
$0
$0
$0
2018
$248,713
$0
$0
$0
$0
$0
$19,725
2019
$249,868
$0
$0
$0
$0
$42,088
$0
2020
$247,170
$0
$0
$0
$0
$0
$0
2021
$248,860
$0
$0
$0
$0
$131,411
$0
2022
$247,427
$0
$0
$0
$0
$0
$0
2023
$245,621
$0
$0
$0
$0
$0
$19,725
2024
$237,853
$0
$0
$0
$24,814
$40,793
$14,945
2025
$249,450
$0
$0
$0
$0
$0
$11,468
Year 2016-
2025
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Capital Plan - 2016-2025
Sidewalks
Roads
Bridges &
Culverts
Vehicles
Equipment
Recreation
Buildings
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9 LEVELS OF SERVICE
9.1
OVERVIEW
Levels of Service (LOS) are statements of service performance delivery. LOS is established
based on Council direction, the needs or wants of the community as well as legislative and
regulatory requirements. This report includes Operating Performance Indicators (OPI's) for
current levels of service. Through the ongoing Asset Management process, LOS will be further
defined for the Township, the Township's assets, and the community. They all are
interconnected.
There is likely further effort required by the Township to address and formally define levels of
service from a customer perspective. Asset management, at its root, is really about balancing
the full life cycle costs of various services and the levels of service being provided. It is about
knowing what levels of service customers expect and what they are willing to pay. The level of
service is a reflection of the quality, function, and capacity of the services being provided. As a
Township, you might consider:
-
The level of service you are currently providing to users
-
The annual cost to continue to provide the current level of service
-
How the current level of service is expected to change in the future given current funding
levels
-
If you are meeting the level of service expectations of your users given the costs to
provide current, increased or decreased levels of service
As a rough generalization, the higher the level of service provided, the higher the life cycle costs
of providing that service. Levels of service drive the expected treatments in the management of
infrastructure. Customer levels of service outline the overall quality, function, capacity, and safety
of the service being provided. Technical levels of service outline the operating, maintenance,
rehabilitation, renewal and upgrade activities expected to occur within the Township. When
practicing asset management, it is important to first document the current level of service being
provided. As asset management becomes more established within your Township, levels of
service may be set through consultation with the community. However, it is critical that prior to
consulting with the public, the current levels of service along with associated life cycle costs are
understood.
It is also important to discuss how various levels of service may have different risks associated
with them. These risks may play an important role in determining if certain levels of service are
acceptable. As with all economic analysis, a sensitivity analysis should be carried out on those
parameters which are more likely to be beyond the control of the organization, such as market
forces affecting the opportunity cost of capital, community expectations/perception on risk and
factors in the long-term, health and safety effects, community economic effects, environmental
and social effects, feasibility including public support and the Township's readiness.
9.2
METHODOLOGY
The implementation of a formal Maintenance Management System (MMS), among many other
items, measures the response time, lag time, total time to resolution, resources involved, and
communication logs for all issues identified internally and by customers. Going forward, this type
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of information not only provides the basis for resource and program management decisions but
is key information that will provide council and the public with the service level information in
relation to the cost of service. Historically a significant portion of activities has been provided at
a 'best we can do with what we have' basis. Through a review of design guidelines, and metrics
being captured by the MMS, the Township of Athens can re-orientate service delivery that is
driven by service level expectations that incorporate Level of Service factors. To assist in better
establishing Levels of Service, the Township should also consider collecting technical
performance measures needed to provide information on:
-
the types of failure
-
the number of customers affected
-
the duration of the failure
-
the severity of the failure
This kind of technical performance measurement and monitoring is undertaken to support
decision-making by the asset managers within an organization. It addresses issues for
consideration in the effective management of the assets, such as:
-
Assessing the effectiveness of the operational, maintenance and capital works program
-
Review and refinement of maintenance and rehabilitation strategies and standards
-
Assistance in strategic decision-making through the definition of remaining life, based on
the measure being assessed, e.g. capacity of a pipe versus demand.
Benchmarking and other comparison management techniques are used both internally and for
external regulation and monitoring, to assess the performance of infrastructure groups and asset
owners. Each Township needs to consider developing rating systems to judge the assets from
both a Township's perspective with the values that it brings to the organization, and also from a
user's or regulator's perspective, in terms of the functionality, suitability, cost and service
performance of the asset.
9.3
LEVELS OF SERVICE PROCESS
Some Levels of Service (LOS) for the Township can be attained through documents developed
in the industry and by internally focusing on technical requirements that meet generally expected
levels of operation and safety:
-
Provincial Minimum Maintenance Standards (MMS) for roads, street lighting, water and
drainage
-
Drinking Water Quality Management System (DWQMS)
-
Engineering Standards Manuals
Operating Performance Indicators - These are the main activities within each operating budget
cost center. These activities (OPI's) link directly to the level of service provided by the Township.
The OPI's also include maintenance tasks that help extend asset life. A good balance between
asset replacement through capital funding and ongoing maintenance provides the best cost
efficiency and service productivity.
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9.4
OPERATING PERFORMANCE INDICATOR EXAMPLE
ROADS
Service
Operating Performance
Indicators (OPI)
Current
Performance
Target
Performance
Timeframe
Examples for Roads below:
Road Maintenance &
Repairs
Complete approximately X
work orders per year for
service requests including
pothole repair, minor asphalt
patching, sightline
improvement, MVA clean-up.
1500
500
3 Years
Brushing and
Roadside Mowing
Complete approximately X
km's of brushing on roadsides
annually.
N/A
50 km
2 Years
Complete roadside mowing X
times annually
2
3
3 years
Boulevard
Maintenance
Twice per year cut every
boulevard in the Township.
2
3
3 Years
Annual weeding, cleaning,
and caulking of X km of
sidewalk and curb.
7
7
Maintain sight lines at
intersections for vehicle and
pedestrian safety.
14 Days
14 Days
Timeline
Achieved
Roads Recapped ____km's -
Annual Average
8
30
2 Years
Gravel Roads Surface
Treated ___km's - Annual
Average
3.5
20
2 Years
Curbing/Shoulders
Annual repair, by August, of
all curbing damage in
previous winter.
September
July
1 Year
Sidewalks &
Walkways
Completed Inspections____
times per year
1
1
Timeline
Achieved
Sidewalks / Walkways swept
_____ times per year
1
1
Timeline
Achieved
Vandalism
Within X hours of notification,
remove graffiti.
48
24
1 Year
Street Lighting
Service requests for street
light repair completed within X
hours.
5 days
48 hours
1 Year
Signs
Annual inspection and
maintenance of all X stop
signs.
1225
1225
Timeline
Achieved
Annual inspection of
crosswalk, pedestrian, school
and playground signs and
beacons.
September
July
1 Year
Annual Upgrade of X signs to
diamond grade
12
25
1 Year
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Snow and Ice Control
Major roads including
emergency routes during
winter events.
16 Hours
16 Hours
Timeline
Achieved
Residential areas - through
roads first then cul-de-sacs
and dead ends.
16 Hours
16 Hours
Timeline
Achieved
Residential areas will be
plowed and maintained within
96 hours unless snow and icy
conditions return crews back
to major roads.
16 Hours
16 Hours
Timeline
Achieved
VEHICLES - FLEET
Service
Operating Performance
Indicators (OPI)
Current
Performance
Target
Performance
Timeframe
Fleet Maintenance
Undertake preventative
maintenance and repairs to
meet industry standards for
safety and operation.
Daily
Daily
Timeline
Achieved
Maintain fleet availability at
X%.
80
100
3 Years
Small Equipment
Inventory, maintain and repair
X pieces of small equipment
for use by all departments.
40
40
Timeline
Achieved
Preventative
Maintenance
Services
X units inspected every X
months to maintain safety and
fleet efficiency.
32 Units
every 250
Hours
32 Units
every 250
Hours
Timeline
Achieved
10 FINANCIAL PROJECTIONS
Our first steps in Financial Forecasting include compounding/inflating historical costs to Present
Value (2015/16) and then further compounding/inflating these numbers to meet future
requirements. To maximize the accuracy of our projections, we have developed a
comprehensive "Municipal Cost Index (MCI)". To further fine-tune our projections, we do a micro-
analysis of your geographic region.
Our basic assumptions and calculations, included within this document, are key to the planning
process and serve as the base for the forecasting and predicting your future budgetary
requirements and needs.
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10.1 CONSUMER PRICE INDEX: OUR PERSPECTIVE
A price index measures the change in the
costs of purchasing a fixed basket of goods
and services in the current period, compared
to a base period, typically month-over-month
or year-over-year. The most widely applied
measure of inflation/price index is the
Consumer Price Index (CPI). Given its
pervasive
use
in
setting
cost-of-living
adjustments, it can be the appropriate metric
when calculating the rate of consumer
inflation
at
the
national
level.
Major
components of the CPI include housing,
food, and transportation.
Source: www.marketmonetarist.com
Extending the use of the CPI into discussions about the appropriate level of tax and fee rate
increases becomes problematic, however, because a government's actual experience with
inflation can differ greatly from the CPI. This is because the largest expenditures for governments
are typically labor, materials, and contractual services -- different factors than those found in the
CPI. Spending patterns that are different than those of other economic sectors. A price index
that does not reflect the municipal purchasing structure does not truly reflect changes in the cost
experience, and thus the purchasing power, of local governments. For instance, the CPI reflects
household spending patterns that focus on shelter (27.7 percent of the Statistics Canada CPI
basket), transportation (19.5 percent), food (15.5 percent), and recreation (12.9 percent) -- none
of which registers as leading purchase categories for local governments.
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There are two main parts to the MCI calculation: the weightings of the expenditure categories
(showing the relative importance of items in the index), and the inflation factor used for each
component. The inflation factors for expected price changes are based on economic data from
two main sources, the Conference Board of Canada (CBOC) and Statistics Canada. The key
issue is to match an appropriate inflator from these external sources to the types of expenditures
in each budget category. MCI can be used in the following ways:
- To measure the increase in overall municipal expenditures attributed to inflation;
- To allow managers to more closely monitor the increase in spending by expenditure
category, thus making inflationary price increases or decreases more visible;
- To provide an indication of the historical, current, and future direction of prices relative
to municipal expenditures;
- To explain increased expenditures attributed to inflation when submitting annual
budgets.
10.2 MUNICIPAL COST INDEX
Municipal Cost Index (MCI), entails both inflationary and non-inflationary components along with
their Weight and Inflators. MCI has been created in such a way that it focuses on the overall
yearly impacts of a basket of goods that our clients have maximum exposure to and represents
the operational/working capital needs on an ongoing basis. MCI will be used to a part of the
assumptions in the following calculations:
- Municipal Cost Index is used as an integral part of Capital Planning Module, MCI served
as the base for inflating/compounding historical costs to Present Value
- Financial Forecasting Municipal Cost Index will be used as a compounding/inflation
factor till the 2016 financial year and then the compounding/inflationary factor will be
based on reliable research reports like RBC, TD, Scotia Bank, Stats Canada to predict
the rest of the years (basis Inflation rate, GDP growth rate, Population, Risk Free Rate,
Market Premium Rate etc. will be considered for a constant growth rate)
- Breakdown of revenue and expenditure and predicting the sources of funds and
expenses
Athens' Municipal Cost Index is attached as Appendix C.
10.3 FINANCIAL STRATEGY ASSUMPTIONS
The following summarizes the key assumptions used in the preparation of the financial strategy
for major assets:
2.3% annual operating income increase (property taxation, base scenario)
2% annual increase in user fees and 1% increase in other revenues
2% annual operating expenditure increase
2% annual increase in capital replacement costs
Gas Tax Fund $90,283 (not inflated)
Existing funding sources, as identified in the 2015 FIR
No growth-related capital has been included in the analysis as the financial strategy
relates to the replacement of existing assets.
Capital replacement needs as identified in the previous section of this report
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It is important to keep in mind that assumptions may significantly change over time. In addition,
capital replacement cost estimates may vary from current projections. As such, there is a need
to monitor the financial strategy over time.
10.4 FUNDING REQUIREMENTS
In our efforts to create the best plan moving forward for the Township, ISI decided to create two
scenarios:
Capital Plan including infrastructure deficit (backlog)
Capital Plan (excluding infrastructure deficit)
A Capital Plan that would eliminate the deficit over the next 10 years would require the Township
to make an average annual capital investment of $460,158 as compared to the current
contribution of $205,628. By our calculations, the Township would be required to increase
property taxes by more than 9% annually, making this scenario a highly unlikely choice. The
Township would need to be successful in attaining government grants/funding to deal with its
infrastructure deficit. In our opinion, it is unlikely, based on the non-criticality of the funding
requests, that the Township would be successful in its applications to the extent required.
We believe that self-sufficiency should be the Township's objective. The Township will continue to
experience an infrastructure deficit like many other similarly-sized municipalities. ISI recommends
what it believes to be an implementable capital plan as a roadmap and encapsulate the
Township's capital projects for the next 10 years. By our calculations, the average annual capital
requirement is $258,051 and the existing contribution to the capital program is $205,628. The
Township needs to increase its current contribution and build reserves so that it can prepare to
maintain service levels and meet future capital requirements. The Township's strategies to
close/reduce the gap will be discussed in the next section of the report.
Figure 23: Capital Program Contributions (Required vs. Existing)
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Current Average Contributions
Average Required Contributions
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10.5 FINANCIAL STRATEGIES - THE INFRASTRUCTURE GAP
Financial sustainability requires that a Township ensures that there are sufficient resources to
support the delivery of services for which the Township bears responsibility. Given the need and
benefit for further infrastructure investment in order to protect, sustain, and maximize the use of
Athens' infrastructure assets, a number of options and strategies have been considered.
STRATEGY 1: SPECIAL LEVY
General Infrastructure
ISI recommends that the Township implement a special infrastructure levy for the replacement of
existing infrastructure. For example, a special infrastructure annual levy increase of 4% would
generate sufficient revenues to reduce the tax related infrastructure gap beyond 10 years. This
levy would meet the requirement of the projected $258,051 annual contribution.
By increasing the levy by an additional 4% annually the Township will increase the funds available
over the 10-year period by approximately $1.3 MM. This reflects the significant power of
compounding:
In year one, the additional 4% special levy would generate an additional $43,563
In year 10, with an assumed 4% special infrastructure levy, this would generate an
additional $279,380
The following table is provided for illustrated purposes to help explain the significant potential
through a modest levy increase to address the tax infrastructure gap:
4% Special Infrastructure Levy
2017
$ 43,563
2018
$ 67,404
2019
$ 92,708
2020
$ 119,543
2021
$ 147,984
2022
$ 178,106
2023
$ 209,990
2024
$ 243,719
2025
$ 279,380
Total
$ 1,382,396
Average Income
$ 153,600
STRATEGY 2: RETHINKING INFRASTRUCTURE/SERVICES
There is always the potential to reduce infrastructure costs by determining the most cost-effective
options for all capital programs for new or rehabilitated infrastructure by pursuing life cycle
costing analysis which was discussed earlier in the report. Further, as indicated previously, the
timing to replace assets is based on the analysis undertaken using theoretical assumptions in
some cases. Due to the funds available, there will be a need to identify where the replacement
of some assets may be deferred.
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Many municipalities develop rehabilitation and replacement programs on a system-wide program
basis versus annual project by project basis. This will allow for improved prioritization and
coordination of required works within similar geographic areas.
Recognizing the significance of the infrastructure deficit, the Township should consider a services
review with the objective of re-evaluating the priorities of the community and cost of services
provided.
STRATEGY 3: STRATEGIC USE OF DEBT
In some circumstances, it makes good sense to incur debt today rather than take the
consequence and cost of allowing assets to deteriorate to a point where replacement or
reconstruction would substantially increase cost to the community. The concepts involved with
changing the oil in our cars and fixing the roof of our house also apply to preventive maintenance
on road networks, for example. Keep a road in good shape with regular maintenance and you
will never face a full reconstruction.
Due to the backlog in the tax-supported programs, there is a need to examine the cost/benefit of
addressing these needs through the issuance of debt. Using debt strategically can provide
capital funding flexibility by allowing certain infrastructure to be built and used before sufficient
revenue has accumulated to offset the needed investment. Debt is frequently issued and
considered a standard practice in Municipalities for capital projects that are long term in nature
and that benefit future taxpayers, thereby spreading the costs across future years. As such, debt
promotes inter-generational equity in that infrastructure is paid for by those who use it. With
favourable interest rates and significant backlog, the Township may wish to consider the need to
issue debt to expedite capital replacement. Infrastructure Ontario interest rates at the time of
this report are as follows:
10 year - 2.64%
15 year - 3.05%
20 year - 3.33%
For example, if the Township were to issue $1 million in debt to address a portion of the backlog
deemed to be the highest priority that was beyond reserve availability, the debt payments would
be approximately $88,000 (assuming 15-year term). A debt management policy improves the
quality of decisions, identifies policy goals and demonstrates a commitment to long-term financial
planning, including a multi-year plan. Adherence to a debt management plan signals to rating
agencies and capital markets that the Township is well managed and is well positioned to meet
its obligations in a timely manner. The Province regulates the amount of debt that Municipalities
issue by setting an annual repayment limit for each Township (25% of a Township's own source
revenues). Based on our experience, Municipalities typically establish thresholds below the
Provincial limit to take into consideration taxpayer affordability and to ensure flexibility.
In addition to a debt guideline, monitoring also becomes important when considering the idea of
the increased use of debt as a funding source to ensure that it is being used in a fiscally
responsible manner. Government Finance Officers Association recommends that Municipalities
adopt policies that specify appropriate uses for debt.
The following strategies are recommended to determine the most appropriate time to issue debt
Debt will be proportionate to the Township's tax base and will not put an excessive
burden on operating expenditures.
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Outstanding and planned debt levels will not exceed an amount that can be supported
by the existing and projected tax revenue base. Debt policies will focus on:
o projected debt requirement
o limits and benchmarks
o term and structure of debt
o use of reserves to offset debt issuance
Long-term debt for the replacement and refurbishment of existing capital assets will be
reduced and a planned process will be developed whereby an annual contribution will
be made to meet lifecycle needs of all assets.
The following policies are recommended to manage debt within the Township:
Tax Debt Charges as a percentage of Tax Own Source Revenues will not exceed 10%.
Long-term debt financing will be restricted to specific project types:
o Increased/new services to residents for new initiatives
o New, non-recurring infrastructure requirements
o Projects which are supported by a business plan that shows revenues will cover
capital and interest costs
o Projects where the cost of deferring expenditures exceeds debt servicing costs
o Project costs not recovered from Development Charges
o Projects tied to third party matching funding
(Note: These restrictions may have to be phased in to meet short-term budget challenges.)
The length of the term of debt will not exceed the useful life of the underlying asset.
The Township will monitor and report on all forms of debt annually.
STRATEGY 4: USE OF GRANTS
It is well established that the condition of Canada's municipal infrastructure is one of the keys to
underpinning, maintaining and enhancing Canada's economic productivity and competitiveness.
It is therefore clearly in the national and provincial interests for the federal and provincial
government to institute permanent and sustainable infrastructure funding. Along with the
strategic use of debt, the Township can also apply for the grants available from the Provincial
and Federal governments. Some significant components of the infrastructure deficit can be dealt
with through close monitoring of grant programs and a careful expression of interest to access
these funds.
FEDERAL GOVERNMENT INVESTING IN CANADA
Across the country, people and communities are in need. The middle class and those working
hard to join it need the opportunities that come with good, well-paying jobs, and communities need
help to maintain, improve and expand the things that make Canada's towns and cities great places
to live.
Investing in Canada's infrastructure builds strong communities and helps to strengthen and grow
the middle class, setting the stage for sustained economic growth in the future. In Budget 2016,
the government made a down payment on future growth by making immediate investments of
$11.9 billion in public transit, green infrastructure and social infrastructure. This 2016 Fall
Economic Statement strengthens the government's commitment to long-term growth for the
middle class. It proposes an additional investment of $81 billion over 11 years, starting in 2017-
18, in public transit, green infrastructure, social infrastructure, transportation that supports trade,
Canada's rural and northern communities, and smart cities. The government will also establish a
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new Canada Infrastructure Bank to provide innovative financing for infrastructure projects, and
help more projects get built in Canada, where public capital can be leveraged.
Taking into account existing infrastructure programs, new investments made in Budget 2016 and
the additional investments contained in this Fall Economic Statement, the government will make
a total investment in Canada's communities of more than $180 billion.
This commitment is unprecedented in Canadian history.
ONTARIO PROVINCIAL GOVERNMENT
As announced in the 2016 Ontario Economic Outlook and Fiscal Review, the Province of
Ontario plans to invest more than $160 billion over 12 years, starting in 2014-15.
Figure 24: The Province's 12-year infrastructure plan by sector (%)
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The infrastructure plan includes investments in Moving Ontario Forward for public transit,
highways and other priority infrastructure projects. The infrastructure expenditures table below
outlines all planned investments over 12 years, starting in 2014-15, and shows they touch all
key sectors.
Figure 25: 2016-17 Infrastructure Expenditures Table
(Source: 2016 Ontario Economic Outlook and Fiscal Review)
11 RECOMMENDATIONS
11.1 SOTI RECOMMENDATIONS
The SOTI/Capital Plan identifies a number of asset-specific recommendations. However, there
are six recurring recommendations that should be addressed in future strategic asset
management initiatives:
1. Develop, through more detailed analysis, a plan for allocating the additional funds to the
operating and/or capital budgets, as required, in order to successfully develop,
implement, and maintain an approved asset management plan;
2. Develop a policy and implement a strategy to reach long-term sustainable funding for
each of the assets covered in this SOTI Report;
3. Implement a comprehensive budget structure along service delivery lines, so that
service managers can adequately know what the true total cost of their service is
(including asset management, operations, capital, and borrowing costs).
4. Review the selection and use of rehabilitation strategies on life-cycle costing and on a
return-on-investment (ROI) basis.
5. Review operating and maintenance practices, balancing least life-cycle cost against
level of service and risk exposure, on a business-case basis using InfraGuide Best
Practices and other industry sources;
6. Provide regular updates to the SOTI Report Card and Analysis
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11.2 CAPITAL PLAN RECOMMENDATIONS
1. Asset condition assessment of capital assets should be considered wherever feasible.
The application of a standard life expectancy of an asset reflects a financial approach
(PSAB 3150). Age-based condition assessment has the least level of confidence for
building a capital plan.
2. The Township of Athens could consider releasing a policy defining its strategy and
intention as it pertains to the infrastructure deficit, including communications to the
general public.
3. The Township needs to build a definitive policy with respect to it's infrastructure deficit.
4. The Township should proactively define organizational responsibilities to maintain the
asset inventory including proposed and actual project cost information, updating the
data as assets are acquired or betterments are added to existing assets and projects
are started and completed. In this manner, the accuracy of future Capital Plans will
increase over time.
5. The Township should consider establishing as policy the following guiding principles,
that it be:
a) Customer Focused: To have clearly defined Levels of Service and applying asset
management practices to maintain the confidence of residents in how the
Township of Athens assets are managed.
b) Forward Looking: To make the appropriate decisions and provisions to better
enable its assets to meet future challenges, including changing demographics and
populations, customer expectations, legislative requirements, technological and
environmental factors.
c) Service Focused: To consider all the assets in a service context and taking into
account their interrelationships as opposed to optimizing individual assets in
isolation.
d) Risk-based: To manage the asset risk associated with attaining the agreed levels
of service by focusing resources, expenditures, and priorities based upon risk
assessments and the corresponding cost/benefit recognizing that public safety is
the priority.
e) Value-Based/Affordable: To choose practices, interventions, and operations that
aim at reducing the life cycle cost of asset ownership, while satisfying agreed
levels of service. Decisions are based on balancing service levels, risks, and
costs.
f) Holistic: To take a comprehensive approach that looks at the "big picture" and
considers the combined impact of managing all aspects of the asset life cycle.
g) Systematic: To adopt a formal, consistent, repeatable approach to the
management of its assets that will ensure services are provided in the most
effective manner.
h) Innovative: To continually improve its asset management approach, by driving
innovation in the development of tools, practices, and solutions.
6. To meet the goals and objectives of this policy, senior management could consider:
a) The creation and maintenance of a Comprehensive Asset Management (CAM)
governance structure to lead the development of AM tools and practices and to
oversee their application across the organization.
b) Adopt a Comprehensive Asset Management Strategy (AMS) to:
- Establish, document and continually adhere to industry recognized asset
management protocols;
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- Develop asset management knowledge and competencies aligned with
recognized competency frameworks;
- Entrench lifecycle costing when evaluating competing asset investment needs
across the Township assets;
- Monitor the performance of the assets and track the effectiveness of AM
practices with a view to continuous improvement;
11.3 LEVEL OF SERVICE RECOMMENDATIONS
1. We recommend that the Township incorporate a Level of Service analysis prior to
resolving the infrastructure deficit in order to maximize the impact of their capital
investments with the objective to:
- Refine levels of service that balance customer expectations with risk,
affordability and timing constraints as it pertains to the Township's unique
requirements;
- Adopt risk-based decision-making processes that consider the likelihood of
asset failure and the consequence of a failure with regards to impacts on safety
and levels of service;
2. To assist in better establishing Levels of Service, the Township should consider
collecting technical performance measures required to provide information on:
- the types of failure
- the number of customers affected
- the duration of the failure
- the severity of the failure
3. To support decision-making for effective management of the assets, the Township
should consider technical performance measurement and monitoring, undertaken by
the Township such as:
- Assessing the effectiveness of the operational, maintenance and capital works
program
- Review and refinement of maintenance and rehabilitation strategies and
standards
- Assistance in strategic decision-making through definition of remaining life,
based on the measure being assessed
11.4 FINANCIAL STRATEGY RECOMMENDATIONS
A financial strategy to support the asset management plan is a dynamic document that should be
updated and re-evaluated on an ongoing basis. The Township should give due consideration to
the following points:
1. The Township has insufficient funds from existing sources to proactively manage its
infrastructure and will need to prioritize its requirements to maximizing the impact of
existing financial resources.
2. The Township has a growing infrastructure deficit which is moderate considering its
population and tax base. A special infrastructure levy will help the Township to reduce
the gap over time and should be taken into consideration.
3. In the event that the Township implements an infrastructure levy, a percentage of the
additional funds should be transferred into a reserve so that the Township has some
flexibility to prioritize and sustain future infrastructure and service level requirements.
4. The Township needs to be proactive in reviewing and capitalizing on the upcoming
Provincial and Federal programs.
5. The Township needs to embrace the principles of Asset Management to formulate
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assumptions, projections, and strategies going forward. The Plan should be modified
on an ongoing basis, taking into account changes in the municipal environment.
6. The Township should track and build awareness of the results of its projections on
current operating and capital spending and funding levels with the objective of fine-
tuning the forecasting process.
7. The Township should continue the analysis and examination of key financial goals and
strategies that guide future priorities and expenditures.
12 CONCLUSION
As a general comment, the Township of Athens is hampered by limited revenue and extensive
infrastructure. ISI worked with staff who were knowledgeable and committed. The information
we received was, by in large, accurate and well organized. The overall state of the linear
infrastructure at the Township is in line with the vast majority of municipalities in this Province.
As highlighted in the Report Card, the current state of the linear infrastructure, based on available
condition rating and age analysis, presents a picture of the Township's linear assets to be in need
of substantial work and the Township should continue to be proactive in their strategies, so as to
extend asset useful life and avoid major rehabilitation/reconstruction or replacement costs.
It is highly recommended that the Township of Athens embrace the principles of Asset
Management. Managing existing infrastructure, doing the right thing, at the right time, involves
knowing and actually doing the most cost-effective maintenance, repair, rehabilitation or
replacement activity at the right time throughout the entire lifecycle of the asset. Beyond cost
savings, assets need to be viewed in terms of their ability to enhance quality, function, capacity
and safety of the service being provided.
The process of implementing Asset Management is rife with challenge. It requires clear direction
from Council. It requires significant cross-departmental cooperation. It requires the allocating of
time, energy, and resource to assume new responsibilities. It requires consultation with the
community. It requires working with constrained budgets to balance priorities. Because
infrastructure management deals with assets that have long lifespans, it may take years before a
substantial financial return on investment (ROI) becomes apparent. Still, managing existing,
capital intensive, public sector infrastructure asset could provide very significant benefits (i.e. 20
- 40% reductions in life cycle costs).
Finally, the Township will likely be faced with difficult decisions over the next years, and the
infrastructure deficit will continue to widen without corrective action. The Council should put
together a public communication program to engage the community in discussing the true cost of
services and the assets required to provide those services. Community and stakeholder buy-in
for an implementable asset management plan and service levels in line with public expectations
and willingness to pay are critical to the success of the program.
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APPENDIX A - DETAILED LIST OF CAPITAL PROJECTS
Click on the Dropbox hyperlink below for a detailed list of your Capital Projects over the next 10
years:
Click here to view
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APPENDIX B - ASSET USEFUL LIFE
Departments
Assets
Useful Life as per CIP
(Years)
Source
Transportation Network
Gravel
(Recurrent Resurfacing)
ISI Infrastructure
Dirt
(Recurrent Resurfacing)
ISI Infrastructure
Hot Mix Asphalt
50
ISI Infrastructure
Sidewalk
40
ISI Infrastructure
Bridge
Bridge
50
ISI Infrastructure
Culvert
Culvert
50
ISI Infrastructure
Facility
Buildings
75
As per the TCA Policy
Historical 150
Fleet
Vehicles
Varies
As per the TCA Policy
Equipment
Heavy Equipment
Varies
As per the TCA Policy
IT Equipment
5
As per the TCA Policy
Recreation
Playground
20
As per the TCA Policy
Rating Category
% Remaining
Service Life (RSL)
Definition
Good
61% - 100%
The infrastructure in the system or network is generally in good condition,
typically new or recently rehabilitated. A few elements show general signs
of deterioration that require attention
Fair
41% -60%
The infrastructure in the system or network shows general signs of
deterioration and requires attention with some elements exhibiting
significant deficiencies
Poor
< 40%
The infrastructure in the system or network is in poor condition and mostly
below standard, with elements approaching the end of their service life. A
large portion of the system exhibits significant deterioration
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APPENDIX C - MUNICIPAL COST INDEX
Notes:
-
Municipal Cost Index, is calculated to better represent the municipal purchasing power
and cost experience, so ISI will use 2.5% as the compounding/inflationary factor up until
2016
-
Municipal Cost Index represents the basket of goods and services which is
consumed/used by Municipalities and represents the operational/working capital needs
on an on-going basis
-
Assigned weights represent the percentage of services/goods consumed out of total
spend
-
Inflators represent the year on year changes in the components
-
Component's weight and inflators, sum all represents the overall cost experience for the
Municipalities/region as compared to CPI
-
MCI is created as to minimize the variation/deviations of cost/purchasing experience in
the region
-
The sources of Municipal Cost Index are the Financial Statements for your specific region
-
Outliers have been removed from the data for Municipal Cost Index calculation to average
out/standardized data
2009
2010
2011
2012
2013
2014
2015
Wages and Salaries and Benefits
31%
12%
7%
1%
-2%
Interest on Long Term Debt
1%
21%
59%
-11%
15%
Materials
32%
-10%
24%
Contracted Services
21%
12%
-4%
37%
Rents and Financial Expenses
0%
-1587%
-16%
-104%
External Transfers
4%
29%
13%
66%
-143%
Amortization
11%
0%
Average MCI
2.5%
MCI(Region 7)
COMPONENTS
Weights
Inflators for Each Component