THE REGION OF DURHAM S ASSET MANAGEMENT STRATEGY: MEETING THE CHALLENGE OF A NEW REGULATORY ENVIRONMENT IN ONTARIO

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1 THE REGION OF DURHAM S ASSET MANAGEMENT STRATEGY: MEETING THE CHALLENGE OF A NEW REGULATORY ENVIRONMENT IN ONTARIO John Presta,* Alfred Ho, ** John Himanen*** * Regional Municipality of Durham 605 Rossland Road East PO Box 623 Whitby, Ontario L1N 6A3 ** Regional Municipality of Durham, 605 Rossland Road East, Box 623, Whitby, ON, L1N 6A3 *** MacViro Consultants, 600 Cochrane Drive, Suite 500, Markham, ON, L3R 5K3 ABSTRACT The Province of Ontario, Canada has introduced significant new legislation in its continuing effort to ensure residents access to safe, secure and sustainable water and wastewater services. Bill 175, the Sustainable Water and Sewage Systems Act, which became law in 2002, now requires Ontario municipalities to assess the full cost of providing water and wastewater services and to develop a plan describing how the municipality intends to pay the full cost of providing these services. The Region therefore has proactively moved forward and developed an asset management strategy that provides Regional staff at all levels with the required asset information and meaningful decision-making tools needed to comply with the new regulatory requirements. Through key findings to-date identified under the program, the Joint Finance and Administration and Works Committee in November of 2005 was able to recommend to Regional Council that water and sewer rates be increased by 2% and 1% respectively in order to provide an additional $2.31 million to the Asset Management Reserve Fund, which will be applied to correct critical asset deficiencies. A key success factor to achieving the support of the public and Council included the development of effective public education and communications programs to ensure that Regional stakeholders understand and recognize the need for higher levels of investment (and the corresponding rate increases). KEYWORDS Asset management, municipal infrastructure, asset sustainability, provincial legislation, Bill 175, Sustainable Water and Sewage System Act, life cycle investment INTRODUCTION In May 2000, contaminated drinking water in the Town of Walkerton, Ontario, Canada resulted in the death of 7 people and over 2,300 becoming ill. Following the release of recommendations developed under Commissioner Dennis O Connor s Inquiry into the tragedy, the Province of Ontario has introduced significant new legislation in its continuing effort to ensure residents access to safe, secure and sustainable water and wastewater services. The Sustainable Water and Sewage Systems Act, which became law in 2002, now requires Ontario municipalities to assess the full cost of providing water and wastewater services and to develop a plan describing how the 4207

2 municipality intends to pay the full cost of providing these services. Significant other legislation including the Safe Drinking Water Act (2002) and the Clean Water Act (2005) have also been recently introduced to ensure that communities identify potential risks to their supply of drinking water and take appropriate action to reduce or eliminate these risks. In response to this new regulatory environment in Ontario, the Regional Municipality of Durham has recognized that more effective tools and processes were needed to better manage their water and wastewater infrastructure. The Region therefore has proactively moved forward and developed an asset management strategy that provides Regional staff at all levels with the required asset information and meaningful decision-making tools needed to comply with the new regulatory requirements. NEW LEGISLATION UNDER THE ONTARIO MINISTRY OF THE ENVIRONMENT Safe Drinking Water Act, 2002 In his final report of the Walkerton Inquiry, Commissioner O Connor recommended that the Ontario government enact a Safe Drinking Water Act to deal with matters related to treatment and distribution of drinking water. As articulated by Commissioner O Connor, the purpose of the Safe Drinking Water Act would be to protect human health through the control and regulation of drinking-water systems and testing of drinking water and to consolidate all existing legislation and regulations relating to the treatment and distribution of drinking water in the Province. The Province of Ontario s Safe Drinking Water Act therefore received Royal Assent on Dec 13, The Act expands on existing policy and practice and introduces new features to protect drinking water in Ontario. The act also provides legislative authority to implement 50 of the 93 recommendations made in Commissioner O Connor s Report. The Government of Ontario has also enacted a set of new drinking water regulations under the Safe Drinking Water Act, The Drinking Water Systems Regulation (O. Reg. 170/03) regulates municipal and private water systems that provide water to year-round residential developments and designated facilities that serve vulnerable populations such as children and the elderly. Designated facilities include children s camps, health care facilities, a delivery agent care facility, a school or private school, a social care facility, a university, college or institution with authority to grant degrees. The Act and regulations distinguish between municipal and non-municipal drinking-water systems. There are four categories of municipal drinking-water systems: small and large systems serving a residential population, and small and large non-residential systems serving, for example, community centres and town halls. Each category has specific requirements that must be met. Key components of the Act and regulations include the following: Sampling and testing of drinking water with a frequency designed to reflect the type and users of the system. The Act requires that all laboratories that conduct drinking water tests be licensed and accredited; Reporting of adverse test results that exceed any of the standards; Requirement that every municipal drinking water system in Ontario must have a license; 4208

3 Requirement that a professional engineer must certify that a municipal non-residential drinking water system is in compliance with regulatory requirements; Requirement that all drinking water system operators must be licensed and receive mandatory training and certification (including previously grandparented operators); Requirement that an annual report be prepared and made available to the public; The Act gives authority to establish an Advisory Council on Drinking Water Quality and Testing Standards ; The Ontario Ministry of the Environment intends to enforce the requirements of the Act through inspection of the drinking water systems. Bill 175, The Sustainable Water and Sewage Systems Act, 2002 The Sustainable Water and Sewage Systems Act, commonly referred to as Bill 175, was also enacted in The Act requires Ontario municipalities to assess the full cost of providing water and wastewater services and to develop a plan describing how the municipality intends to pay the full cost of providing these services. These requirements are covered under the two main components of the Act; the Full Cost Report and the Cost Recovery Plan. In developing the Full Cost Report, preparation of a written report related to water and wastewater services (including an asset inventory and management plan needed to provide these services) must be prepared and certified by a professional engineer. The report is required to include an assessment of the full cost of providing the water and wastewater services as well as revenues obtained including source protection, operating, financing, renewal, replacement and improvement costs. Development of the Cost Recovery Plan consists of preparation and approval of a plan indicating how the municipality will pay the full cost of providing water and wastewater services. The Act also requires that municipalities establish and maintain a dedicated reserve account for revenues allocated in its approved Cost Recovery Plan to pay for the services. The specific Regulations under which the Act is to be implemented are still being developed (in fact, the Regulations are now considerably overdue). A key unknown factor that will impact the implementation of Bill 175 includes the establishment of the proposed Ontario Water Board as recommended in the Water Strategy Expert Panel s 2005 Watertight Report (discussed below). In answer to the Watertight Report, the Ministry of the Environment is developing a White Paper (discussion paper) which will establish the Province s official policy response to the recommendations of the Report and moving ahead with the development of specific regulations under Bill 175. The Ministry s White Paper has however not yet been completed. This has resulted in some delay in the release of the actual regulations under which Bill 175 is to be implemented. 4209

4 Other key factors which may impact the implementation of Bill 175 include potential future restrictions on the maximum amount a municipality may increase water and sewer charges for any customer over any period of time, as well as future phase-in periods and timelines for preparation and approval of the reports. Nutrient Management Act, 2002 The Ontario government introduced the Nutrient Management Act in The Act provides a comprehensive nutrient management framework for Ontario s agricultural industry, municipalities and other generators of materials containing nutrients. The Act also establishes standards for the management of the materials containing nutrients and sets out requirements for farmers, municipalities and others in the business of managing materials containing nutrients. Under this Act, Ontario farms must develop nutrient management plans to deal with animal waste and other substances that are kept on farm properties or spread on fields. Nutrient management plans will therefore help ensure that farms are managed in an environmentally responsible way to prevent contamination of lakes, streams and groundwater. The Nutrient Management Act received Royal Assent on June 27, The Ministry of the Environment and the Ministry of Agriculture, Food and Rural Affairs share responsibility for ensuring the Act is effectively implemented. The Province of Ontario is also establishing a Nutrient Management Standards Science Committee to advise the Ministries of the Environment and Agriculture, Food and Rural Affairs on a short list of risk-based nutrient management standards that would apply to farms of all sizes. The Science Committee will consist of five independent experts from agriculture, hydrogeology, land use planning, risk management and risk assessment. Proposed Clean Water Act, 2005 The proposed Clean Water Act, introduced in 2005 as Bill 43, has received second reading in the Provincial legislature. The Act consists of comprehensive water supply source protection legislation that requires drinking water source protection plans to be developed and implemented across the province. The proposed Clean Water Act establishes source protection areas and requires that a source protection plan be developed for each area. In areas of the province where conservation authorities currently exist,(there are currently 36 conservation authorities across Ontario) it is proposed that the source protection area will match the conservation authority area. The conservation authority would then be referred to as the Source Protection Authority and would have responsibility for facilitating the source protection planning process. The proposed Act would allow for the creation of source protection regions that would essentially group together various source protection areas. There are currently 36 conservation authorities across Ontario. Through the proposed legislation, there would be 10 source protection regions and 9 source protection areas within the province that would be covered by conservation authorities. Some boundary changes would likely be required for the purposes of incorporating some municipalities within a source protection area or by expanding (or reducing) the portion of the municipality that is included in the source protection area. 4210

5 In parts of the province that are not currently covered by a conservation authority, the Minister would establish the boundaries of a source protection area and likely designate a municipality within the area to assume responsibility for the preparation of the source protection plan. A source protection committee (SPC) would be established consisting of staff from the conservation authorities, municipalities and the public. The SPC would be responsible for preparation of the terms of reference and the development of an assessment report for the source protection area and ultimately the preparation of the source protection plan. The terms of reference would set out the roles and responsibilities for the planning process and public consultation requirements that apply to the preparation of an assessment report and source protection plan. The assessment report would identify the watersheds in the source protection area, the vulnerable areas within the watershed, and assess the drinking water threats in each vulnerable area in order to determine which threats constitute significant drinking water threats. The proposed Act identifies 4 types of vulnerable areas: a groundwater recharge area, a highly vulnerable aquifer, a surface water intake protection zone and a wellhead protection area. The assessment report would be submitted to the Director of the Ministry of the Environment for his approval. The source protection plan would set out policies intended to ensure that every activity identified by the assessment report as a significant drinking water threat ceases to be a significant threat. The province recently announced an investment of $67.5 million, including $51 million over five years for technical studies and $16.5 million to conservation authorities over the next year for staff and resources. After the source protection plan comes into effect, the responsibility of enforcing the regulation of drinking water threats is given to the municipality, although that responsibility could be delegated to another public body. The body responsible must appoint a permit official and all required permit inspectors. For an activity designated by the plan to occur within a wellhead protection area or surface water intake protection zone a permit will be required. A risk assessment may be required in order for the permit to be issued. OTHER INITIATIVES Water Strategy Expert Panel, 2005 On July 22, 2005, the Minister of Public Infrastructure Renewal, David Caplan, announced the release of the Water Strategy Expert Panel s report entitled, Watertight: the Case for Change in Ontario s Water and Wastewater Sector. The Study was initiated in response to the Provincial government s recognition that a long-term infrastructure investment and financing strategy is needed to ensure that Ontario s water systems are financially sustainable and that water rates are affordable. It is currently estimated that $34 billion in investments are needed over the next 15 years in Ontario s water and wastewater systems. In August 2004, the Province therefore appointed the Water Strategy Expert Panel to develop recommendations on how to ensure that 4211

6 water rates remain affordable, that water systems are financially sustainable and that needed investments in water and wastewater systems can be made. The Panel was mandated to recommend the best way to organize and deliver water and wastewater services to achieve these objectives, while ensuring continued public ownership of these systems. Key recommendations of the Watertight Report focused on the future organization, governance, investment needs, pricing and financing of the province s water and wastewater systems, and included the following: Increasing the scale and capacity of water systems, including consolidating smaller water systems in various parts of the province into larger regional utilities; Strengthening the governance of water services and increasing their effectiveness by making municipally-owned utilities responsible for providing services; Phasing in cost increases over a seven-year period; Creating an independent economic regulator the Ontario Water Board charged with reviewing business plans and proposed water rates; Encouraging innovations in technology and training in order to reduce costs; Revitalizing the Ontario Clean Water Agency by revising its mandate to include an arm slength relationship with the province and establishing a business-oriented Board of Directors; As mentioned above, the Province s White Paper in response to the recommendations of the Report is expected for release in Requirements Under Public Sector Accounting Board Guidelines It has been anticipated for a number of years that municipalities would be required to report Capital Assets on their financial statements similar to that of organizations in the private sector. In preparation for this change, the Treasurer's Group within the Ontario Municipal Benchmarking Initiative (OMBI) formed a sub-group in 2001 to study the impacts of this accounting change and to make recommendations in the methodology and implementation of Capital Asset accounting. In July 2005, the Public Sector Accounting Board (PSAB), which sets accounting and financial reporting standards for all levels of government within Canada, issued a draft of the guidelines for capital asset accounting applicable to local governments. The proposed guidelines are consistent with the work done by the OMBI sub-group. The date for implementation as currently indicated by PSAB is This would require a municipality to report capital assets in its 2009 consolidated financial statements. Capital asset accounting involves the recording, tracking, and reporting of the municipality s assets and will therefore bring about significant changes for municipalities. PSAB will not only 4212

7 require adherence to guidelines for reporting capital assets on an ongoing basis, but will require that assets currently owned also be reflected on a municipality's financial statements beginning in The challenge for the Region will be to develop an inventory of assets to be capitalized, determine original costs, and calculate the accumulated depreciation from the time of acquisition. In addition, well-defined policies and procedures will need to be written to ensure that asset information is accurately recorded on a continuing basis. While the exact requirements (method of valuation, asset classes and reporting standards etc.) are not confirmed, it is clear that this represents a significant change in how municipalities not only track and maintain their assets, but also report them on their financial statements. Specific requirements are expected to be finalized in REGION OF DURHAM WATER AND WASTEWATER SYSTEMS The Region of Durham, with a current population of approximately 540,000, has experienced rapid growth since it was formed in The Region currently provides services to approximately 142,300 customers and owns, operates and maintains water and wastewater assets totaling more than $4.5 billion. A breakdown of the area municipalities and related asset ages is provided in the following Table 1. Although, the Region has existing assets of a significant age, much of the infrastructure is in fact comparatively new, having been constructed in the 30 years since the Region was formed. Table 1 Region of Durham Area Municipalities Area Municipality Population First Infrastructure Installed Oldest Infrastructure City of Pickering 100, Town of Ajax 87, Town of Whitby 101, City of Oshawa 149, Municipality of Clarington 67, Township of Scugog 9, Township of Uxbridge 9, Township of Brock 7, Total 533,

8 The Region s water and wastewater systems include over 4,000 kilometres of water distribution and sewage collection system pipe infrastructure, 14 water supply plants, 11 water pollution control plants and 67 pumping stations. The estimated replacement costs of the Region s linear infrastructure (watermains, sewers and related assets) and vertical infrastructure (facilities) are $3.2 billion and $1.3 billion, respectively. Maps of the Region and related water and wastewater systems are provided in Figure 1 below. Figure 1 Region of Durham Water and Wastewater Systems CHALLENGE FOR THE REGION OF DURHAM With the emergence of a new regulatory environment in Ontario and the forthcoming Provincial legislation, the Region of Durham recognized that more effective tools and processes were needed to better manage their water and wastewater infrastructure. A strategic life cycle-based approach was necessary in order to achieve the operational and financial sustainability of their infrastructure. Shortcomings inherent in existing management practices and systems would not provide the necessary information and reporting capabilities to ensure that future compliance with regulatory requirements could be achieved. The Region has therefore proactively moved forward and developed an asset management strategy that provides Regional staff at all levels 4214

9 with the required asset information and meaningful decision-making tools needed to meet requirements under the new and anticipated future legislation. FRAMEWORK FOR DEVELOPMENT OF AN ASSET MANAGEMENT APPROACH Objectives for Development of an Asset Management Strategy In moving forward with the development of an asset management strategy, the Region s key objectives for the initiative had to be established. These included: To determine the Region s specific needs, business processes and information requirements, related to the strategic management of their water and wastewater infrastructure; To establish a vision and a framework for the implementation of a workable and practical asset management strategy to meet these needs. To assess the Region s current asset management practices and business processes and provide recommendations on best management practices and processes related to the new asset management strategy; To assess the current availability of asset data, acceptability of existing data sources and requirements of the ultimate end users of the asset management strategy and related plans; To define additional data, recommended application software, data source and information system integration requirements, particularly with respect to the Region s existing Computer Maintenance Management System (CMMS); To develop an implementation strategy including timing, staff resources and training required, and associated costs; To establish annual investment requirements for maintaining infrastructure sustainability while managing risk, maintaining quality standards and levels of service, minimizing impact on rate payers, and meeting legislated requirements under Bill 175. Key Asset Management Concepts In developing the objectives of the overall asset management strategy, several asset management concepts were considered critical in achieving a successful asset management plan implementation. These included: The importance of having the framework fit the Region; Development of asset management building blocks ; The implementation of a practical, workable asset management approach; 4215

10 The criticality of effective integration of data management systems; The key role of an asset management champion. Considerable work has been undertaken around the world and in Canada (for example, the National Guide to Sustainable Municipal Infrastructure) on the development of municipal asset management practices. It is generally agreed that key elements of an effective strategy include a comprehensive asset inventory, an asset condition assessment, determination of asset and/or facility valuations, and recommendations for required asset maintenance, improvements and replacement together with timing and associated costs. However, since asset management encompasses such a wide range of activities, meaningful asset management activities can range from a simple cleaning of a pumping station to sophisticated predictive modelling of failure rates for the facility s pump motors. No one approach can therefore be construed as an asset management best practice for all municipalities. The primary consideration in implementing the Region s asset management initiative was: what is Durham s understanding of asset management and how does it relate to their particular situation? It was critically important that the strategy be developed and implemented such that it fit the unique decision-making and information needs, user requirements, existing data sources and data availability, current level of technical staff and system sophistication, organizational culture and political environment of the Region. The Region recognized that asset management is part of a continuous performance improvement process. It involves taking a rational, systematic approach to answering the essential questions that form the building blocks for a life cycle based asset management strategy. Effective asset management does not however simply consist of standardized tasks implemented step-by-step, in sequential order, to ultimately achieve a successful asset management program. Rather, key business practices and systems are implemented and integrated to work together and support each other, building upon the knowledge gained from previous experiences, to achieve the Region s overall objectives. These objectives needed to be clearly identified in the Region s asset management strategy to provide the vision and foundation for the strategy development and implementation. It was also understood that not all the key elements of the strategy needed to be fully in place before effective management of Durham s assets was begun. A crucial component of the asset management strategy implementation was that the systems developed be practical and workable, in effect, as simple as possible while still satisfying the information and reporting needs of its users. As discussed above, the system would need to fit its users. Changing of firmly established work practices that are deemed to be effective, in response to the asset management strategy requirements, was therefore avoided. It was recognized that there are effectively no limits to technology currently available (or to be developed in the future) and that far too many situations exist where increasingly sophisticated systems and processes have been implemented but are currently not being used effectively (or at all) simply because the systems are too complicated, do not meet the needs of individual users and/or require too large a time commitment to be maintained. As mentioned above, integration of existing and new information systems and business processes was considered to be an essential element of the Region s asset management strategy implementation. This also included integration of manual systems which, in many cases, based 4216

11 on user needs and experience, were equally as effective as computerized systems. Automation of asset management systems remained however a more complicated issue. The critical importance of experienced human judgement in the asset management decision-making process was fully recognized. The decision to implement a recommended maintenance, improvement and/or replacement activity, for example, a watermain replacement, will be impacted by a number of significant factors, such as experience and knowledge of construction and operations staff with the system, political considerations and growth needs and priorities established in the master plan. All of these factors, due to their complexity, simply could not be automated in an effective asset management decision-making process. Stakeholder buy-in was essential for effective implementation of the asset management strategy. To ensure that the strategy was fully accepted, a champion within the Region organization would be needed to sell the benefits of adopting the strategy to all stakeholders. FIRST STEPS FORWARD FOR THE REGION S STRATEGY DEVELOPMENT The first question facing the Region in moving forward with the development of their asset management strategy was essentially: where do we start? It was therefore determined that a review of existing work already being carried out in other Canadian municipalities would form a good starting point in defining the Region s own strategy. Review of the City of Edmonton Infrastructure Strategy In response to an identified infrastructure gap the difference between the projected cost of infrastructure projects and the capital financing available to pay for them, the City of Edmonton in 1998 initially approved its Infrastructure Strategy in conjunction with its Long Range Financial Plan. The City s continuing efforts have included: The completion of a comprehensive inventory of municipally-owned infrastructure assets; The development of a standard rating system that can be applied across infrastructure classes (i.e. drainage, streets, recreation facilities, information systems) to assess the state and condition of infrastructure assets using three key criteria: physical condition; demand / capacity (the ability of infrastructure assets to meet demand); and functionality (the ability of infrastructure assets to deliver services and meet program needs); Several decision-support tools that will help the City assess critical areas for investment and to better manage its infrastructure assets; The development of a biennial update of the Infrastructure Strategy. The report provides the inventory and state and condition of city infrastructure, and explores potential revenue and strategic management opportunities to address the funding gap. Based on the work already successfully carried out in Edmonton, the Region of Durham held discussions with the City to identify key aspects of their program that could be implemented in 4217

12 Durham. Discussions were also held with various Ontario municipalities as to key features of their asset management strategic approaches. Municipal Infrastructure Investment Planning (MIIP) The Region also joined the Canadian Institute for Research in Construction s Municipal Infrastructure Investment Planning (MIIP) program. The objectives of the program are to identify, evaluate and develop tools, procedures, and practices that will help infrastructure managers make strategic and cost-effective planning and management decisions. The MIIP consortium work is focused on evaluating existing asset management practices. Their work also includes surveying the state of asset management in Canada and identifying existing tools and techniques used to plan, prioritize and schedule maintenance and construction, and comparing, evaluating, and carrying out field trials of those tools and techniques using criteria established by experts in decision support software (DSS). A prototype DSS will be built, tested and validated with the consortium partners. Final deliverables of the 3-year project are expected in Establishment of Asset Management Committee The Region has also established an Asset Management Steering Committee to provide direction, input and feedback into the overall strategy implementation. Because a wide range of Durham staff will be impacted by the development of the Regional asset management strategy, it was crucial that representation on the Committee would be provided from all relevant Departments including the Works Department (Water Supply, Sanitary Sewerage, Transportation, Facilities Management) and Finance (Financial Planning/Utility). The Committee is also playing a key role in clearly identifying from a Region-wide basis, Durham s specific information needs, current availability of asset data, acceptability of existing data sources and requirements of the ultimate end users of the asset management strategy. KEY ASPECTS OF REGION S ASSET MANAGEMENT APPROACH Based on the Region s assessment of best-in-class asset management practices being developed by other Canadian municipalities as well as a review of the Region s own internal requirements, it was determined that the Region s best practice asset management approach for both linear and vertical assets would consist of five major phases, as follows: 1. Development of asset inventories (i.e. what does the Region have?) including key information on asset types and specifications, age, materials, pipe length etc. Comprehensive facility audits would be conducted for vertical assets (including water and wastewater treatment plants, storage facilities and pumping stations etc.). Relevant assets would be tagged; 4218

13 2. Determination of the replacement values for facilities and individual assets based on factors including asset and facility age, capacity, size, diameter, material, location and expected installation method etc.; 3. Condition assessment and application of condition ratings (A, B, C, D, F system for grades ranging from very good to critical as shown in Table 2 below) for all assets based on asset age, visual inspection, maintenance history including availability of spare parts, service conditions, industry-accepted life expectancy and compliance with applicable codes and regulations. Testing and CCTV investigations would be conducted where applicable for watermains and sanitary sewers. A criticality or failure risk impact rating would also be determined for each asset which will allow the Region to establish priorities for improvements based on the potential consequences of no action being taken; Table 2 Region of Durham Asset Condition Rating System Grade Descriptor Factors Soundness Functionality A Very Good Sound As Intended B Good Sound As Intended C D Fair Poor Signs of Deterioration Significant Deterioration F Critical Unsound Lower Than Intended Much Lower Than Intended Not Performing As Intended Maintenance Costs Well Within Normal Level Acceptable But Increasing Exceeding Acceptable Levels & Increasing Significantly Above Normal Levels Costs Unacceptable & Rehabilitation Not Cost Effective Age New Within Mid- Range of Expected Life Later Stage of Expected Life Approaching End of Expected Life Past End of Life 4. Needs assessment and requirements for investment would be developed based on the established condition of the assets, taking into consideration discussions with operations staff. Reinvestment costs would be generated for all assets (over their entire life cycle) based on the requirements for minor maintenance, major maintenance, rehabilitation and replacement; 5. A life cycle investment profile (as shown in Figure 2 for the Oshawa WSP) would be developed that will provide the Region with a forecast of the annual cost of minor maintenance, major maintenance and rehabilitation and replacement required over a 25-year planning horizon for each facility and linear infrastructure asset. 4219

14 Figure 2 Typical Life Cycle Investment Profile $10,000,000 Phase 5 - Annual Minor and Major Maintenance, Rehabilitation and Replacement Costs 25 - Year Planning Horizon (in Constant Year 2005 Dollars) $9,000,000 End of Service Life Replacement Rehabilitation Major Maintenance Minor Maintenance $8,000,000 $7,000,000 Total Projected Minor and Major Maintenance, Rehabilitation and Replacement Costs for Years 2005 to 2030 = $29,352,417 (in Constant Year 2005 Dollars) $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $ Key aspects of the Region s asset management approach include the following: The approach meets all the requirements of new legislation introduced within the Province, particularly Bill 175, the Sustainable Water and Sewage Systems Act. The approach allows the Region to determine the full life cycle cost of providing water and wastewater services, which includes system and facility operating and maintenance costs, infrastructure asset renewal costs and system expansion costs to service new growth. Utilizing the costs established under this approach accordingly will allow the Region to develop a cost recovery plan to pay for the services provided and related infrastructure; The approach establishes annual investment requirements for maintaining infrastructure sustainability while managing risk, maintaining quality standards and levels of service, and minimizing impacts on rate payers; The approach meets the Region s specific needs, both process and information related, and the requirements of the ultimate end users of the asset management strategy; The approach is practical, workable and does not require the implementation of specific, proprietary software. The overall approach is based on professional judgement for 4220

15 evaluation of asset performance and condition and establishment of the corresponding investment requirements; The approach is flexible and allows for a greater level of detail based on priorities established for each facility and/or infrastructure evaluated; The approach allows successive initiatives to build upon the experience gained from previous asset management plans and evaluation studies implemented. ASSET MANAGEMENT PROJECTS IMPLEMENTED Key water and wastewater asset management plan projects implemented to-date include: Asset Evaluation and Facility Forecast for the Duffin Creek WPCP The Study included development of an Asset Evaluation for the Region s 420,000 m 3 /day Duffin Creek WPCP, Odour Control Facility, Boundary Meter Chamber, the YDSS trunk sewer and plant outfall to establish a comprehensive asset inventory, condition assessments, replacement values, and an investment profile indicating annual expenditures required to maintain the facility existing assets in good working order. Development of the Facility Forecast for the Duffin Creek WPCP will serve as a key planning tool to identify recommended capital projects based on flow increases and future regulatory requirements and ensure that major infrastructure renewal projects are adequately coordinated and integrated with respect to technical issues. Asset Management Plans for the Regional Sanitary Sewage Pumping Station (SPS) and Water Supply Booster Pumping Stations (BPS) Detailed field assessments were carried out for 49 SPS and 18 BPS. Asset types were assessed and classified into 8 groups: Siteworks, Structural, Architectural, Process, Mechanical, Electrical, Instrumentation & Control and Life, Health & Safety. Data collected were grouped and catalogued utilizing a non-proprietary MS Access database model developed to provide a comprehensive inventory of all facilities. Asset management plans were developed for each facility based on the asset groups, which included the detailed asset inventories, the asset condition assessments, the asset valuations, and recommendations on maintenance, rehabilitation and renewal activities required. Life-cycle investment profiles were developed for each facility to provide the Region with a forecast of the annual cost of maintenance, rehabilitation and replacement required over a 25-year planning horizon. Asset Evaluation for the Oshawa Water Supply Plant A detailed asset evaluation of the 134,000 m 3 /day Oshawa WSP was carried out as part of the proactive implementation of the asset management strategy and continuing development of an overall asset management plan to ensure the operational and financial sustainability of all water and wastewater infrastructure in the Region. The objectives were to complete a detailed field study and condition assessment of the Oshawa WSP assets and develop a comprehensive asset 4221

16 inventory database (with all assets having been tagged) including all required attribute data. Asset valuations, asset condition assessments, recommendations on maintenance, rehabilitation and renewal activities required and their timing were developed for each facility. Reinvestment plans were also developed for a 25-year planning horizon. A key component of the project was the development of an data integration plan whereby asset management data developed from the study could be merged with equipment maintenance information from the Region s Avantis computerized maintenance management system (CMMS). Watermain Asset Management The Region has developed in-house watermain condition assessment software which utilizes watermain breakage records to assess pipe conditions and rehabilitation requirements. The next step is to develop software to link the database to the Region s water modelling package to allow for ranking and prioritization of the watermain rehabilitation and replacement programs. Sewer Asset Management In 2004, the Region implemented Sewer Management System (SMS) software for management of the Region s sewer inventory and asset data. A CCTV inspection program has been implemented on a 10-year cycle, to establish condition assessments and rehabilitation requirements. RESULTS OF REGION S ASSET MANAGEMENT STRATEGY Key results to-date of the Region s asset management strategy include: 84.1% of the Region s watermains are in very good or good condition; 93.6% of the sanitary sewers are in very good condition. However, the need for a large increase in replacement investment will be required in the future to address sewers in critical or poor condition; Immediate needs identified for critical watermains are $103 million. Immediate needs identified for critical sanitary sewers are $6.6 million; Estimated average annual life cycle investment requirement for watermains and sewers is approximately $40 million. Current annual budget expenditures for replacement and rehabilitation of water and sewer infrastructure are only $11 million. Therefore, a significant investment gap has been identified for linear infrastructure; Based on total replacement value, approximately 96% of the Region s water supply plant infrastructure is in fair or better condition; Based on total replacement value, approximately 65% of the Region s water pollution control plant infrastructure is in fair or better condition; 4222

17 Estimated average annual life cycle investment requirement for water supply plants and water pollution control plants is approximately $27 million. Current annual budget expenditures for replacement and rehabilitation of the Region s water and wastewater plants are $24.9 million. Therefore, a investment gap also exists for the plants, particularly for the water supply plants (many of which are new however) for which the annual replacement and rehabilitation budget is only $100,000. IMPACT OF ASSET MANAGEMENT STRATEGY IMPLEMENTATION Following the implementation of the asset management strategy in 2004, Regional Council established an Asset Management Reserve Fund with the initial contribution equivalent to a 1% increase in water and sewer rates. In the past, it has been a significant challenge for water and wastewater needs to compete for funding with other Regional priorities. Through key findings to-date established through specific initiatives under the Region s asset management strategy, the Joint Finance and Administration and Works Committee in November of 2005 was able to recommend to Regional Council that the Regional water and sewer rates be increased by 2% and 1% respectively in order to provide an additional $2.31 million to the Asset Management Reserve Fund, which will be applied to critical asset deficiencies. The effective implementation of the Region s asset management strategy reflects the Region s proactive efforts to achieve full compliance with the full cost recovery requirements of Bill 175. KEY SUCCESS FACTORS TO ACHIEVING REGIONAL COUNCIL SUPPORT Regional Council and the Finance and Administration and Works Departments are effectively working together to establish needed budgets for investment in the Region s water and wastewater infrastructure. Key success factors to achieving the support of the public and Council include: Effective public information, education and communications to ensure that Regional stakeholders understand and recognize the need for higher levels of investment and the corresponding rate increases; Development of comprehensive technical asset management and financial strategy reports that clearly identify infrastructure needs and establish investment requirements to provide support for Regional Council decision-making; Impending requirements under Bill 175, and other related legislation, acting as a driver to encourage proactive asset management practices; Consistent efforts by Finance and Administration and Works Departments staff to develop a strong working relationship and level of trust with Council. 4223

18 NEXT STEPS The Region s asset management strategy will continue to be an ongoing corporate initiative. Regional Finance and Works Department staff will continue to refine the overall asset management approach (and specific long-term projections of investment needs and costs) through subsequent facility assessment and asset evaluation studies to ensure rehabilitation and development projects are adequately funded. The necessary management tools and processes will continue to be developed to better manage the Region's investment in infrastructure assets. Activities will include the following: Undertake detailed condition assessments of each of the Region s water supply, water storage and water pollution control plants. These assessments will be completed over time on a plant-by-plant basis; Continue to update and verify the linear water and Sewer Management System (SMS) databases; Fill in missing CCTV inspections for sanitary sewers over a 10-year cycle; Initiate a CCTV inspection program for storm sewers over a 10-year cycle; Incorporate maintenance history into the Sewer Management System (SMS); Develop more complex life cycle modelling and risk assessment for infrastructure investments; Utilize the GIS database, inventory information and financial analysis tools to develop a more strategic approach to prioritizing watermain projects; Move forward on completing Regional GIS mapping (Strategic GIS lmplementation Study); Merge asset management findings with annual Business Plans and the Budget process. CONCLUSIONS The Region of Durham has moved forward in anticipation of the release of Regulations under Bill 175, The Sustainable Water and Sewage Systems Act, 2002 and developed an asset management strategy that provides Regional staff with meaningful decision-making tools needed to comply with the new regulatory requirements. Through key findings to-date established through specific initiatives under the Strategy, the Region has been able to implement annual increases to the water and sewer rates as required to ensure the long-term sustainability of the Region s infrastructure assets. Regional asset management strategy will continue to be an ongoing corporate initiative as Regional Finance and Works Department staff continue to refine the overall asset management approach and long-term projections of investment needs and costs through subsequent facility assessment and asset evaluation studies. 4224

19 REFERENCES City of Edmonton Office of Infrastructure (2002) 2002 Update Infrastructure Strategy; City of Edmonton, Alberta, Canada. 4225