City CAO David Allen focuses on sustainable asset management

Wide-ranging urban expansion has left municipal taxpayers with growing unfunded long-term debt for the infrastructure required by water, sewer, stormwater and other services. But a relatively new framework for management of public assets hopes to change that.

Courtenay Chief Administration Officer David Allen was part of a small group in 2008 that developed this system for managing public assets that provides for service and financial sustainability. It is now used by almost every municipality in British Columbia.

“The goal is sustainable service delivery; to avoid service failures,” Allen told Decafnation. “By moving to a proactive rather than reactive approach to maintenance, we can keep the infrastructure in good shape based on what the community wants and can afford.”

The provincial and federal governments regulate water and sewer standards through statutory regulations. But other things that have value, like quality of life services and stormwater, have not been regulated and the standards are discretionary.

“Therefore, City Council and the public must agree on what services are provided and at what levels of service, compared to the price the public is willing to pay,” Allen said.

Green infrastructure, for example, reduces a municipalities’ dependence on hard engineering in the future, and it does not depreciate and requires less maintenance, he said.

“It also does not have to be replaced in the future,” Allen said. “So it also extends the life of existing infrastructure.”

The city has been working with the Municipal Natural Assets Initiative (MNAI), which attempts to place a value on a municipalities’ natural assets. The Public Sector Accounting Board is working on a shift in official accounting methods to allow for this approach.

“We are using these methods to develop ways to use a combination of engineered assets and natural assets to replace our existing stormwater and flood management systems,” Allen said.

Infrastructure has no value by itself; its value is the service it provides, Allen says.

In 2009, the Public Sector Accounting Board required municipalities to record the value of their tangible assets, not including their natural assets, and only the original or historical costs. It did not consider replacement value in today’s dollars.

The whole Comox Valley has somewhere near $400 million in unfunded infrastructure liabilities, the backlog of foregone capital renewal and maintenance.

“Consequently, those numbers are not realistic and grossly undervalued,” Allen said.

It’s like owning a house or a car, according to Allen. Regular maintenance means no surprising big bills and inevitable down time later.

The Asset Management BC framework corrects this misunderstanding and allows for improved long-term financial planning by identifying what truly needs to be renewed, when that should happen and how much it will actually cost.

The infrastructure deficit is related to the municipal share of the property tax bill, which is about eight percent.

“It’s too low,” Allen said, “because the nature of the services that municipalities deliver are far more dependent on capital assets than other levels of government.”

“Those numbers are not realistic and grossly undervalued”

For example, in most western nations the national governments use capital assets to deliver their services that are valued at approximately the same amount as their total annual revenue. Provincial or state governments have capital assets worth approximately three times their total annual revenues.

But to deliver local government services, municipalities typically own capital assets worth 10 or more times their annual revenue.

Some communities — like Victoria and Richmond — have created new utility functions for stormwater to fund the maintenance and replacement of its infrastructure. In most communities, however, those bills are paid out of general taxation, and most years there hasn’t been enough.

But the Asset Management BC framework, which Courtenay has adopted, guides the city to undertake infrastructure conditions assessment, and to assess each asset’s risk of failure. This way, the city can prioritize its maintenance schedule and avoid a major service failure.

When city workers recently dug up a street in one of Courtenay’s oldest neighbourhoods, they found the stormwater pipe under the street they needed to repave was in good condition; it would last for another 30 years. Since pavement only lasts for 20 years, they left the pipe in the ground and plan to replace it the next time the street needs repaving.

Understanding the actual condition of stormwater pipes, Allen says, can prevent premature replacement, so available resources can be directed to those assets that need replacement or to reserves for future renewal when it’s necessary.

“We want to replace infrastructure only when necessary,” Allen said. “Otherwise, we’re wasting money.”

THE MUNICIPAL NATURAL ASSETS INITIATIVE

The Municipal Natural Assets Initiative (MNAI) provides scientific, economic and municipal expertise to support and guide local governments in identifying, valuing and accounting for natural assets in their financial planning and asset management programs, and in developing leading-edge, sustainable and climate resilient infrastructure.

Asset management—the process of inventorying a community’s existing assets, determining the current state of those assets, and preparing and implementing a plan to maintain or replace those assets—allows municipalities to make informed decisions regarding a community’s assets and finances.

Unfortunately, local governments lack policies to measure and manage one class of assets: natural assets. Natural assets are ecosystem features that provide, or could be restored to provide, services just like the other engineered assets, but historically have not been considered on equal footing or included in asset management plans.

Read more about MNAI

WHAT IS A NATURAL ASSET?

The term ‘Municipal Natural Assets’ refers to the stocks of natural resources or ecosystems that contribute to the provision of one or more services required for the health, well-being, and long-term sustainability of a community and its residents.

WHAT IS THE ECOLOGICAL ACCOUNTING PROCESS (EAP)?

Ecological Accounting Process — “The EAP approach begins by first recognizing the importance of a stream in a natural state and then asking: how can we maintain those ecological values while allowing the stream to be used for drainage,” says Jim Dumont, Engineering Applications Authority with the Partnership for Water Sustainability in BC.

ASSET MANAGEMENT BC

Learn more about this organization here