With municipal revenues failing to keep pace with investment needs, civic leaders across Canada face the daunting task of managing scarce dollars, balancing competing demands for services, and ensuring citizens continue to enjoy a high quality of life.
While the challenges confronting Edmonton are no different, the City has long understood the importance of sound infrastructure planning and has always been at the forefront of adopting innovative and strategic ways to manage resources.
The Edmonton Experience: Leading the Way
The City realized over a decade ago that a long-term plan was required to sustain current and future infrastructure assets. In the absence of a clear roadmap, the infrastructure gap would only magnify as costs continued to escalate and aging assets were not repaired or replaced.
To manage the issue, Edmonton was among the first municipalities in Canada to create a dedicated office to focus exclusively on asset management. One of our office’s first deliverables was to develop a comprehensive infrastructure strategy that would identify the scope of the problem and what was needed to reverse it.
This effort was successful. The City of Edmonton now has firm knowledge of its asset inventory, its age, and its replacement value. The City also has the ability to optimize investment, based on an asset’s lifecycle, condition and risk exposure by using sophisticated infrastructure management tools that the municipality developed and continues to refine. Along the way, Edmonton garnered recognition as one of Canada’s leading municipalities in the implementation of advanced infrastructure management techniques.
Today, Edmonton is making significant strides in managing over $35 billion worth of municipal assets, identifying funding needs and priorities, and using objective and quantitative decision-support tools to address the City’s growing infrastructure deficit.
City administration and elected officials are using infrastructure management to help guide their decisions on how to best invest scarce infrastructure dollars. And even more importantly, they are using it to better defend tough funding and investment decisions.
There is now a recognition that infrastructure management is evolving beyond the traditional engineering, financial and technical arena—it is playing a more pivotal role in the City’s strategic planning and policy development arena.
Entering a New Frontier
The transition to a more strategic orientation is evident in how the asset management function and infrastructure management tools have in the past few years been integrated with corporate business planning and long-term direction-setting. Some of Edmonton’s notable achievements in this area include a better capital planning process and a program to renew neighbourhood infrastructure.
Capital Planning
Edmonton’s Risk-based Infrastructure Management System, commonly known as RIMS,was used successfully to develop the City’s 10-year capital plan and three-year capital budget. With City assets aging and more maintenance and rehabilitation required, RIMS is an important capital planning tool to optimize investment in existing infrastructure to ensure assets are in a condition that meets intended performance and service levels.
To establish capital funding requirements, RIMS provides valuable information on how to balance the competing demands between renewal and growth infrastructure by determining renewal targets for each asset class in relation to risk exposure and current physical condition.
Our analysis showed that to reduce the amount of poor and very poor infrastructure, an average annual reinvestment of $400 million was required over the next three years (2012-14) and an average annual reinvestment of $450 million over the remaining seven years (2015-2021). This level of reinvestment will ensure the City’s asset base is maintained in a good state of repair and the percentage of assets in poor and very poor condition is reduced.
Currently, about 16% of Edmonton’s infrastructure is in poor or very poor physical condition. Our goal is to reduce the amount of assets in poor or very poor condition to 6% within 20 years.
Neighbourhoods: Earmarking of Tax Levy
Asset management was also the main driver in substantiating the need to inject significant dollars into Edmonton’s crumbling neighbourhoods. Again, the risk methodology was used to identify critical assets and their projected physical condition based on a given level of renewal investment. Our analysis showed that neighbourhoods topped the critical list and confirmed that inaction would result in further asset deterioration, posing a potential risk and liability for the City.
Neighbourhood infrastructure at the time had a staggering $2 billion funding gap, and represented about one-third of the City’s renewal shortfall. The grim scenario demanded a proactive approach that could guarantee a stable and predictable revenue stream to deal with the infrastructure backlog. Revenues also had to grow over time to generate sufficient dollars for the ongoing maintenance of neighbourhoods beyond the 30-year life of a newly created neighbourhood renewal program.
Council approved the earmarking of property taxes on the basis of the risk analysis to address the significant funding shortfall. The tax levy included 2% per year for the first and second year (2009-10), and 1.5% for 2011. The City’s 10-year capital plan has the levy continuing at 1.5% per year until 2018, when the program will be self-sustaining.
Over the first three years of the program the annual tax levy raised about $45.7 million. Based on current estimates, a 10-year dedicated property tax increase will generate a required funding pool of about $170 million by 2018.
Allocation of Grant Funding
In the City’s previous capital plan (2008-17), a less refined risk model was utilized as a tool to allocate Edmonton’s $2.1 billion share of the Government of Alberta’s Municipal Sustainability Initiative (MSI)—a province-wide program designed to provide Alberta municipalities with sustainable funding over a 10-year timeframe.
Given MSI’s considerable dollar value, coupled with Edmonton’s sizable infrastructure need, the City wanted to ensure the dollars allocated to the renewal of existing assets was based on highest need, priority and corporate strategic direction.
The grant was allocated on a city council approved split of 60 percent to renewal and 40 percent to growth; renewal funding was then allocated using the risk model. To optimally allocate dollars, the decision-tool informed the City how much it would cost to maintain its renewal infrastructure at a specified level of performance and risk, and how various funding scenarios might impact asset performance and risk.
*This article was also featured in the June 2012 Edition of the APWA Reporter
– By Konrad Siu
Konrad Siu is the Director of the Office of Infrastructure and Funding Strategy for the City of Edmonton. The Office’s mandate is to implement Edmonton City Council’s Infrastructure Strategy to address the City’s growing disparity between infrastructure capital needs and available funding. Konrad has been actively involved in a number of national initiatives related to infrastructure management, including the Canadian Infrastructure Report Card, National Round Table on Sustainable Infrastructure, National Asset Management Working Group, Public Sector Accounting Board (PSAB) Task Force on Assessment of Tangible Capital Assets, and the Board of Directors for the Canadian Network of Asset Managers. Konrad also served as Co-chair of the Core Public Infrastructure National Advisory Committee, and Vice-chair of committees contributing to the development of the “National Guide to Sustainable Municipal Infrastructure” (InfraGuide) and “Framework for Assessment of State, Performance and Management of Canada’s Core Public Infrastruce.”
Konrad is a member of the Canadian Society of Civil Engineering (CSCE) Infrastructure Renewal Committee, and a member of the Organizing Committee for the CSCE 1st Specialty Conference on Infrastructure Technologies, Management and Policies (2005). He has been invited to speak at numerous conferences and seminars on infrastructure asset management, and published several papers and articles in technical journals and magazines.
Konrad holds a Bachelor of Science degree in Civil Engineering and a Master of Engineering degree from the University of Manitoba, as well as a Master of Business Administration degree from the University of Alberta. He also has completed the Program for Senior Executives in State and Local Government at Harvard University’s John F. Kennedy School of Government.
Konrad is a Fellow of the Canadian Society of Civil Engineering (CSCE). The Office of Infrastructure and Funding Strategy has recently received Silver in the Institute of Public Administration of Canada/Deliotte Public Sector Leadership Award in the municipal category for its leadership in advancing infrastructure management.