1. Regional AMCTO Session 8 May 2019 London
Friendly Asset Management: an overview of Petrolia’s journey and lessons learned
Rick Charlebois, CAO-Treasurer

2. Bad planning is buying a new saddle for an old horse!

3. Outline: What is an asset management plan?
Why is improved asset management important?
History of municipal asset management
Petrolia’s asset management journey
Conclusions

4. What is an Asset Management Plan?
International Infrastructure Management Manual: a plan developed for the management of one or more infrastructure assets that combines multi- disciplinary management techniques (including technical and financial) over the life cycle of the asset in the most cost- effective manner to provide a specific level of service
Bonnie and Clyde story
Petrolia has 6,000 residents – what is the replacement cost of our public infrastructure?

5. Profile of Public Infrastructure Share of Infrastructure by Order of Government (1955 and 2007)
Source: New Tools for New Times: Innovative Infrastructure Financing, funding and Delivery, Canada West Foundation – January 27, 2011

6. Source: The Fraser Institute’s Canadian Tax Simulator, 2014
Municipalities Own Majority of Infrastructure But Receive the Smallest Share of Tax Dollars
Source: The Fraser Institute’s Canadian Tax Simulator, 2014
Infrastructure Canada 2016 suggested: 60% Municipal; 38% Provincial; 2% Federal

7. Why is Asset Management Important?
Asset management is about long-term service management
Councils cannot provide critical services to residents without well maintained public infrastructure – ex, residents just want their municipal governments to ensure that when they turn on their kitchen taps that they get safe drinking water and that when they flush their toilettes that the wastewater goes away and is properly treated before being released back into the environment

8. Why is Asset Management Important?
Residents do not understand the tremendous amount of infrastructure that is required to provide these critical and important municipal services. They do not understand the complexities, the tremendous costs, the huge coordination and management effort to plan the maintenance and replacement of this municipal infrastructure.
It is our job as the municipal professionals (the CAOs, Clerks, Public Works, Parks and Recreation, Treasurers, etc.) with Council oversight and direction to ensure our municipal infrastructure is properly managed and meets the needs of our residents.

9. History of Municipal Asset Management1
2009 – province mandated municipalities to use PSAB for audited financial statements – forced us to list infrastructure with costs, age, and useful life; and start depreciating our assets – major change, but necessary first step 2
2012 – province introduced “Building Together: Guide for Municipal Asset Management Plans”. Required municipal AMPs, again a necessary step 3
2014 – province required municipal AMPs to apply for capital grants and show how projects fit within their AMP (federal government basically followed suit) 4
2017 – province approved regulation Ont. 588/17 that requires municipalities to improve their AM planning over a seven-year period 5
2018 – new provincial government very supportive of AM 6
Percent of municipalities with AMPs:
Pre-2012 – 40%
2019 –100%
2024 provincial goal is 100% up-to-date robust AMPs that inform investment decisions
History of Municipal Asset Management

10. Municipal A.M. Planning Ontario Regulation 588/17
Phase I: by July 2019, every municipality shall have Council approved strategic asset management policy and shall review and, if necessary, update it at least every five years.
Phase II: by July 2021, every municipality will have an asset management plan for core assets (water, sewer and roads) that discusses current levels of service and the cost of maintaining those services.
Phase III: by July 2023, every municipality will have an asset management plan for ALL municipal infrastructure assets (such as, buildings, vehicles, etc) that discusses current levels of service and the cost of maintaining those services; and
Phase IV: by July 2024, this phase builds on Phase I and II by adding proposed levels of service, and lifecycle management and financial strategy (Long Term Financial Plan – LTFP – which Petrolia started six years ago.)
Municipal A.M. Planning Ontario Regulation 588/17

11. Petrolia’s A.M. Journey
Early in 2014, Council approved Petrolia’s first ten-year Asset Management Plan which included water, sewer and roads. BUT we did not include all Town assets, such as, Community Centre, Arena, vehicle fleet, etc.
In 2014, our senior management meetings would discuss one major infrastructure priority at a time because we had no means to focus our management attention on all our priorities in a holistic and integrated manner
We needed a multi-year plan that addressed our municipality’s key infrastructure priorities
I had worked at National Defence – led strategic financial planning group – about $10 billion annual budget, $3 billion for capital, we used a 15-year planning horizon, used a model similar to the one we developed in Petrolia
Became Petrolia’s Treasurer in 2013 (my first experience at the municipal level). I was lost. Fortunately, I found a mentor with over 30 years municipal finance experience (former Treasurer at City of Sarnia)
With our combined experience, we conceived, developed and implemented a strategic decision support tool that evolved over about a 12-month period, and we are still annually enhancing our model as we drop/add a year to our 10-year planning horizon

12. Petrolia’s A.M. Journey
With our first long term financial planning (LTFP) model, we realized that our first Asset Management Plan was a “wish list”, not affordable, not a practical, our long-term plan that could be implemented – it would just build up false expectations!
We re-prioritized our capital program, projects were taken out, projects were moved to the right, projects were added, projects were better integrated and coordinated, eg, road construction with water and sewer work.
Our timing was perfect as we knew the Federal Government and the Province were going to start announcing new major infrastructure grants, and we were ready.
KISS principle used as we have limited staff capacity and time, like most municipalities
Some key success factors:
- Integrated management team (Mandi)
- Council very supportive and saw the big picture, ex, 2015 established a 5% capital sustainability level to our tax rate (staff also decreased our operating costs by the same amount)
- Staff employ an integrated, long term view on everything we do, not just AM

14. Total Road Construction Versus Road Maintenance Strategy

18. Petrolia’s Long-Term Financial Planning (LTFP) Model
Another measure of success is the percentage of “very poor” assets to total assets.
2016 was 39% will be about 20%
Reasons for our success:
Council quickly understood the importance of AM – it is where the money and services are!
In 2015, Council approved a 5% capital sustainability levy and at same time directed a 5% reduction in operating budgets without reducing services (not easy things to do)
Developed and implemented a simple, tailored to our needs, long term financial plan that is updated annually and integrated with our annual budgeting process
Moved from a noun “AM Plan” to action “AM Planning”
Respect and trust between Council and staff, e.g., Clean Water Wastewater Fund (CWWF) grant (awarded contract before grant approval)

19. Petrolia’s Long-Term Financial Planning (LTFP) Model
Petrolia developed a basic guide and Excel model with our FCM AM grant
Provided to AMOntario for sharing
It is difficult for municipalities to implement change such as setting up a LTFP especially for smaller municipalities.
Hopefully, this will help you get to where you want to go.
For those of you who do implement a LTFP, Petrolia would be glad to exchange ideas or just talk.

20. Conclusions
Like most municipalities, Petrolia is a capital intense organization ($300M replacement cost)
These assets are critical to Council maintaining its levels of service (LOS) to the residents
Petrolia now has an integrated, long term view of our capital and operational plans for all our activities
We use our Strategic Financial Planning model to help Council plan, prioritize and smooth out our future capital requirements
Helps with service delivery reviews, shared service reviews, etc
In addition, the model can be utilized to determine future water and sewer rates. We now know our costs and can better manage our future.

21. Multi-year Budgeting Maturity Model
Level 2
Level 4
Budget approved before budget year starts
Long Term Financial Plan (LTFP)
Level 1
Level 3
Budget approved after budget year starts
Budget approved before budget year starts with insights into future years

22. Enough with all the strategic planning
Enough with all the strategic planning Get out there and kill something!