Municipality adopts asset management plan
By Liz Dadson
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Even though it received only a D-plus rating overall, Kincardine council has accepted the asset management plan as prepared by consultants Public Sector Digest.
The plan was presented to council in committee-of-the-whole at the March 19 meeting, and will serve as a tool to assist in ensuring sound financial planning with respect to municipal roads, bridges, culverts, storm sewers, water and wastewater infrastructure, said treasurer Roxana Baumann.
She recommended approval of the plan, with the purpose of guiding council during future budget deliberations.
The plan was the next step, after Kincardine drew up a database of all the tangible capital assets for the Public Sector Accounting Board (PSAB) in 2009.
Baumann said Kincardine received an overall D-plus rating with an annual infrastructure deficit of about $4-million.
Ironically, the report showed that Kincardine's infrastructure is in pretty good shape; however, the funding of that infrastructure was dismally low.
As presented by Gabe Metron and Chad Gale of Public Sector Digest, the report indicates that the replacement cost of Kincardine's infrastructure, including roads, bridges, culverts, water, sewer and storm sewer, is $327,504,280, in 2012 dollars.
For roads, bridges, culverts and storm sewers (tax-funded assets), the average annual investment required is $3.8-million. Meanwhile, Kincardine allocates about $465,000 annually, leaving an annual deficit of $3.369-million. These assets are currently funded at 12 per cent of their long-term requirements.
For water and sanitary sewers (rate-funded assets), the average annual investment required is $3.256-million. Kincardine is doing much better, allocating $2.595-million annually, with a deficit of $661,000. These assets are funded at 80 per cent of their long-term requirements.
The plan offers recommendations that would provide full-funding for all of these assets. These include increasing tax revenues by three per cent each year for the next 10 years, and increasing the water rates by 1.7 per cent and sewer rates by 0.7 per cent for the next 10 years.
Metron noted that Kincardine has 27 bridges and 52 culverts. The municipality must revisit the useful life policy that reflects what's happening in the field.
For example, perhaps the sewer pipes are in good condition and will last another 15 to 20 years.
Metron said this report includes just the infrastructure; no information has been put together yet regarding all the buildings owned by the municipality.
The next steps include:
Councillor Kenneth Craig asked Metron how the consultants reconcile the fact that Kincardine's infrastructure is in good condition, but the funding of that infrastructure received such a poor grade.
Metron said the report is based on the replacement cost of assets over their useful life, and having those funds on hand to replace the assets. "If you don't put enough money aside, the condition will continue to drop."
Deputy mayor Anne Eadie, policy chairperson for public works, agreed with Craig and said she did not see the purpose of the overall grade when the infrastructure condition received a B-plus.
"For example, the useful life of the deck of a bridge is 15 years, in a high-traffic area but not on a concession road," she said. "However, your assessment is correct and this is good data to have."
Councillor Jacqueline Faubert said she understands the real purpose of the PSAB report and the subsequent asset management plan is to increase taxes in Kincardine which is what the province wants to do, as a form of downloading.
"My recommendation," she said, "is to lobby the upper-tier governments for infrastructure funding."
"This process was not to promote tax increases," countered Metron. "The province needed to get a handle on capital requirements."
The PSAB report was the first step, and the asset management plan is the logical next step.
Faubert said it will be very disappointing if Kincardine works to get a good grade for funding its infrastructure and then loses out on provincial funding because of it.
"Increasing taxes is not the only option," said Metron. "Other municipalities are looking at levels of service, cutting inventory and shutting down roads."
"For decades, the province has been giving us more work and no funding," said councillor Ron Coristine. "Kincardine has just seen a 30-per-cent increase in taxes over four years. Now, we're expected to increase taxes another 30 per cent over 10 years. That's too aggressive. It should be 1.5-per-cent/year over 20 years.
"We can't ignore the report," said mayor Larry Kraemer. "We have a shortfall in our amortization; we've known that for a long time. If we don't plan, then very expensive repairs come up. Thank you for the report."
"Based on this report, I can't see how any municipality in Ontario can be sustainable," said councillor Mike Leggett.
"If we have to take a D-plus overall to get government grants, fine," said Eadie.
Committee-of-the-whole accepted the asset management plan. Final approval of the plan will come forward at a future council meeting.
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Wednesday, March 26, 2014