City of Hamilton State of the Infrastructure Report Community Services Department
Housing Recreation Culture Long-Term Care Quality-of-Life Infrastructure
April 28, 2009
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Executive Summary and Report Card
Since the late 1990s, the City of Hamilton has been actively engaging in sustainable infrastructure asset management practices. Over this period, the City has built a reputation as a leader in this field. A bold step was taken by the City in 2005: the preparation of a 2005 Lifecycle State of the Infrastructure (SotI) Report for some of the City’s Public Works assets including Community Facilities. This high-level State of the Infrastructure Report was based on limited information that was available at the time. Community Facilities were included as part of Public Works SotI in 2006 without the benefit of the much improved data that is now available. These initiatives were well received by City Council and the City’s peers in North America. Numerous copies of the SotI reports have been distributed as far away as Australia. In 2008, Stantec Consulting Ltd. was retained to produce this Life-Cycle SotI Report for the Community Services Department. The Best Practice for Municipal Infrastructure Asset Management, published in November 2003 by the National Guide to Sustainable Municipal Infrastructure, was used to provide the framework for the asset management plan, along with industry experience and expertise. A series of simple questions were asked in order to perform analysis on a life-cycle basis. These are: 1. What do we have? 2. What is it worth? 3. What condition is it in? 4. What do we need to do to it? 5. When do we need to do it? 6. How much money do we need? 7. How do we reach sustainable funding? The City of Hamilton has, over the last few SotI Reports, added two very important questions: 8. How do we maintain sustainability? 9. Do we still need it? Since service reviews would be done at the tactical and operational levels, question number 9 should follow question number 1. The SotI report employs this framework, which the City has already adopted in its assessment of sustainable water and wastewater financing needs to systematically evaluate each asset
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
category. Best Practices from the US, the United Kingdom, and Australia/New Zealand have also been incorporated into the work. Developed as a communication tool, this report presents study results in an easy-to-understand format that can be updated regularly to track the City’s path toward sustainability. As a strategic document, the report identifies trends and issues that impact the community’s ability to deal with services (and their supporting assets) on a sustainable basis, and provides recommendations aimed at continuing the deployment of asset management practices within the City of Hamilton. Intergenerational Fairness Intergenerational fairness is an emotional issue that comes up every time a government wishes to deal with the backlog in infrastructure funding. There is no easy way to deal with a significant backlog since the backlog belongs, in some cases, to a number of past generations. It could be argued that intergenerational fairness is impossible to achieve; and, in fact, that it may even be unfair to try to achieve it for a number of reasons:
Most assets last longer than one generation or the assets have components that last less than one generation (such as electronic components)
Difficulties in assigning costs properly to one generation
Increasing operating and maintenance costs as assets age
Current shortfall or infrastructure deficit, etc.
Despite these challenges, infrastructure costs need to be dealt with in the most equitable manner possible. There is also a need to recognize that the current situation is not so much an issue of intergenerational fairness as it is as a result of past and current public policies and practices. It is, therefore, paramount to change those policies and practices so that we do not repeat mistakes of the past. This, of course, represents somewhat of a double impact for the current generations, but there is little choice in the matter since, as a society, we are at a crossroad where changes and tough decisions need to be made. The current infrastructure deficit was created by the fact that Life-Cycle costing is a fairly new concept and has not been practiced in the past. Quite the opposite occurred in the past, which has led to municipalities being addicted to growth. Analysis Results While the Community Services Department is comprised of many departments, the specific services provided by the City reviewed as part of this SotI Report are listed below. 1. Housing Analysis of Housing services was performed based on a 100-year timeline to encompass the maximum anticipated lifespan of the various facilities. Future needs were assessed in terms of the following variables:
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
Three different life-cycles for the assets: minimum life, expected life and maximum life
Two funding options: Pay-As-You-Go (PAYG) and Debt-Financing (Debt)
The services provided by Housing that were included in this study were limited to those wholly owned by the City, which comprise approximately 50% of the asset portfolio, totalling 794 facilities. The results discussed in this report concentrate on the expected life of each asset, which is considered to be the number of years that the asset is expected to last with regular usage and proper maintenance. Over the next 100 years, annual capital requirements will grow from $29 million in 2009 to $84 million in 2108 based on the PAYG model and with expected population growth. If using the Debt-Financing option, annual capital requirements will grow from $45 million in 2009 to $128 million in 2108. The results of the analysis are listed in Table E.1 below, which illustrates the difference between the Pay-As-You-Go and Debt-Financing Options. When Debt-Financing is included, the sustainable capital funding levels increase significantly. Since the sustainable capital costs increase from $29 million for PAYG to $45 million for DebtFinancing in 2009, $16 million per year is taken out of the community to pay for interest only. Under the Debt-Financing model, costs per capita would increase from $56 to $86, thus illustrating the true cost of debt. Table E.1: Sustainable Capital Funding Requirements ($Million) 2009 PAYG Debt $29
$45
2034 PAYG Debt $38
$58
Year 2059 PAYG Debt $50
$76
2084 PAYG Debt $65
$99
2108 PAYG Debt $84
$128
2. Recreation Analysis of Recreation services was performed based on a 100-year timeline to encompass the maximum anticipated life spans of the various facilities. Future needs were assessed in terms of the following variables:
Three different life-cycles for the assets: minimum life, expected life and maximum life
Two funding options: Pay-As-You-Go (PAYG) and Debt-Financing (Debt)
The results discussed in this report concentrate on the expected life of each asset, which is considered to be the number of years that the asset is expected to last with regular usage and proper maintenance. If the City were to fund all capital projects on a Pay-As-You-Go plan, then Recreation facilities would require $11 million in capital funding in 2009. If, however, capital funding was generated through Debt-Financing, the sustainable capital funding levels would increase significantly to
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
$17 million in 2009. In other words, approximately $6 million per year would be taken out of the community to pay only for interest. Costs per capita would also increase from $21 to $33; thus illustrating the true cost of debt. These costs are also expected to grow over time. Since the City of Hamilton is a growing community, and in order to maintain the current level of service, the number of assets that need to be provided and maintained must also grow. The result is that, by 2108, the sustainable funding requirements would be $32 million (PAYG) compared to $49 million (Debt). These growth-driven cost increases are illustrated in Table E.2. Note that this increase in costs over time reflects the growth of the community, and as such, the cost per capita would remain constant from one year to the next. Table E.2: Sustainable Capital Funding Requirements ($Million) 2009 PAYG Debt $11
$17
2034 PAYG Debt $15
$22
Year 2059 PAYG Debt $19
$29
2084 PAYG Debt $25
$38
2108 PAYG Debt $32
$49
3. Culture If the City were to fund all capital projects on a PAYG plan, then Culture assets would require $5 million, or $9 per capita, in capital funding in 2009. When Debt-financing is included, the sustainable capital funding levels increase significantly. For example, sustainable capital costs increase from $5 million for Pay-As-You-Go funding to over $7 million for Debt-Financing. In other words, more than $2 million per year is required to pay for interest only. Costs per capita also increase from $9 to $14, thus illustrating the true cost of debt. Unlike many service groups, the growth of the Culture asset portfolio is influenced mostly by societal ideals and unforeseeable cultural events. Since these growth drivers are difficult to project, population growth was applied to the analysis model to provide an estimate of the asset portfolio growth. As a result, the sustainable funding requirements would increase from $5 million (PAYG) or $7 million (Debt) in 2009 to $14 million (PAYG) or $21 million (Debt) by 2108, as further illustrated in Table E.3. Table E.3: Sustainable Capital Funding Requirements ($Million) 2009 PAYG Debt $5
E.4
$7
2034 PAYG Debt $6
$10
Year 2059 PAYG Debt $8
$13
2084 PAYG Debt $11
$16
2108 PAYG Debt $14
$21
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
4. Long-Term Care Long-Term Care facilities are unique among the facilities in this report in that they are generally utilized only by older age groups. With the availability of recent demographic projections from Statistics Canada, Stantec produced a level-of-service (LOS) scenario for Long-Term Care which considers: 1. The aging of Canada’s population - people who require Long-Term Care services tend to be in older age groups; 2. Demand for Long-Term Care services for the segment of the population above the age of 75 is growing faster than the general population; and 3. The result is a more detailed demand model that produces fluctuations in costs as demographics shift. Demand for Long-Term Care services will grow at the same rate or faster than population growth, and the annual cost per capita is not constant from one year to the next. If the City were to fund all capital projects on a Pay-As-You-Go plan, then Long-Term Care facilities would require $1.2 million in capital funding in 2009. When Debt-Financing is included, the sustainable capital funding levels would increase significantly. For example, sustainable costs would increase from $1.2 million for PAYG to $1.9 million for Debt-Financing, as shown in Table E.4. In other words, almost $700,000 per year is allocated for interest only in 2009. Costs per capita also increase from $2 - $5 to $4 - $7, thus illustrating the true cost of debt. The minor variations in the cost per capita for Long-Term Care result from the fact that demand for the service is expected to exceed population growth in the next 50 years, resulting in a gradual increase in cost per capita over this period. When considering the future demand for Long-Term Care services, the sustainable funding requirements would increase from $1.2 million (Demand/PAYG) to $1.9 million (Demand/DebtFinancing) in 2009. By 2108, the sustainable funding requirements would be $6.1 million (Demand/PAYG) compared to $9.4 million (Demand/Debt-Financing). Table E.4: Sustainable Capital Funding Requirements (million) 2009 PAYG Debt
2034 PAYG Debt
Year 2059 PAYG Debt
2084 PAYG Debt
2108 PAYG Debt
Growth
$1.2
$1.9
$1.6
$2.5
$2.1
$3.3
$2.7
$4.2
$3.5
$5.4
Demand
$1.2
$1.9
$2.7
$4.2
$3.7
$5.7
$4.7
$7.3
$6.1
$9.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
Summary The services provided by these departments are generally program-driven, which in turn leads to a greater focus by management on program and service delivery to their clients rather than management of the assets required to provide the service. In other words, these services are much more client-driven than asset-driven. In light of the type of programs and services provided; this is a positive thing and is the right focus. However, there is also a need to implement appropriate asset management practices since hard infrastructure is required to deliver these programs and services in a cost-effective manner and at an expected and desired level of service. The following streetscape graphically represents the summarized 2008 replacement values and costs per capita based on Pay-As-You-Go (PAYG) and Debt-Financing (Debt) options.
Housing 2008 Replacement Value: $782M Annual Cost Per Capita: $56 Debt-Financed: $86
Long Term Care 2008 Replacement Value: $54M Annual Cost Per Capita: $2 - $5 Debt-Financed: $4 - $7
Culture 2008 Replacement Value: $266M Annual Cost Per Capita: $9 Debt Financed: $14 Recreation 2008 Replacement Value: $396M Annual Cost Per Capita: $21 Debt Financed: $33
Figure E.1: Community Services Replacement Values
Table E.5 provides a summary of the per-capita requirements for sustainable capital funding for each department. To provide sustainable funding to the four departments considered in this study, a total capital cost of $88 to $91 per capita, per year would be required. If the city funded all capital expenditures through Debt-Financing, those costs would rise by over 50 percent to $137 to $140 per capita.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
Table E.5: Summary of Costs Per Capita Group
PAYG
DEBT
Housing
$56
$86
Recreation
$21
$33
Culture
$9
$14
$2 - $5
$4 - $7
$88 - $91
$137 - $140
Long-Term Care TOTAL:
The minor variations in the cost per capita for Long-Term Care result from the fact that demand for the service is expected to exceed population growth in the next 50 years, resulting in a gradual increase in cost per capita over this period. If capital expenditures are financed through debt, the sustainable capital funding requirement increases by $25 million to a total of $71 million in 2009. The current capital budget is $12 million. As a result, the current requirements for sustainable funding of $46 million (PAYG) fall short by $34 million. If Debt-Financing is used, the shortfall grows to $59 million, as illustrated in Table E.6. Table E.6: Summary of 2009 Sustainable Capital Funding Requirements ($Million) PAYG
DEBT
Current Capital Budget
Housing
$29
$45
$7
Recreation
$11
$17
$5
Culture
$5
$7
$0
Long-Term Care
$1
$2
$0*
TOTAL:
$46M
$71M
$12M
SHORTFALL:
$34M
$59M
Group
NOTE: LTC current capital budget is approximately $200,000
In order to provide sustainable capital funding to the four departments included in this report, it must be understood that these figures are based on 2008 dollars and do not include any discount rate or inflation. Sustainable funding requirements should increase annually to reflect the growth in facilities required to meet the demands of a growing population. The PAYG sustainable capital funding requirements in 2009 total $46 million and by 2108, sustainable capital requirements exceed $136 million. Table E.7 illustrates the sustainable capital funding requirements over the next 100 years. Values have been provided for Long-Term Care based on growth as well as demand, due to expected increases in population.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
Table E.7: Initial and Final Sustainable Capital Funding Requirements ($Million) PAYG 2009
DEBT 2009
PAYG 2108
DEBT 2108
Housing
$29
$45
$84
$128
Recreation
$11
$17
$32
$49
Culture
$5
$7
$14
$21
Long-Term Care
$1
$2
$6
$9
$46
$71
$136
$207
Group
TOTAL:
Summary Report Card The following report card is a summary of the condition assessment worksheets that were completed by City staff in order to determine the current funding situation within each Division. The Housing Division has a grade of D and the Recreation Division and the Culture Division each receive a grade of D, with the Long-Term Care Division earning a grade of C-. The grades for all of the Divisions are expected to fall by 2020. Based on the grades received for each of the Divisions, the Community Services Department is currently in a less-than-ideal position. While, typically, a grade of A is considered to be more expensive to maintain than is necessary, the City should consider targeting a grade between B and C in order to optimize the return on investment. While Housing and Long-Term Care facilities have received grades of D and C-, respectively, the projected downward trend will cause these grades to deteriorate before 2020, as is expected of the Recreation and the Culture Divisions. Community Services is currently considered to be at a D level but is moving towards level F. Figure E.2 provides a graphic representing the Report Card for the Community Services Department.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
City of Hamilton State of the Infrastructure Report Card 2008 Asset Group
2008 Rating
Comments
Housing
D
Significant deficit in capital funding. Detailed analysis using New Zealand Toolkit to better assess risk and liability.
Recreation
D
Analysis not done for all facilities. Strategic plan required by asset categories, as they are not all at the same level of deterioration and liability. Detailed analysis using New Zealand Toolkit.
Culture
D
Limited asset inventory data. No capital contribution in the budget. Significant deterioration of assets is ongoing.
Long-Term Care Facilities
C-
Projected 2020
Limited asset inventory data. No capital contribution in the budget. Lodges are in relatively new condition. Growth in the number of seniors will be a serious challenge.
Figure E.2: Summary Report Card
Recommendations With this first SotI Report for the Community Services Department, there are enough issues on the table that this is an opportune time to start developing long-term policies and implementation plans in a rational and strategic way. This will require some tough decisions to be made, both at the service level and the asset level. However, the current situation is clearly unsustainable over the long term and if the funding is unsustainable, then the service is unsustainable. The first priority is to “Stop the Slide”; too often new assets are received by the municipality either at no cost (such as those from developers or built through development charges) or at a fraction of the actual construction cost (such as those subsidized by grants or cost-sharing programs). These assets are not free or cheap, but in fact are the gifts that keep on taking. There is a need to develop budget management models that take into account the City’s physical and population growth and its associated impact on services and assets on an annual basis. These new funds would go to increase operating and capital funding to reserves for future upgrading, rehabilitation and replacement of the asset. This policy also should apply to assets that have just been replaced to ensure that sustainable funding is in place for the future.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Executive Summary May 7, 2009
With those introductory notes in mind, the following recommendations are being made, as a whole, to the Community Services Department for priority consideration in 2009: 1. Implement a policy of annual funding increases for new assets 2. Proceed with a condition assessment survey of Housing assets as a priority 3. Develop and implement an analytical model that incorporates alternatives, levels of service, risk management, project ranking, etc. to assist in the development of the tenyear Capital budget 4. Develop options with respect to closing the gap in terms of capital budget financing for all Divisions over the next five to ten years, assess impact of further delays and present report to City Council for their approval 5. Develop performance measures/Level of Service at the strategic, tactical and operational levels, and establish links between a service and the true life-cycle cost of delivering that service through appropriate assets 6. Review existing budgetary documents and budget structure with a view to establishing the True Cost of Service (TCS) which include asset management, operations, capital and borrowing costs and can measure their progress towards sustainable funding A complete summary of recommendations can be found in Appendix A.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Acknowledgements Report Authored by Stantec Consulting Ltd. and Infrastructure Dynamix Inc. © January 2009. Stantec would like to thank the City’s Community Facilities team for its contribution to this State of the Infrastructure Report. We apologize in advance for any inadvertent omissions. In particular, we note the following major contributors: The following City of Hamilton staff provided information and support in the completion of this document.
Joe-Anne Priel, General Manager of Community Services Gerry Davis, Director of Capital Planning and Implementation Rick Andoga, Senior Project Manager, Infrastructure Planning Joyce Boyd, Administrative Assistant (acting), Culture Division Anna Bradford, Director of Culture Carl Capuano, Project Manager, Facilities, Parks / Infrastructure Sandra Denman, Director of Building Services Rick Dube, Housing, Contract Administrator (Operations) Deborah Filice, Manager of Operations in the Housing Division Matthew Hall, Director of Building Services, Macassa Lodge Ian Kerr-Wilson, Manager of Museums and Heritage Presentation Diane LaPointe-Kay, Director of Recreation Brian Lodewyks, Housing and Long-Term Care, Contract Administrator Ann Moffatt, Administrative Assistant Chris Murray, Director of Housing John Murray, Manager of Asset Management Services Debbie Myers, Executive Director, Hamilton-Wentworth Catholic Child Care Centres Coralee Secore, Area Recreation Manager Christie Wiggers, Project Manager, Infrastructure Management Systems Vicki Woodcox, Senior Director, Program Delivery Hank Wroblewski, Facility Supervisor, Heritage Buildings, Culture Division
Project Team Rick Andoga (905)546-2424
[email protected]
George Kraehling (519)585-7330
[email protected]
Debbie Burns (905)381-3244
[email protected]
John Murray (905)546-2424
[email protected]
Andy Dalziel (519)585-7484
[email protected]
Thor Neumann (519)585-7414
[email protected]
Leo Gohier (905)574-6428
[email protected]
John Vraets (905)381-3202
[email protected]
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Table of Contents EXECUTIVE SUMMARY AND REPORT CARD ...................................................................... E.1 ACKNOWLEDGEMENTS .............................................................................................................i 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 1.15 1.16 2.0 2.1
2.2 2.3 2.4
BASIC PRINCIPLES AND APPROACH .......................................................................1.1 INTRODUCTION............................................................................................................1.1 OVERALL APPROACH .................................................................................................1.1 1.2.1 Implementing Asset Management in the Community Services Department ...1.1 BACKGROUND AND CORE DOCUMENTS .................................................................1.3 SCOPE FACILITIES INCLUDED ...................................................................................1.4 TASKS AND ACTIVITIES ..............................................................................................1.5 GLOSSARY OF TERMS ................................................................................................1.7 BACKGROUND TO SUSTAINABLE BUDGETS .........................................................1.10 RATING SYSTEM ........................................................................................................1.11 DETERIORATION MODELS AND ASSUMPTIONS....................................................1.14 TRUE COST OF GROWTH/SYSTEM EXPANSION/NEW DEVELOPMENT..............1.16 LIFE-CYCLE ANALYSIS: GENERAL APPROACH/ASSUMPTIONS ..........................1.16 1.11.1 Factors Affecting Demand .............................................................................1.16 TOTAL COST OF SERVICE (TCS) .............................................................................1.18 RELATED ISSUES FOR FUTURE POLICY DEVELOPMENT ....................................1.18 INTERGENERATIONAL FAIRNESS ...........................................................................1.19 CITY ENERGY USE POLICY ......................................................................................1.22 CONCLUSION .............................................................................................................1.23 HOUSING ......................................................................................................................2.1 ASSET DESCRIPTION ..................................................................................................2.1 2.1.1 Facilities...........................................................................................................2.1 2.1.2 Components ....................................................................................................2.2 SERVICES PROVIDED/PURPOSE OF ASSETS..........................................................2.2 INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS ....................................................2.3 LIFE-CYCLE ANALYSIS................................................................................................2.3 2.4.1 Introduction and List of 9 Questions ................................................................2.3 2.4.2 What do you have? - Assets (Groups, Types, Components, Hierarchy).........2.4 2.4.3 What is it worth? ..............................................................................................2.5 2.4.4 What condition is it in? - Age and condition profiles ........................................2.5 2.4.5 When do we need to do it? - Asset Useful Lives ...........................................2.10 2.4.6 What do we need to do to it? - Rehabilitation and Replacement...................2.10 2.4.7 How much money do we need? - Capital Costs/Rehabilitation and Renewal..................................................................................................2.12 2.4.8 Summary of the Financial Analysis Results ..................................................2.17 2.4.9 How do we reach sustainable funding?.........................................................2.21 2.4.10 How do we maintain sustainability?...............................................................2.21 2.4.11 Do we still need it? ........................................................................................2.21
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Table of Contents May 7, 2009
2.5 2.6
2.7
2.8 3.0 3.1
3.2 3.3 3.4
3.5 3.6
3.7
3.8
KEY PERFORMANCE INDICATORS ..........................................................................2.22 IMPROVEMENT PROGRAM .......................................................................................2.22 2.6.1 Asset Management Process Improvements..................................................2.22 2.6.2 Asset Management Information System Improvements................................2.23 2.6.3 Asset Management Data and Knowledge Improvements .............................2.24 2.6.4 Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management...........................................................................................2.24 2.6.5 Life-Cycle Analysis and Integration with Financial Tools...............................2.24 CITY ENERGY USE POLICY ......................................................................................2.25 2.7.1 Mechanical & Structural.................................................................................2.25 2.7.2 Electrical ........................................................................................................2.25 RECOMMENDATIONS ................................................................................................2.25 RECREATION ...............................................................................................................3.1 ASSET DESCRIPTION ..................................................................................................3.1 3.1.1 Facilities...........................................................................................................3.1 3.1.2 Components ....................................................................................................3.2 SERVICES PROVIDED/PURPOSE OF ASSETS..........................................................3.2 INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS ....................................................3.3 LIFE-CYCLE ANALYSIS................................................................................................3.4 3.4.1 Introduction and List of 9 Questions ................................................................3.4 3.4.2 What do we have? - Assets (Groups, Types, Components, Hierarchy) ..........3.4 3.4.3 What is it worth? ..............................................................................................3.4 3.4.4 What Condition is it in? - Age and Condition Profiles ......................................3.5 3.4.5 When do we need to do it? - Asset Useful Lives ...........................................3.15 3.4.6 What do we need to do to it? - Rehabilitation and Replacement...................3.18 3.4.7 How much money do we need? - Capital Costs/Rehabilitation and Renewal.................................................................................................3.19 3.4.8 Summary of the Financial Analysis Results ..................................................3.25 3.4.9 How do we reach sustainable funding?.........................................................3.29 3.4.10 How do we maintain sustainability?...............................................................3.29 3.4.11 Do we still need it? ........................................................................................3.29 KEY PERFORMANCE INDICATORS ..........................................................................3.30 IMPROVEMENT PROGRAM .......................................................................................3.30 3.6.1 Asset Management Process Improvements..................................................3.30 3.6.2 Asset Management Information System Improvements................................3.31 3.6.3 Asset Management Data and Knowledge Improvements .............................3.32 3.6.4 Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management...........................................................................................3.32 3.6.5 Life-Cycle Analysis and Integration with Financial Tools...............................3.32 CITY ENERGY USE POLICY ......................................................................................3.33 3.7.1 Mechanical ....................................................................................................3.33 3.7.2 Electrical ........................................................................................................3.33 RECOMMENDATIONS ................................................................................................3.34 3.8.1 2008 SotI .......................................................................................................3.34 3.8.2 2006 SotI .......................................................................................................3.35
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Table of Contents May 7, 2009
3.8.3 4.0 4.1 4.2 4.3 4.4
4.5 4.6
4.7
4.8 5.0 5.1
5.2 5.3 5.4
iv
2005 SotI .......................................................................................................3.36
CULTURE ......................................................................................................................4.1 ASSET DESCRIPTION ..................................................................................................4.1 SERVICES PROVIDED/PURPOSE OF ASSETS..........................................................4.2 INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS ....................................................4.2 LIFE-CYCLE ANALYSIS................................................................................................4.2 4.4.1 Introduction and list of 9 questions ..................................................................4.2 4.4.2 What do we have? - Assets (Groups, Types, Components, Hierarchy) ..........4.3 4.4.3 What is it worth? ..............................................................................................4.3 4.4.4 What condition is it in? - Age and Condition Profiles.......................................4.4 4.4.5 When do we need to do it? - Asset Useful Lives .............................................4.6 4.4.6 What do we need to do to it? - Rehabilitation and Replacement.....................4.6 4.4.7 How much money do we need? - Capital Costs/Rehabilitation and Renewal....................................................................................................4.6 4.4.8 Summary of the Financial Analysis Results ..................................................4.11 4.4.9 How do we reach sustainable funding?.........................................................4.14 4.4.10 How do we maintain sustainability?...............................................................4.14 4.4.11 Do we still need it? ........................................................................................4.15 KEY PERFORMANCE INDICATORS ..........................................................................4.15 IMPROVEMENT PROGRAM .......................................................................................4.15 4.6.1 Asset Management Process Improvements..................................................4.15 4.6.2 Asset Management Information System Improvements................................4.16 4.6.3 Asset Management Data and Knowledge Improvements .............................4.16 4.6.4 Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management...........................................................................................4.17 4.6.5 Life-Cycle Analysis and Integration with Financial Tools...............................4.17 CITY ENERGY USE POLICY ......................................................................................4.17 4.7.1 Mechanical ....................................................................................................4.17 4.7.2 Electrical ........................................................................................................4.18 RECOMMENDATIONS ................................................................................................4.18 LONG-TERM CARE FACILITIES..................................................................................5.1 ASSET DESCRIPTION ..................................................................................................5.1 5.1.1 Facilities...........................................................................................................5.1 5.1.2 Components ....................................................................................................5.1 SERVICES PROVIDED/PURPOSE OF ASSETS..........................................................5.2 INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS ....................................................5.2 LIFE-CYCLE ANALYSIS................................................................................................5.3 5.4.1 Introduction and List of 9 Questions ................................................................5.3 5.4.2 What do we have? - Assets (Groups, Types, Components, Hierarchy) ..........5.3 5.4.3 What is it worth? ..............................................................................................5.3 5.4.4 What condition is it in? - Age and Condition Profiles.......................................5.4 5.4.5 When do we need to do it? - Asset Useful Lives .............................................5.7 5.4.6 What do we need to do to it? - Rehabilitation and Replacement.....................5.7 5.4.7 How much money do we need? - Capital Costs/Rehabilitation and Renewal.5.8
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Table of Contents May 7, 2009
5.5 5.6
5.7
5.8 6.0 6.1
5.4.8 Summary of the Financial Analysis Results ..................................................5.16 5.4.9 How do we reach sustainable funding?.........................................................5.21 5.4.10 How do we maintain sustainability?...............................................................5.21 5.4.11 Do we still need it? ........................................................................................5.21 KEY PERFORMANCE INDICATORS ..........................................................................5.21 IMPROVEMENT PROGRAM .......................................................................................5.22 5.6.1 Asset Management Process Improvements..................................................5.22 5.6.2 Asset Management Information System Improvements................................5.22 5.6.3 Asset Management Data and Knowledge Improvements .............................5.23 5.6.4 Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management...........................................................................................5.24 5.6.5 Life-Cycle Analysis and Integration with Financial Tools...............................5.24 CITY ENERGY USE POLICY ......................................................................................5.24 5.7.1 Mechanical ....................................................................................................5.24 5.7.2 Electrical ........................................................................................................5.25 RECOMMENDATIONS ................................................................................................5.25 SUMMARY.....................................................................................................................6.1 SUMMARY OF ANALYSIS RESULTS...........................................................................6.1 6.1.1 Summary Report Card.....................................................................................6.3
APPENDICES APPENDIX A: SUMMARY OF RECOMMENDATIONS APPENDIX B: USE, RENOVATION AND REPLACEMENT STUDY FOR HAMILTON RECREATION AND PUBLIC-USE FACILITIES APPENDIX C: NEW ZEALAND ASSESSMENT TOOL (EXCERPT FROM NAMS PROPERTY MANUAL) APPENDIX D: VENICE CHARTER FOR CONSERVATION AND RESTORATION OF MONUMENTS AND SITES, AND OTHER HERITAGE CHARTERS AND STANDARDS APPENDIX E: ASBESTOS SURVEY FOR CITY HOUSING HAMILTON APPENDIX F: CITY OF HAMILTON CORPORATE ENERGY POLICY APPENDIX G: CITY HOUSING HAMILTON 25-YEAR PLAN (REPORT #05032) APPENDIX H: KEYS TO THE HOME, A HOUSING STRATEGY FOR HAMILTON, CITY OF HAMILTON OCTOBER 2004 APPENDIX I: SHERMAN-DERGIS FORMULA APPENDIX J: DEBT FINANCING AND TRUE COST OF CAPITAL: IMPACT ON THE TAXPAYER AND ON LONG-TERM SUSTAINABILITY OF INFRASTRUCTURE APPENDIX K: ONTARIO HEALTH COALITION, SUBMISSION TO THE FACILITATOR, SHIRLEE SHARKEY, REVIEW OF STAFFING AND CARE STANDARDS FOR LONG-TERM CARE HOMES APPENDIX L: LISTING OF ALL ASSETS ANALYZED FOR THIS REPORT
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
1.0
Basic Principles and Approach
1.1
INTRODUCTION
Since the late 1990s, the City of Hamilton (City) has been actively engaging in sustainable infrastructure asset management practices. Over this period, the City has built a reputation as a leader in this field. A bold step was taken by the City in 2005: the preparation of a 2005 LifeCycle State of the Infrastructure (SotI) Report for some of the City’s Public Works assets (Water, Wastewater, Stormwater, Roads, Waste Management, Facilities and Open Spaces, Transit, and Fleet Services). This initiative was well received by City Council and the City’s peers in North America. Numerous copies of the SotI report have been distributed as far away as Australia. Stantec Consulting Ltd. (Stantec) has been retained to produce this Life-Cycle SotI Report for the Community Services Department. 1.2
OVERALL APPROACH
1.2.1
Implementing Asset Management in the Community Services Department
The services provided by the City, reviewed as part of this SotI Report, include:
Housing (specifically City Housing Hamilton)
Recreation
Culture
Long-Term Care
These services are all offered by the Community Services Department and have some characteristics that are inherently different from services provided through the Public Works linear assets such as roads and sewers. These services are targeted to specific clients; unlike traditional linear assets, which provide services to the community as a whole. As a result, they are generally program-driven, which in turn leads to a greater focus by management on program and service delivery to their clients, rather than management of the assets required to provide the service. In other words, these services are much more client-driven than assetdriven. In light of the type of programs and services provided, this is a positive thing and is the right focus. However, there is also a need to implement appropriate asset management practices, since hard infrastructure is required to deliver these programs and services in a costeffective manner and at an expected and desired level of service. The literature on asset management, from the Canadian InfraGuide to the Australian and New Zealand Manuals, suggests that there are basically three stages of asset management development: strategic, tactical, and operational. The same holds true for program and service delivery. Although there is no hard delineation between the stages, Figure 1.1 illustrates conceptually where some of the more common initiatives fit with respect to these three stages.
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1.1
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Where Does It Fit? Policies
Strategic
State of the Infrastructure Reports
Programs
Tactical
Level of Service
Projects & Budgets
Operational
Benchmarking
Figure 1.1: Three Stages of Asset Management Development
By complementing the bottom-up approach with a “top-down” approach, the asset manager can significantly accelerate the development of a full service management plan, from technical and financial to communication. This can be achieved through the development of State of the Infrastructure Reports and associated Report Cards as a building block, which in this case provides a strong link to the service side. This approach does not replace the bottom-up approach but is in fact complementary to it and essential in its own right. For example, the Monteith Brown Report on Use of Facilities (Appendix B) is at the operational/tactical level and was referred to in the process of producing this SotI Report. The approach of this SotI report is therefore a high-level and forward-looking document that clearly spells out the true cost of a service, the future pressure points (service, asset and financial), the associated funding gap, and the steps that need to be taken to close that gap. SotI Reports are easily updatable, need to be updated on a regular basis, and are uniquely based on life-cycles. SotI Reports are also an essential component in developing and implementing a service and asset management culture in an organization as well as facilitating dialogue that will be so critical in the coming decades as service and infrastructure challenges really come to bear. They need to be written in plain English, with a view of being a communication tool rather than a technical or financial report. It is important to recognize that the audience is different from that of benchmarking: the audience is external, and communication is aimed at the other stakeholders in the community, i.e. elected officials and the recipients of these programs and services. As illustrated in Figure 1.2, assets should only exist to provide a service. Furthermore, as a result of their inherent “hard” structure, once assets are built they can easily restrict service delivery in terms of flexibility should service or service levels be required to change. Service Management, through proper asset management, is a cultural issue to be supported by a structure or process. Successful implementation depends on developing this state of mind since everyone needs to develop into a formal or informal asset manager, not just people working in a particular section or Division. This SotI Report will assist the Community Services Department in implementing that process.
1.2
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
C
Asset
Asset
Asset
straints on
Service
Figure 1.2: Assets/Service Relationship 1.3
BACKGROUND AND CORE DOCUMENTS
The principles used in completing this study were taken from various and extensive Best Practice publications from around the world, including:
Monteith Brown Use, Renovation and Replacement Study for Hamilton Recreation and Public-Use Facilities (Appendix B)
The National Guide for Sustainable Municipal Infrastructure (Canada)
The International Infrastructure Management Manual (Australia / New Zealand)
The NAMS Property Manual (New-Zealand) (Excerpt from the manual can be found in Appendix C)
Various ASCE Manuals of Practice for infrastructure assessment and rehabilitation (USA)
2006 RSMeans Square Foot Costs 27th Annual Edition Residential, Commercial, Industrial, Institutional
Venice Charter for Conservation and Restoration of Monuments and Sites, And Other Heritage Charters and Standards (Appendix D)
Asbestos Survey for City Housing Hamilton (Appendix E)
City ReCAPP databases, where available
City of Hamilton Corporate Energy Policy (Appendix F)
25-Year Capital Plan, City Housing Hamilton (Report #05032) (Appendix G)
Keys to the Home, A Housing Strategy for Hamilton, City of Hamilton October 2004 (Appendix H)
The City of Hamilton’s Corporate Vision and Mission Statement were also included in the considerations for this study, and are listed below.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Vision To be the best place in Canada to raise a child, promote innovation, engage citizens and provide diverse economic opportunities. Mission Statement We provide high quality services in a fiscally and socially responsible, environmentally sustainable and compassionate manner in order to ensure a healthy, safe and prosperous community. We engage our citizens and promote a fair, diverse and accepting community. We are a skilled, knowledgeable, collaborative and respectful organization that thrives on innovation and quality customer service. We are led by a forward thinking Council. The team (staff) shows leadership in carrying out their responsibilities and is valued and appreciated for their contributions and accomplishments. Values Honesty; Accountability; Innovation; Leadership; Respect; Excellence; Teamwork. 1.4
SCOPE FACILITIES INCLUDED
While the City of Hamilton is comprised of many departments, this SotI report focused on the services provided by the Community Services Department. These included City Housing Hamilton (Housing), Recreation, Culture, and Long-Term Care as illustrated in Figure 1.3 below.
City of Hamilton
Corporate Services
Emergency Services
Planning & Economic Development
Housing
Community Services
Recreation
Public Works
Culture
Hamilton Public Library
HECFI
Long-Term Care
Figure 1.3: Asset Managing Groups in the City of Hamilton
1.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
It is important to note that the Housing Division staff oversee all social housing providers in the City including City Housing Hamilton and that City Housing Hamilton operates and maintains approximately 45% of all social housing in the City. 1.5
TASKS AND ACTIVITIES
The tasks and activities for the SotI Report 2008 on Community Services were as follows: Task 1 – Information and Data Gathering Task 1 was the review and update of the applicable sections of the 2006 SotI, as well as the initial interview process between the City and Stantec staff. The interview process identified, at a high-level, the current condition of the asset network based on the City's databases. It was also the means of identifying the source of all asset inventory data and provided the specific information to be used in identifying the current and future funding levels. The following activities were part of Task 1:
Attend kick-off meeting
Review existing reports
Interview key staff from each asset class to answer the questions contained within the Asset Management framework
Review industry standards for asset life projections/deterioration with City Staff, and determine and document any local impact based on staff knowledge
Identify and collect all data sources for Asset Inventory and Condition, Rehabilitation/Replacement Activities and Unit Costs, as well as any revenue information
Summarize information and report back to the City
Task 2 – Condition Analysis The condition analysis task involved the systematic review of known and assumed data. The input to this process was all the hard data gathered and confirmed in Task 1. The output from this process was a final needs analysis for assets within the scope of work. The following activities were part of Task 2:
Load data into analysis tool and review data for irregular records
Execute analysis using assets' life expectancies to determine rehabilitation/replacement time lines
Utilize probability distribution to identify early and late rehabilitation/replacement time lines
Document methods used to populate data and run the analysis
Document calculations utilized within the analysis
Present the results from the analysis
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1.5
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Task 3 – Risk Analysis and Environmental Considerations The risk analysis task involved determining those areas that traditionally merit more detailed analysis in terms of level of service, consequence of failure, and economic exposure. It also utilized the results of the Condition Analysis to assist in determining those areas that are more at risk and/or would provide beneficial returns on investment such as energy consumption. The final report identifies where additional focus may be desirable. The following activities were part of Task 3:
Identify risk parameters to be considered
Utilize risk analysis results to recommend areas where more detailed analysis is required in the future, or where investments may be appropriate from a business perspective (e.g. energy conservation)
Task 4 – Financial Analysis The financial analysis determined a range of sustainable revenue requirements for capital expenditures, as well as Reserve Funding. It utilized the results of the Condition Analysis to further identify potential peaks and valleys in terms of expenditures for each class of service/facility. A funding gap report was produced to identify where funding exceeds, or fails to meet, sustainable funding requirements. The following activities were part of Task 4:
Identify current revenue and reserve funds
Identify current sources of revenue and assess the stability of that funding
Identify and analyze current levels of expenditures, both in the capital and operating budgets
Utilize condition analysis results to determine levels of future investment requirements and associated timing of expenditures
Determine and report on the financial gap
Task 5 – Report and Targeted Recommendations This final task provided the final deliverable to the City, and included the delivery of the Summary and Detailed reports, and the presentation to staff, as well as to the Departmental Management Team. The following activities were part of Task 5:
1.6
Develop a "Report Card" on all Assets to provide a high-level summary of the current state of the City's community assets, as well as areas of risk and projected trends for the future
Develop a detailed report that includes compiled information from the interviews, condition analysis, financial analysis, and final assessment of the City's community facilities
Prepare recommendations on administration processes for managing assets
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
1.6
Prepare PowerPoint presentation material for review and acceptance by the City's Project Staff
Deliver presentations to City Staff and the Departmental Management Team GLOSSARY OF TERMS
The following definitions are excerpts from various InfraGuide Best Practices that were developed or adopted as part of the National Guide to Sustainable Municipal Infrastructure, as well as from other sources. These definitions were used in this Life-Cycle State of the Infrastructure Report on the Community Services Department assets. Assessment — the process used to describe the condition and/or performance of a system component. Asset — A physical component of a facility, which has value, enables services to be provided and has an economic life greater than 12 months. Dynamic assets have some moving parts, while passive assets have none. Asset management (source: Transportation Association of Canada, 1999) — The combination of management, financial, economic, engineering, and operational and other practices applied to physical assets with the objective of providing the required level of service in the most cost-effective manner. This is the systematic process of maintaining, upgrading and operating physical assets effectively, combining engineering principles with sound business practice and economic theory, providing tools to facilitate a more organized, logical approach to decision making. Asset management plan — A plan developed for the management of one or more infrastructure assets that combines multidisciplinary management techniques (including technical and financial) over the Life-cycle of the asset in the most cost effective manner to provide a specified level of service. A significant component of the plan is a long-term cash flow projection for the activities. Asset management strategy — A strategy for asset management covering the development and implementation of plans and programs for asset creation, operation, maintenance, rehabilitation/replacement, disposal, and performance monitoring to ensure that the desired levels of service and other operational objectives are achieved at optimum cost. Benchmarking — measuring performance against a standard of quality (industry sector or technical standard). Best practices — State-of-the-art methodologies and technologies for municipal infrastructure planning, design, construction, management, assessment, maintenance and rehabilitation that consider local economic, environmental and social factors. Capital — Up-front costs associated with building new infrastructure and investment that extends the life of current infrastructure.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Evaluation — the process used (following completion of the assessment) to determine the remedial measures necessary to improve the condition and/or performance of a system component at the best value for the community. Infrastructure — the term as used in InfraGuide refers to roads and sidewalks, potable water, wastewater, storm water, and transit. Other infrastructure was considered for purposes of the Life-Cycle State of the Infrastructure Reports for Public Works Assets, City of Hamilton, including but not limited to: community facilities, recreational facilities, Long-Term Care facilities, cultural facilities, as well as stormwater, waste management, facilities, open spaces, transit, fleet, cemeteries, urban forest, etc. for other SotI Reports. Indicator — at its simplest, an indicator is data that identify the condition or state of something being measured. There is a hierarchy of indicators that roughly mirrors the organizational decision-making structure of municipalities. As indicators are aggregated and massaged, they usually combine with related data to form higher levels of indicators, moving from the specific (operational) to more abstract (strategic). Levels of Service — Levels of service reflect social, technical and economic goals of the community and may include any of the following parameters: safety, customer satisfaction, quality, quantity, capacity, reliability, responsiveness, environmental acceptability, cost and availability. The defined levels of service comprise any combination of the above parameters deemed important by the municipality Life-Cycle Asset Management/Total Asset Management — a tool consisting of an inventory of assets, and the ability to track the performance and projected needs of those assets based on Life-Cycle maintenance and care activities and their associated costs during the expected life of an asset, typically computerized. Life-Cycle Costing — a method of expressing cost, in which both capital costs and operations and maintenance costs are considered, to compare alternatives. “Present worth” is one way to express Life-Cycle costs. The present worth represents the current investment that would have to be made at a specific discount (or interest) rate to pay for the initial and future cost of the works. Maintenance — activities of a local nature that occasionally or regularly are needed to ensure the asset performs its intended function. This expenditure is for the ongoing upkeep of assets and includes inspections, mowing, and grading. Building and facility maintenance can be further classified into the following four categories.
1.8
Backlog - this includes both statutory and non-statutory expenditure on maintenance works previously uncompleted for reasons such as a lack of suitable funds and changes to legislation.
Scheduled - preventive, programmed or predicted maintenance with a scheduled cycle of less than one year.
Breakdown - unplanned or reactive maintenance on activities related to the immediate upkeep of assets, and includes safety repairs.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Cyclic - periodic maintenance of a cyclic nature with the cycle period being greater than one year but less than the capital renewal cycle. Examples include painting and carpet replacement.
Municipal Manager — any public or private sector staff working on behalf of a municipality or public utility at the technical or administrative level, either directly or in a consulting capacity (also called decision maker). Operational — this expenditure is the expected outlay on normal business operations or activities, and includes rates, electricity costs, cleaning, security, and fuel costs. Some operating costs are shared with or paid by other units or sections through their own operating budgets. Performance Measure — a performance measure is an attempt to quantify the success of a best practice in achieving its intended goals or objectives. In the context of municipal infrastructure decision-making support, a performance measure assesses the condition and quality of infrastructure. It can also assess the effectiveness of a particular decision-making process. Rehabilitation — Works to rebuild or replace parts or components of an asset, to restore it to a required functional condition and extend its life, which may incorporate some modification. Generally involves repairing the asset to deliver its original level of service without resorting to significant upgrading or renewal, using available techniques and standards. Reinvestment — Funds allocated to capital projects that are rebuilding the existing municipal infrastructure asset base. New capacities and operations are excluded from infrastructure reinvestment decisions. Renewal — Restoring or upgrading the condition or capacity of an asset by rehabilitation or replacement/reconstruction to satisfy the objectives for structural and functional integrity, and hydraulic adequacy. Replacement — the complete replacement of an asset that has reached the end of its service life, to provide an alternative that satisfies a targeted level of service. Senior Government — Provincial, state or federal levels of government. Service Life — There are basically three types of “lives” to be considered when analysing and making decisions about assets; physical, useful and economic life.
The physical life of an asset reflects the actual projected life of an asset based strictly on its estimated physical deterioration.
The useful life of an asset reflects the projected life of an asset based on the amount of time that the asset is required to provide a service and the provision of that service to an acceptable level of service.
The economic life of an asset reflects the period when the present worth of the future maintenance costs is equal to the present worth of its replacement, at which time it makes economic sense for the asset to be replaced if the service is still required.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
1.7
BACKGROUND TO SUSTAINABLE BUDGETS
While it is obviously impossible to collect data on the future, it is possible to project what some of the potential issues might be. If assumptions are reasonable, then it is safe to assume that resulting projections will also be reasonable. That is the basic premise of the State of the Infrastructure Reports: reasonableness, not accuracy. What the State of Infrastructure (SotI) Reports are:
A revenue plan
Long-term and strategic
Service based
Life-Cycle based
Basis of a communication tool
Easily updatable
State of Infrastructure Reports (SotI) are NOT:
A budget
Short-term/tactical
Project specific
In other words, SotI Reports: 1. Identify trends and issues, not specific solutions 2. Represent a non-traditional top-down approach or a “skunkworks” approach to identify trends and potential issues in the future, not a traditional detailed financial exercise 3. Represent base principles of sustainability and Life-Cycle, not fixed-term budgeting 4. Establish estimated revenue requirements. They are not expenditure budgets but revenue projections, although they are based on reasonable projections and timeliness of expenditures The SotI Reports also suggest that there is a need: 1. To differentiate between the initial construction of an asset and its replacement when developing financial reinvestment policies; and 2. To possibly develop a variety of reinvestment policies depending on whether an asset is operationally- or capital-cost intensive, and whether it has a long or short useful life.
1.10
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
The reader is referred to the appendices within this Report for a more detailed discussion on infrastructure financing considerations in developing appropriate infrastructure reinvestment policies. 1.8
RATING SYSTEM
Since it is unrealistic to scientifically rate every asset for a high-level SotI Report, a modified American Society of Civil Engineers (ASCE) alphanumeric system was employed for each asset component grouping. Service managers were interviewed and asked to evaluate their assets on a simplified component-by-component basis. Although every rating system is subjective, this process improved accuracy since it incorporated the anecdotal knowledge of the managers with respect to their assets. As a result, uncertainty-based inaccuracies tended to balance one another out. The assets (by individual components) were rated using a four-step process in order to ensure consistency, focus, and detail: 1. The first step was an overall rating of the assets’ current physical condition. A simple illustrative deterioration curve was used for this process, and the overall physical condition of the asset was noted and displayed on this curve. 2. The second step was a more detailed rating of the current condition in order to start understanding the makeup of the overall rating and identifying what the potential problems the managers were facing. 3. The third step was to combine the detailed rating into a single blended rating that represented the overall score of that component, and then totaled into an overall score for the asset class for purposes of the SotI Report Card. 4. Finally, the fourth step involved generating a projected asset rating for 2020. This consisted of using a simple arrow system in order to indicate trends, i.e. improving, status quo or deteriorating. The following detailed process was used for each step:
Service managers were asked to rate the current physical condition of their assets by putting a numerical value to this simplified deterioration curve: 1 being in excellent condition stage where deterioration begins, 2 being average but on the way to rapid deterioration, and 3 having failed.
Condition
Step 1: Overall Rating of Current Physical Condition Only 1 2
3 Time
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Step 2: Detailed Rating of Current Condition Assets were evaluated based on the following criteria. Completed tables are included in the individual chapters for those individual assets.
Detailed Rating (A, B, C, D or F) Condition & Performance
Condition and Performance
Capacity versus Need
Funding versus Need
Capacity vs. Need Funding vs. Need
Condition and Performance: This first criterion characterizes the current physical condition of infrastructure. The condition index scale below was provided as a general guideline for grading under this category. A = Excellent: No noticeable defects. Some aging or wear may be visible. B = Good: Only minor deterioration or defects are evident. C = Fair: Some deterioration or defects evident, but function not significantly affected. D = Poor: Serious deterioration in at least some portion of the structure. Function is inadequate. F = Failed: No longer functional. General failure or complete failure of a major structural component. Capacity versus Need: For most infrastructure categories, this second criterion relates to the demand on a system, such as volume or use, versus its design capacity. This is a critical evaluation criterion for municipalities that are facing ongoing population and community growth. It is also important because a particular asset may be in excellent condition and performing well, but it is simply too small to meet the needs. A grading scale in 10-percent increments was suggested as a guideline for purposes of intuitive assessment by City staff, as follows: A = systems that can support > 100% of demand B = systems that can support 90 - 99% of demand C = systems that can support 80 - 89% of demand D = systems that can support 70 - 79% of demand F = systems that can support less than 70% of demand
1.12
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Funding versus Need: The third evaluation criterion reflects the status of funding dedicated to: 1. Maintaining, replacing and improving the current condition of existing infrastructure, and/or; 2. Building new infrastructure that is needed to keep up with growth (where development charges may not be applicable or may be difficult to define). Infrastructure systems need funding that is dedicated, indexed, long-term, and most importantly sustainable. The primary measure is the amount of funding provided versus the estimated funds needed to meet or maintain the community’s desired quality or performance standard. Dedicated funds, such as user fees and development charges, need to be applied only to infrastructure systems for which they are raised. Indexing means that funds need to increase as the use of the system increases, or as the cost of providing the service increases. Maintenance and construction costs also need to be considered in the evaluation of funding. Steady funding provides for maintenance that extends the life of infrastructure. Long-term, multi-year funding plans should account for growth estimates so that projects can be designed and constructed in anticipation of needs where it is logical and feasible to do so, and not simply in reaction to inadequate capacity or problems caused by poor maintenance. Again, a grading scale in 10percent increments was suggested as a guideline for purposes of intuitive assessment by City managers, as follows: A = 90 to 100% of need B = 80 to 89% of need C = 70 to 79% of need D = 41 to 69% of need F = under 40% of need Qualitative information collected through the review process was incorporated into the grading process. Step 3: Blended Rating An overall 2008 Report Card Rating was assigned to each asset category based on a consolidation of Condition & Performance, Capacity vs. Need and Funding vs. Need criteria.
Detailed Rating (A, B, C, D or F)
2005 Rating (A, B, C, D or F)
Condition & Performance
At this time, each factor equally Capacity vs. Need contributes to the overall weighting. In Funding vs. Need the future the City may want to weight the contribution of one or more factors to better reflect their relative impact on sustainability or other factors related to the service itself. mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
1.13
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Based on a preliminary assessment, the “Funding vs. Need” criterion appears to be the most critical in terms of sustainability. For example, quite often new infrastructure or facilities are built through grants, development charges, or other external sources of funding with little or no consideration for its proper maintenance, rehabilitation, and ultimate replacement. In these cases, this newer asset may have received a very favourable rating in the first two criteria since it is in excellent condition and meets current and future needs, but it would receive a low rating in the “Funding vs. Need” category because the lack of financial investment and planning compromise the long-term sustainability of the facility or service to the community.
Step 4: Projected Rating of Future Condition (improving↑, status quo→, deteriorating↓)
Projected 2020 Rating
The fourth step consisted of a projected asset rating for 2020 using a simple arrow system in order to indicate trends, i.e. improving, status quo or deteriorating.
1.9
DETERIORATION MODELS AND ASSUMPTIONS
As noted in the Glossary of Terms, there are actually three “lives” that should be considered: physical, service, and economic. According to the New Zealand Infrastructure Asset Valuation and Depreciation Guidelines, failure is defined as “the point where assets fail to achieve required levels of service”. Although one can assign a useful life to an asset, for example 50 years for a building, there are many factors that affect the actual life of that asset such as design standards, production of material and quality of construction, operational stresses, lack of maintenance, and lack of capacity as a result of growth. The result is that assets constructed or installed at the same time do not all fail at the same time. Therefore, for the particular assets under review as part of this SotI Report, the analysis considered a range of cost profiles associated with maximum and minimum life expectancies. Broad Economic Assumptions, exceptions, and details are noted, as required, in individual Chapters.
All estimates in 2008 dollars
No discount rate or other time value of money adjustments were used
No inflation was used, and neither was interest gained on reserve funds. These would have a tendency to balance out over time.
Growth of assets: assets were assumed to grow at the same rate as the population, which is 1.07%/year per the Monteith Brown report which itself was based on provincial projections. A more detailed analysis of the number of seniors was included as an option in the chapter on Long-Term Care facilities. In summary, it was assumed that to maintain services at the current level, growth represented an increase in population, which in turn means more infrastructure needs to be built; which requires more funding (for staff and resources) to operate, maintain, and ultimately replace that infrastructure at the end of its useful life.
1.14
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Capital costs were calculated on the basis of four (4) ranges: 1. Useful/expected lives – maximum / minimum / expected 2. Construction costs – high / low / average 3. Financing options: pay as you go (PAYG) versus debt-financing 4. Status Quo vs. Growth
The Sherman-Dergis formula was used for facilities within the Culture Divisions since no data were available in ReCAPP. This well-recognized formula adds approximately 2% of an asset’s replacement value per year for funding of large maintenance items, including rehabilitation of facilities over their Life-Cycle. See the Appendix I for a description of this formula and its merits.
Current debt levels were not incorporated when assessing reserve funds.
Other sources of revenue such as development charges and grants/subsidies from senior levels of government were not built into the analysis since they are either generally not significant or have not historically been consistent enough to be relied on in a Life-Cycle analysis.
TRUE and TOTAL cost of capital was used. Allowances for engineering, overhead and contingencies were included, as well as the cost of interest for debt-financing.
Debentures were calculated on the basis of 15 years at 6%, as recommended by the City’s Finance Department.
Costs were tracked separately by the financial models in order to determine the potential savings to the community if reliance on Debt-Financing for capital expenditures was reduced to a minimum, if not completely abandoned, thus increasing the amount of net capital available for infrastructure investment. This analysis serves to illustrate the following three principles: 1. The real cost of capital to the community 2. The permanent debt levels that are experienced with debt-financing of capital and that will only increase as the City moves towards sustainable funding levels, unless changes are made at the policy level 3. The power of small investments over the long-term, especially in terms of contributions to reserves This is a complex issue that merits more discussion and analysis. A detailed discussion of this issue can be found in Appendix J, Debt-Financing and True Cost of Capital: Impact on the Taxpayer and on Long-Term Sustainability of Infrastructure.
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1.15
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
1.10
TRUE COST OF GROWTH/SYSTEM EXPANSION/NEW DEVELOPMENT
Every time a new facility is added there is an increase in the overall inventory of infrastructure that the City must operate, maintain, and ultimately replace. This additional infrastructure becomes a significant liability for the City; more on this issue can be found in the Appendix J. 1.11
LIFE-CYCLE ANALYSIS: GENERAL APPROACH/ASSUMPTIONS
Analysis on a life-cycle basis means asking a series of simple questions. The first seven are often referred to as "The Magnificent Seven": 1. What do we have? 2. What is it worth? 3. What condition is it in? 4. What do we need to do to it? 5. When do we need to do it? 6. How much money do we need? 7. How do we reach sustainable funding? The City of Hamilton has, over the last few SotI Reports, added two very important questions: 8. How do we maintain sustainability? 9. Do we still need it? Since service reviews would be done at the tactical and operational levels, question number 9 should follow question number 1. The one and only rule of service/asset management: If a service is not fully funded, it is not sustainable; And if it is not sustainable, it will eventually fail or fall to an unacceptable level. 1.11.1 Factors Affecting Demand There are a number of economic, social, environmental, technological, and political factors that can impact the demand for community services and their associated infrastructure, as illustrated below. Only population growth and some demographic data obtained from Statistics Canada were included within this analysis.
1.16
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Economic
Population Growth
The use of real estate as an investment tool
Growth in floating population due to tourism
Social
Level of awareness of community services
Population density
Changes in interest in leisure activities
Demographic shifts
Value and perceived cost of service
Access
Type of service
Quality of service
Environmental
Cost of and Level of access to required resources
Climate change
Changes in environmentally responsible practices
Technological
Availability, affordability, and popularity of alternative energy sources and new construction materials
Changes in communication and promotion methods
Lifestyle shifts due to impact of technology
Political
Changes to legislative requirements
Changes to policies
Privatization or downloading of services
Further study of these factors and predictions regarding their future impact on demand would better prepare the City to provide the appropriate quality and quantity of community services at the appropriate time. A key long-term strategy is to manage demand so that future services can be provided at a reasonable cost without a negative impact on delivery.
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1.17
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
1.12
TOTAL COST OF SERVICE (TCS)
In the case of Housing and Long-Term Care, detailed budgets were available. It was therefore possible to go beyond simply the sustainable capital requirements and to project the Total Cost of Service (TCS) to provide a truer and more complete picture of where the sustainable revenue levels need to be set for a specific service. This is important in terms of clearly illustrating the community commitments required to provide a service at a prescribed level of service. Figure 1.4 provides an example of a TCS for Housing.
$7M
Maintenance
$42M
Operations
$29M
Capital
($30M)
Revenues
Total Net Budget $48M $15M
Shortfall
$22M/year
Net Cost (PAYG) Interest
Focus of Ratepayer and Council
Total Net Budget $63M Net Cost w/ Debt
Figure 1.4: Example of Total Cost of Service (TCS) The maintenance and operations budgets are $7 million and $42 million, respectively and the analysis for this report specifies a sustainable capital funding level of $29 million. Present revenue levels are approximately $30 million annually for a total funding requirement of $48 million. If capital projects are funded through Debt-Financing, this increases the funding requirement to $63 million in 2009. The $22 million shortfall in capital funding represents the difference between the present capital budget for the division and the required capital budget for sustainability. The focus of the ratepayer and council should be concentrated on the total net budget, rather than on any one component, in order to provide a true picture of the funding requirements. 1.13
RELATED ISSUES FOR FUTURE POLICY DEVELOPMENT
All financial projections were prepared in 2008 dollars at the time of writing. The following list is not meant to be all-inclusive, but only serves to illustrate related issues that were not considered within this analysis and that will need to be dealt with as part of the development of a sound infrastructure reinvestment policy. A detailed discussion is available in the Appendix J.
Definition of Capital vs. Operating expenditures
User fees
Depreciation
1.18
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
Discount rates
Inflation
Existing debt was not included in the analysis, except for Housing where the debt repayment information was available
Reinvestment of savings
Financing policies
Investment selection policies
Revenues: pricing and subsidies
Development charges
1.14
INTERGENERATIONAL FAIRNESS
Intergenerational fairness is an emotional issue that comes up every time a government wishes to deal with the backlog in infrastructure funding. There is no easy way to deal with a significant backlog since the backlog belongs, in some cases, to a number of past generations. It could be argued that intergenerational fairness is impossible to achieve, and in fact, that it may even be unfair to try to achieve it, for a number of reasons: 1. Most assets last longer than one generation (i.e. 50-150+ years), so how can costs be properly assigned to one generation? 2. Many assets have components that last less than one generation such as electronic components. 3. How do you build in advancements in society (i.e. technology, health, and education) that provide benefits today and in the future? How do you apportion the cost of research and development, and ultimately of implementation as well as the cost of the facilities to make this progress possible? 4. Operating and maintenance costs increase as assets get older, so how can costs be fairly distributed over an asset’s life? One generation would have enjoyed lower costs when the asset was young, while another generation would be saddled with higher costs when the asset is older. The difference is even more dramatic when one generation needs to deal with high O&M costs of the old asset as well as the replacement cost of that asset in any given year. 5. There is a current shortfall or infrastructure deficit. It has been created over many generations. Who does it belong to and how can that deficit be fairly apportioned? 6. Intergenerational fairness has never been an issue before, so how can society suddenly bring in a new concept simply because there is a shortfall and looming infrastructure crisis? Is it really just a “Me-generation” issue? Past generations have always built for and invested in the future. Not doing so could be perceived as wasting money and opportunities (i.e. Building a sewer or watermain that does not allow for growth). mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
1.19
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
7. All generations have gained from investments by past generations, and future generations will gain from current initiatives (i.e. health, education, etc.). Society, as a whole, and communities are better for it. 8. Intergenerational fairness is a short-term outlook, when what we need to do is to actually strive for a sustainable and life-cycle outlook (i.e. First Nations: seven generations out). 9. There are many service lives that can be used for an asset: physical life, useful life, and economic life. Which life will be used for the purpose of cost apportionment? Despite the challenges, infrastructure costs need to be dealt with in the most equitable manner possible. There is also a need to recognize that the current situation is not so much an issue of intergenerational fairness as it is as a result of past and current public policies and practices. It is, therefore, paramount to change those policies and practices so that we do not repeat mistakes of the past. This, of course, represents somewhat of a double impact for the current generations, but there is little choice in the matter since as a society we are at a crossroad where changes and tough decisions need to be made. The current infrastructure deficit was created by the fact that Life-Cycle costing is a fairly new concept and has not been practiced in the past. Quite the opposite occurred in the past, which has led to municipalities being addicted to growth. There are four main drivers: 1. Traditionally, in new subdivisions, the infrastructure is built at the developer’s cost and is then turned over to the municipality at no cost. These assets can then generate revenues for the City without much additional cost for at least 25 years or more. That funding is then used to offset older infrastructure elsewhere in the City. This “siphoning” of funds may help offset tax increases on the short term, but it leads to unfunded or under funded liabilities in the longer term. 2. Development charges are collected for building new parks, libraries, etc. Again, these assets are essentially “free” in terms of initial capital costs and are relatively inexpensive to operate and maintain in their initial years. As they age, costs increase significantly to the point where replacement is warranted but no funding has been put aside since LifeCycle financing policies have not been implemented from Day One. 3. Too often, projects required to allow this growth to occur such as widening of roads, expansion of water plants, etc. are not completely funded by development charges. Municipalities face restrictions as to what they can charge against and collect from development charges. 4. Grants from senior levels of government also skew the fiscal fundamentals, by allowing municipalities to build assets on a cost-shared basis. Assets are then built at a fraction of the cost in terms of municipal contributions, and as noted above no funding has been put aside since Life-Cycle financing policies have not been implemented from Day One.
1.20
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
There is a need for aggressive policy decisions in terms of infrastructure management over the next decade or so if the community is to maintain most of the services that it has grown accustomed to and that have defined it. There is a need not to perpetuate the mistakes of the past, and to move towards Life-Cycle financing policies from the time assets are initially transferred to the municipality and/or put in service. This SotI Report was prepared on the basis of a fixed contribution per capita (in 2008 dollars) for the services that were reviewed. The concept is that revenues would increase over time as the population increases, thus protecting and maintaining revenues at a sustainable level as services and related facilities are expanded in order to maintain the same service level. If services and facilities are not allowed to grow with the growth in population, then in fact the level of service decreases and contributions by ratepayers could decrease. This is illustrated in Figure 1.5 below where the funding gap is spread out evenly over the next 100 years for Option 1 or the funding gap is adjusted as population increases, Option 2. Option 2 is preferred from an intergenerational fairness perspective. To do this, the funding gap is calculated for the 100-year period and then the average is used for each year for Option 1. Option 2 includes population increases to help cover the costs. Option 1: If the funding gap is equal to the average cost over the next 100 years then the gap is initially overstated. This is because the costs are averaged over the 100 years so they will remain the same but the number of people available to pay this will change, as population increases. Initially, there are fewer people required to pay the same amounts as the greater number of people available will in the future. This results in higher payments per capita in the beginning and much lower payments at the end. For example, the cost per capita is too high initially and too low at the end. Option 2: The solution: public policy is needed to close the funding gap as population increases. This will make certain that the cost per capita remains the same and it requires precommitted annual increases to the base revenues. As infrastructure is built, it should be added to the cost. Money obtained through growth should be used to maintain the portfolio. Figure 1.5 illustrates how cost per capita for Option 2 should change as population increases.
Option 1 Option 2
10
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
0
Total O&M + Capital
Sustainable Funding Level
Figure 1.5: Intergenerational Fairness Resolution: $ per Capita mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
1.21
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
It is important to note, however, that the public policy required for Option 2 to become reality would need to include pre-committed annual increases to budgets based on population growth, and would require the discipline to not use that growth in assessment and its resultant revenues to reduce the proposed increase in taxes for a particular year. It would also require a commitment to development and use of reserve funds, with regular auditing and review of fiscal requirements through detailed SotI reports. 1.15
CITY ENERGY USE POLICY
This State of the Infrastructure Report identifies high-level order-of-magnitude capital and O & M requirements over the Life-Cycle of an asset/asset group to help identify and ensure adequate funding levels are put in place and maintained. The City of Hamilton’s Corporate Energy Policy (Appendix F) sets out a strategy for achieving energy reduction targets and defines specific policies for capital investment related to energy, as well as energy procurement (see City of Hamilton Corporate Energy Policy For City Facilities and Operations October 2007, Executive Summary p. 3). The Energy Policy calls for targeted energy reductions in energy intensity of City-owned facilities and operations of 20% by 2020 (p6). It is the City’s Energy Policy that will ensure that the Energy Conservation and Demand Management (CDM) requirements are brought to the forefront of the City’s day-to-day operations and capital planning activities. The City’s Energy Policy sets out a framework for implementing CDM initiatives, including the formation of a Corporate Energy Steering Committee (CESC) to help key staff work together in developing energy plans and strategies for their Divisions (p. 7). The SotI Report provides a common reference document to help staff put energy reduction plans into the context of asset Life-Cycle planning. The City’s energy reduction targets and CDM activities will be achieved through a combination of: (p.9) 1. Monitoring and Targeting of Existing/New/Retrofitted Buildings 2. Investment in Energy Efficiency – Existing Buildings 3. Implementation of Energy Efficient Design – Major Renovations/New Construction 4. Implementation of Eco-Responsible Energy Management Policies For example, the City’s Energy Policy sets out requirements for monitoring and reporting of energy use under the requirements of Bill 21 – Energy Conservation Responsibility Act (p.5). In order to meet Bill 21 requirements, the City has purchased an Energy Management Software System (Utility Manager) that will store a database of historical energy costs and consumptions (p. 5). From this database, energy intensity factors can be calculated to compare facilities and to accurately identify and monitor energy reductions and savings from CDM activities (p. 6).
1.22
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
The Energy Policy identifies the types of typical equipment that are considered under the process of CDM Retrofits and Capital Renewal/Life-Cycle Replacements such as:
HVAC equipment
Lighting and controls
Building envelope
Water use (e.g. pools, toilets, water reclaim etc.)
BAS (building automation system) controls
Process improvements
Back-up generators
Any other energy consuming device (p. 11).
The Energy Policy also sets out strategies for CDM investment for major renovations and new construction, including the evaluation of Leadership in Energy and Environmental Design (LEED) and Green Building Design options. There are also specific policies for investment in the types of equipment listed above, as well as items such as:
Roof replacement, etc.
Energy efficient equipment purchasing
Energy education and awareness
Electricity generation, cogeneration and district energy
Specific policies for energy procurement (p. 21)
The City’s Energy Policy provides the framework for achieving the energy reduction targets. The SotI report would be a common reference document and resource in the analysis of various initiatives and provide context relative to an asset’s overall Life-Cycle. The SotI report is a high-level analysis of the future investment needs of the City to ensure continued provision of services; therefore, it is not possible to comment upon the overall impact of the City’s energy policy. However, we do recognize that while refurbishing facilities, use of energy efficient alternatives may require additional capital investment. 1.16
CONCLUSION
The SotI Reports are not meant to suggest that the City is in crisis. They are meant:
To convey a consciousness and ultimately to project the true cost of services on a Lifecycle basis; and
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1.23
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Basic Principles and Approach May 7, 2009
To encourage discussion and the development of sound financial reinvestment policies that reduce life-cycle costs to a minimum, while balancing economic and social objectives.
Therefore, SotI reports are meant to assist in managing the crisis before the crisis actually occurs. By focusing solely on asset management, there is a risk of keeping assets long after they have served their useful lives. This in fact leads to the never ending loop of inputs and outputs. Services offered to the community, especially the unique nature of those offered by the Community Services Department, need to focus on outcomes.
1.24
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
2.0
Housing
In an ongoing effort to ensure an adequate quality of life for all Hamilton residents, the City provides subsidized housing to the members of the community who demonstrate financial or other special needs. This non-profit initiative aims to provide housing to people from all walks of life, with most housing rental fees calculated relative to tenant income. Figure 2.1 illustrates the nature of Housing infrastructure and its components which are explained in detail within this document. The Housing Division staff oversees all social housing providers in the City including City Housing Hamilton. City Housing Hamilton operates and maintains approximately 45% of all social housing in the City. This report provides an analysis of City Housing Hamilton.
Housing
High-Rise Apartments
Surface & Site Systems
Low-Rise Apartments
Vertical Movement
Electrical
Row Houses
SemiDetached Houses
Mechanical
SingleFamily Houses
Structural
Parks, Trails & Grounds
Figure 2.1: Housing Asset Types and Components 2.1
ASSET DESCRIPTION
2.1.1
Facilities
There are five categories of housing facilities within City Housing Hamilton inventory:
High-rise apartments – apartment buildings that are taller than three stories, 22 highrise buildings comprised of 4,194 individual units were analyzed
Low-rise apartments – multi-unit apartment buildings that are three stories tall or less, 5 low-rise buildings comprised of 115 individual units were analyzed
Row houses – one housing unit within a long line of identical houses that have individual entry ways and yards, but share structural walls on both sides and typically have a common roof, 202 row house buildings comprised of 1,254 individual units were analyzed
Semi-detached houses – houses built in pairs, side-by-side and share a common wall; semi-detached houses differ from row houses in that they are only ever two units wide, allowing three outside walls for each unit, 273 individual units were analyzed
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2.1
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Single-family houses – Single-family houses are individual housing units that are not directly connected to any other dwelling, 292 individual units were analyzed
In total, City Housing Hamilton and the other 68 housing providers within the City maintain and operate approximately 14,000 units of non-profit housing. The focus of this report will be on the 6,128 units that are owned by City Housing Hamilton and can be found within the abovementioned categories. 2.1.2
Components
There are six component classifications for the Housing facilities:
Surface and Site Systems – components that are located on the same site as the facility, but are not typically attached to that facility, e.g. walkways
Structural – physical parts that make up the building, e.g. foundations, walls, doors, windows, roofs
Electrical – all parts of a facility that use or conduct electricity, e.g. wiring, lighting, electric heaters, and fire alarm systems
Mechanical – parts of the facility that convey and utilize all non-electrical utilities within a facility, e.g. gas pipes, furnaces, boilers, plumbing, ventilation, and fire extinguishing systems
Vertical movement – components used for moving people between floors of buildings, e.g. elevators, wheelchair and stair lifts.
Parks, Trails and Grounds – components include fields, fencing, courtyards, flower beds, etc. where applicable
Of the five component categories, site components are unique in that their replacement and refurbishment is not directly dependent on the facility with which they are associated. For example, walkways on the property likely would not need to be replaced as part of the replacement of the facility. Rather, site components are scheduled for replacement based on their own useful lives and their replacement schedule remains independent of the facility. Unlike site components, structural, mechanical, electrical, and vertical movement components are directly incorporated into the facility itself, and would need to be replaced as part of the replacement of the facility. 2.2
SERVICES PROVIDED/PURPOSE OF ASSETS
Housing facilities are rented to City residents whose financial or medical needs would make it difficult to otherwise afford this quality of housing.
2.2
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.3
INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS
The following assumptions were included in the analysis of Housing facilities.
Since a number of administrative and/or community facilities are located within some of the high-rise apartment complexes, the capital costs associated with those facilities are included in the total capital costs for the building.
The property value of the land was not included in the analysis, since property is considered to be a completely separate asset category and the land itself is not replaced when the facility or asset is replaced.
Site components on the land, such as walkways, are included as separate identities in the analysis since these components are replaced based on their respective expected service lives and not necessarily based on the expected service life of the facility or asset being replaced.
Minimum, maximum and expected facility replacement costs are based on NAMS, RS Means data and Stantec industry experience.
Component costs (HVAC, electrical, roof, plumbing, etc.) are based on ReCAPP data. The low and high ranges for component replacement costs are derived from an analysis of NAMS and RS Means data as well as Stantec industry experience.
Status quo analysis assumes no increase in gross service provision, thereby resulting in decreased level of service as demand/population increases.
Demand-based analysis assumes maintaining level of service relative to projected demand/population growth.
At present, there are approximately 4,000 people on the City’s waiting list for access to housing. This number has remained roughly the same over the last three years and in some cases, individuals have waited over seven years for a building of their choice to become available. Changes to the waiting list have not been included in this analysis.
2.4
LIFE-CYCLE ANALYSIS
2.4.1
Introduction and List of 9 Questions
Analysis on a Life-Cycle basis means answering a series of simple questions. The first seven are generally accepted within the industry: 1. What do we have? 2. What is it worth? 3. What condition is it in? 4. What do we need to do to it? 5. When do we need to do it?
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2.3
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
6. How much money do we need? 7. How do we reach sustainable funding? The City of Hamilton has added two very important questions, which are: 8. How do we maintain sustainability? 9. Do we still need it? 2.4.2
What do you have? - Assets (Groups, Types, Components, Hierarchy)
The Housing facilities were grouped into five categories. A total of 794 facilities were included in the analysis as illustrated in Figure 2.2.
Housing 794 Facilities Consisting of 6,128 Units 22 High-Rise Apartment Buildings •4,194 Units 5 Low-Rise Apartment Buildings •115 Units 202 Row Houses •1,254 Units 273 Semi-Detached Houses 292 Single-Family Houses 2008 Replacement Value: $782M Annual Cost Per Capita: $56 Debt-Financed Cost Per Capita: $86
Figure 2.2: Housing Assets (Capital Costs Only)
2.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.4.3
What is it worth?
The Housing portfolio used for this analysis has a replacement value of approximately $782M, as illustrated in Figure 2.2. 2.4.4
What condition is it in? - Age and condition profiles
The following criteria were used for the analysis:
High-rise apartments were analyzed with a 75-year expected life and all will be in need of reconstruction within 31-43 years. (Reconstruction consists of returning a damaged structure to a known or similar earlier state by the introduction of new materials.)
Low-rise apartments were analyzed with a 75-year expected life and all will be in need of reconstruction within 33-45 years.
Row houses were analyzed with a 58-year expected life. All row houses were listed as having been built in 1970; therefore, all are considered in need of reconstruction in 19 years (2028).
A 58-year expected life was also applied to each semi-detached house. Of the total 273 semi-detached houses, 88 were built in 1951 and 185 were built in 1957; therefore, all will be in need of reconstruction within the next six years.
The 292 single-family houses were analyzed using 58-year life spans. The construction and expected replacement dates are as follows:
81 houses were built in 1951 and are currently in need of reconstruction (2009)
195 houses were built in 1957 and are in need of reconstruction in six years (2015)
16 houses were built in 1965 and are in need of reconstruction in 14 years (2023)
During interviews with key City staff, worksheets were completed in order to obtain estimates of the present condition and expected future condition of the Housing facilities. Table 2.1 lists the results of the interviews and includes ratings for each facility based on a component-bycomponent level.
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
2.5
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Table 2.1: Condition Assessment Worksheet: Housing
Single Family & SemiDetached
Asset Component Surface & Site Systems
Condition
Useful Life
(Select point on deterioration curve)
(Years) (min – max)
1 Condition
Asset Type
2
20 3
Time
1 Condition
Architectural & Structural
2
15 – 20 3
Time
1 Condition
Vertical Movement
2
5 – 10 3
Time
Mechanical Condition
1 2
15 – 20 3
Time
Electrical Condition
1 2
20 3
Time
1 Condition
Parks, Trails & Grounds
2
15 3
Time
2.6
Overall Rating
Rating (A, B, C, D or F)
(A, B, C, D or F)
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need
C-
Funding vs. Need
D
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need
B
CD CD D B B B CD
CD CCD
2020 Rating
D+
D+
B
D+
C
D+
Comments
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Asset Component
Row Town House & Duplex
Surface & Site Systems
Condition
Useful Life
(Select point on deterioration curve)
(Years) (min – max)
1 Condition
Asset Type
2
20 3
Time
1 Condition
Architectural & Structural
2
15 – 20 3
Time
Mechanical Condition
1 2
15 3
Time
Electrical Condition
1 2
15 – 20 3
Time
1 Condition
Parks, Trails & Grounds
2
20 3
Time
Overall Rating
Rating (A, B, C, D or F)
(A, B, C, D or F)
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need
C-
Funding vs. Need
C
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need
C
D D C D CC C
C CC C C
2020 Rating
D+
C-
C
Comments
C C
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
2.7
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
High Rise
Asset Component Surface & Site Systems
Condition
Useful Life
(Select point on deterioration curve)
(Years) (min – max)
1 Condition
Asset Type
2
20 3
Time
1 Condition
Architectural & Structural
2
20 – 25 3
Time
1 Condition
Vertical Movement
2
15 – 20 3
Time
Mechanical Condition
1 2
10 – 15 3
Electrical Condition
1 2
15 – 20 3
Time
1 Condition
Parks, Trails & Grounds
2
20 3
Time
2.8
(A, B, C, D or F)
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need
Time
Overall Rating
Rating
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need
(A, B, C, D or F)
CCD D C D B B B C+ C C C+ B C C C C
D+ D+ B C
2020 Rating
Comments
Additional funding is required to rehabilitate site components in order to prevent further structural deterioration (water infiltration) and possible safety issues for the public.
Presence of asbestos may require abatement. As a result, increased costs for the component rehabilitation or replacement will occur.
Individual high rise audits will recommend when elevator modifications are required.
Capital funding must be provided to maintain the 'B' rating.
Additional funding should be provided for energy conservation initiatives
Additional funding should be provided for energy conservation initiatives
C+
C
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Low Rise
Asset Component Surface & Site Systems
Condition
Useful Life
(Select point on deterioration curve)
(Years) (min – max)
1 Condition
Asset Type
2
20 3
Time
1 Condition
Architectural & Structural
2
20 – 25 3
Time
1 Condition
Vertical Movement
2
15 – 20 3
Time
Mechanical Condition
1 2
10 – 15 3
Electrical Condition
1 2
15 – 20 3
Time
1 Condition
Parks, Trails & Grounds
2
20 3
Time
(A, B, C, D or F)
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need
Time
Overall Rating
Rating
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need
(A, B, C, D or F)
C+ C C C C C B B B C+ C C C+ C C C C C
2020 Rating
C
C
B C C C
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
Comments
Individual audits will recommend when elevator modifications are required.
Capital funding must be provided to maintain the 'B' rating.
Additional funding should be provided for energy conservation initiatives.
Additional funding should be provided for energy conservation initiatives.
No inventory or information kept on this asset
2.9
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.4.5
When do we need to do it? - Asset Useful Lives
Each asset has an associated useful life value assigned to it. This useful life is the number of years that the asset is expected to last with regular usage and proper maintenance. The useful lives for each type of Housing facility are listed in Table 2.2. Table 2.2: Range of Expected Lives of Housing Facilities Minimum Expected Life
Expected Life
Maximum Expected Life
High-Rise Apartments
60
75
90
Low-Rise Apartments
60
75
90
Row Houses
40
58
75
Semi-Detached Houses
40
58
75
Single-Family Houses
40
58
75
Facility
Various factors can affect the useful lives of facilities. Factors such as weathering, heavy use, or misuse can shorten the life of a facility. Conversely, factors such as under-utilization or betterthan-expected construction practices and materials could extend the life of a facility. For this reason, a range of useful lives for each facility was considered in the analysis as listed in Table 2.2. These ranges were determined through analysis of NAMS, ReCAPP data, RSMeans, and Stantec industry experience. These useful lives provide an indication of when significant capital expenditures will be required in order to maintain the Housing facilities. For example, if a single-family house was originally constructed in 1957 and it has an expected life of 58 years, then it is assumed that in 2015 (58 years after 1957) a new single-family house will be constructed in order to replace the aging facility. It is expected that the new facility would be constructed in a similar fashion, and would therefore have the same expected life. In the example of the single-family house that would be reconstructed in 2015, that house would then be replaced again 58 years later in 2073, and again in 2131, and so on. 2.4.6
What do we need to do to it? - Rehabilitation and Replacement
Within this report this question deals only with the capital investments associated with maintaining the facilities and, for the purposes of this report, it has been assumed that operating and maintenance (O & M) costs are currently at the appropriate level, which is not the case. Each facility consists of various components. These components have unique properties and typically have to be replaced or refurbished in order to ensure that the facility remains functional for the entirety of its expected life as illustrated in Figure 2.3.
2.10
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Figure 2.3: Life-Cycle of a House and its Roof Component For example, a single-family house that has an expected useful life of 58 years has a shingled roof that is installed as part of the house’s construction. At the time of construction, the cost of that roof would be included in the total construction cost of the facility. Likewise when that facility would be reconstructed in 58 years, the cost of the roof would be included in the cost of reconstruction. However, a shingled roof has an expected useful life of only 22 years, much less than the 58 years that the house is expected to last. Therefore, in year 22 of that facility’s life, the cost of a roof replacement would have to be accounted for as a unique capital cost. Likewise, the cost would have to be accounted for again in year 44 of the house’s life, as illustrated in Figure 2.3. The same method is used to account for all capital costs associated with maintaining and replacing components of a facility as part of maintaining the facility as a whole. Table 2.3 provides an example of the components and life expectancies used for this analysis. Expected lives used for this analysis were provided by the City of Hamilton in the ReCAPP database. The minimum and maximum expected life spans were determined based on these expected life spans and adjusted with consideration of NAMS, RSMeans and Stantec industry experience. Table 2.3: Examples of Facility Component Life Expectancy Example Component
Life Expectancy
Roof
22 Years
Furnace
15 Years
Windows
32 Years
Parking lot
22 Years
Actual life expectancies were provided within the City’s ReCAPP databases. However, in order to determine a range of expected lives for this analysis, these values were adjusted to create minimum and maximum expected life estimates. Using NAMS, RSMeans and Stantec industry experience, a range of expected lives for different types of assets was determined as a percentage of the actual expected lives and applied to create minimum and maximum life scenarios, as summarized in Table 2.4 below.
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2.11
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Table 2.4: Percentage Ranges of Facility Component Life Expectancy Asset
Component
Row, SemiDetached and Single-Family Houses
High- and LowRise Apartments
Low
Medium
High
Site
63.8%
100.0%
138.7%
Structural
74.4%
100.0%
118.7%
Vertical Movement
75.0%*
100.0%
125.0%*
Electrical
83.7%
100.0%
114.4%
Mechanical
83.7%
100.0%
114.4%
Site
75.0%*
100.0%
125.0%*
Structural
75.0%*
100.0%
125.0%*
Vertical Movement
75.0%*
100.0%
125.0%*
Electrical
68.9%
100.0%
133.2%
Mechanical
90.8%
100.0%
109.6%
*Note: Where values could not be determined through available resources, a 25% variation was applied.
2.4.7
How much money do we need? - Capital Costs/Rehabilitation and Renewal
The expected useful lives outlined in Sections 2.4.5 and 2.4.6 are used to define the rehabilitation and reconstruction cycles used within the analysis. The cost of this reconstruction or rehabilitation is expected to be comparable to the initial cost of the facility; and the new facility is assumed to have the same expected life. Similar to a facility’s expected useful life, its expected replacement value can vary depending on a number of factors, including furnishings and market pricing. In consideration of these factors, a range of expected replacement costs was developed using NAMS, ReCAPP data, RSMeans and Stantec industry experience. The expected replacement costs per square foot are summarized in Table 2.5. Table 2.5: Facility Replacement Unit Costs Minimum Replacement Cost (per ft2)
Expected Replacement Cost (per ft2)
Maximum Replacement Cost (per ft2)
High-Rise Apartment Buildings
$101.33
$189.94
$278.55
Low-Rise Apartment Buildings
$66.14
$156.03
$245.92
Single-Family Houses
$112.59
$126.62
$140.66
Semi-Detached Houses
$112.59
$126.62
$140.66
Row Houses
$108.08
$120.86
$133.63
Facility
2.12
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.4.7.1 Level of Service Two level-of-service (LOS) options for the Housing facilities were considered within this analysis; these are status quo and growth-based demand, as explained below. Status Quo The first LOS option assumes that the:
Housing Division would maintain the status quo for service, i.e., the number of housing units presently available would remain unchanged indefinitely; and
Facilities would be maintained and replaced as necessary, but facilities themselves would never be expanded and no new facilities would be added to the existing inventory.
This scenario would be adequate to maintain the existing level of service as long as the population of the City was also static and nothing was done with the current waiting list. However, if the City’s population were to grow as is expected, the result of the status quo maintenance of the Housing inventory would result in a reduced level of service. This is because the gross supply of service would remain the same, approximately 6,000 housing units while the population continued to increase. As can be seen in the following table, the number of units per 1,000 residents will reduce from the current level of 11.5 to 4.0 over the course of this analysis. Table 2.6: Number of Housing Units per 1,000 Residents – Status Quo Year Units/1000 Capita
2009
2034
2059
2084
2108
11.5
8.8
6.8
5.2
4.0
Figure 2.4 illustrates the annual capital requirements and sustainable funding level for maintaining the status quo in Housing. In the status quo model, it is important to note that the sustainable funding level is constant from year to year, while population is growing. The result is that the per-capita cost for the service would decrease as population grows as shown in Table 2.7. Table 2.7: Cost per Capita for Capital Funding for Housing – Status Quo Year Cost/Capita
2009
2034
2059
2084
2108
$56
$43
$33
$25
$20
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2.13
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Millions
Housing May 7, 2009
$250
$200
$150
2009 $29.2M
2042 $29.2M
2075 $29.2M
2108 $29.2M
$100
$50
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
Total Capital Requirements
Sustainable Capital Funding
Figure 2.4: Sustainable Capital Funding Model (Status Quo) In fact, both cost per capita and level of service decrease at the same rate if the City maintains the status quo. Each Hamilton resident pays less for the service from one year to the next; however, their opportunity to utilize that service also decreases at the same rate. Therefore, if the demand for Housing continues at current levels based on a percentage of the population there will be an increasing shortfall in available units resulting in significantly longer wait times. Growth-Based Demand The second LOS option assumes that:
Demand is a constant as a percentage of the population;
Housing facilities will grow at the same rate as population increases; and
The average rate of population growth is approximately 1.07% per year based on the results of the Monteith Brown Report.
As shown in Figure 2.5, the sustainable capital funding requirement is not constant. However, since sustainable capital funding grows at the same rate as population, the cost per capita remains constant. It reflects the increased cost of maintaining the existing level of service as the City’s population grows.
2.14
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
$500
Millions
$400
$300
2009 $29.2M
2042 $41.4M
2075 $58.9M
2108 $83.6M
$200
$100
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
Total Capital Requirements (w/ Growth)
Sustainable Capital Funding
Figure 2.5: Sustainable Capital Funding Model (Maintain LOS)
For example, the sustainable capital funding level in 2009 is $29.2 million and the population is approximately 520,837, resulting in a cost of $56 per capita. In 2042, it is expected that Hamilton’s population will have grown to 740,009. The sustainable capital funding in 2042 is expected to have grown to $41.4 million, resulting in a cost of $56 per capita. Each Hamilton resident pays the same amount each year for the service; and the level of service is the same from year to year. 2.4.7.2 Factors Affecting Levels of Service The factors affecting levels of service can be broken into three broad categories according to their key performance criteria.
Legislative Requirements - mandatory provisions or standards set by local, state, federal or international bodies that govern asset utilization, particularly in terms of various issues affecting the general public.
Strategic and Corporate Goals - broad framework-based management directives. These are expected to be consistent with goals and values stated in policies and strategies.
Customer Requirements - customer expectations of the services provided by the utilization of the asset which are, in turn, dependent upon the customers’ ability and willingness to pay.
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2.15
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Legislative Requirements There are many pieces of legislation that govern the operation, maintenance and development of affordable housing. The most influential is the Ontario Social Housing Reform Act enacted in 2000. Its authority governs the quantity and quality of housing provided in municipalities all over the province. City Housing Hamilton Operational Plan The strategic and corporate goals of City Housing Hamilton’s Operational Plan are:
Create financial sustainability
Maintain and improve building conditions of City Housing Hamilton’s Operational Plan
Create healthy, secure communities
Re-invest in communities and increase affordable housing
Influence and adapt Social Housing reform
Customer Requirements Customer requirements that influence the City’s operations are listed below in Table 2.8. Table 2.8: Customer Requirements for Level of Service Requirement
Example (where applicable)
Reference(s)
Safety
Stability of asset
Customer surveys, complaints
Security
Security system, patrol
Customer surveys, complaints
Aesthetics
Elevation, landscape
Customer surveys, complaints
Condition
Physical condition
Customer surveys, feedback
Comfort, suitability
Air conditioning, carpets
Customer surveys, complaints
Accessibility
Ramps, disabled access
Customer surveys, feedback
Availability
Ease of availability
Customer surveys, complaints
Capacity
Accommodation size
Customer surveys, complaints
Functional Utility
Swimming pool
Customer surveys, complaints
Environmental, ecological
Non polluting
Customer surveys, complaints
Reliability-performance
Continuous desired performance
Customer surveys, feedback
Maintainability
Regular maintenance
Customer surveys, complaints
Quantity
Number of facilities
Customer surveys, feedback
Quality
Condition of use, value for money
Customer surveys, complaints
Affordability
Cost for service
Customer surveys, feedback
Cleanliness
Hygiene
Customer surveys, complaints
Future adaptability
Withstand future growth
Statistical data, planning
2.16
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.4.8
Summary of the Financial Analysis Results
The SotI analysis attempts to predict capital costs up to 100 years into the future. Rather than consider the results to be definitive, they are considered to be guideline figures and can vary for any number of reasons. Within the following section expected results have been listed as well as high and low estimates of sustainable funding requirements. There are three key factors that can have a significant impact on the sustainable funding requirements:
Anticipated useful lives of assets
Replacement costs of assets
Whether those costs are paid in cash or debt-financed by the City
Figure 2.6 demonstrates how these three factors can be graphically depicted as three physical dimensions, with replacement cost as the vertical y-axis, expected useful life as the horizontal xaxis, and amount of debt incurred as the z-axis. When all capital costs are paid in cash by the City, otherwise referred to as Pay-As-You-Go (PAYG) spending, a two-dimensional range of sustainable funding requirements is determined as illustrated in Figure 2.7.
Max
Max
$25.4M
$57.6M
t
b De
$
$
l
g
na Fi
Min Max
p Ca
ita
Per capita per year
$29.2M
$56
in nc
YG PA
Min $18.9M
Life
Min
Figure 2.6: The Three Dimensions of Impact on Capital Requirements
Max
$30.7M
Life
Min
Figure 2.7: 2009 Sustainable Capital Funding Requirements (PAYG)
The figure above illustrates the expected sustainable capital funding requirements for 2009 for the range of expected life and replacement costs. The number in the centre of the square represents the midpoint of both dimensions and is considered to be the most likely (expected) outcome. In other words, if the City funds all capital projects on a PAYG plan, then Housing would require $29.2 million, or $56 per capita, in capital funding in 2009.
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
2.17
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.4.8.1 PAYG versus Debt-Financing Figure 2.8 illustrates the analysis results for Housing facilities including the third dimension, Debt-Financing.
Debt Financing Interest = + $15.4M/year
$38.8M
$88.0M
Max bt $44.6MDe l ta pi a C
$
Per Capita Per Year $86 Debt
g in c n $28.9M na Fi
$47.0M
Min Max
Life
Min
Figure 2.8: 2009 Sustainable Capital Funding Requirements (PAYG and Debt-Financing) When Debt-Financing is included, the sustainable capital funding levels increase significantly. For example, sustainable capital costs increase from $29.2 million for PAYG to $44.6 million for Debt-Financing. In other words, some $15 million/year is taken out of the community to pay for interest only. Costs per capita also increase from $56 to $86, thus illustrating the true cost of debt. Table 2.9 provides a comparison of the sustainable capital funding requirements for PAYG and Debt-Financing over a 100-year period. Table 2.9: Sustainable Capital Funding Requirements (million) 2009 PAYG Debt
2034 PAYG Debt
Year 2059 PAYG Debt
Status Quo
$29.2
$44.6
$29.2
$44.6
$29.2
$44.6
$29.2
$44.6
$29.2
$44.6
Growth
$29.2
$44.6
$38.1
$58.2
$49.7
$75.9
$64.8
$99.0
$83.6
$127.8
2.18
2084 PAYG Debt
2108 PAYG Debt
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.4.8.2 Sustainable Funding Model Figure 2.9 illustrates the results of the analysis for Housing using the PAYG model. The blue (vertical bar) columns represent the actual capital requirements for each of the subsequent 100 years
The orange line represents the average capital requirements weighted by population growth of 1.07%.
The green line provides the amount of cumulative reserves that would be generated if the sustainable capital funding requirements (orange line) were adhered to.
Millions
$800
$600
$400
$200
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
-$200
-$400
-$600
Total Capital Requirements (w/ Growth)
Cumulative Reserves
Sustainable Capital Funding
Figure 2.9: Housing Sustainable Capital Funding Model (PAYG) In years when the actual capital requirements are less than the sustainable capital funding level, the surplus would be added to the capital reserves. In years where the capital requirements are greater than the sustainable capital funding level, money would be taken from reserves to cover the shortfall. This ensures that investments are the most timely and cost-effective, i.e. doing the right thing to the right asset at the right time, instead of trying to maintain capital spending at a fairly consistent level from year to year.
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2.19
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
These results illustrate a deficit around 2050 due to the current backlog, as well as the nonsustainable funding practices used in the past.
Millions
Figure 2.10 illustrates the analysis results assuming that all capital expenditures would be funded through Debt-Financing, using a 15-year borrowing period at 6%. The sustainable funding requirements would increase from $29 million (PAYG) to $45 million (Debt-Financing) in 2009. By 2108, the sustainable funding requirements would be $84 million (PAYG) compared to $128 million (Debt-Financing).
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
20 09 20 13 20 17 20 21 20 25 20 29 20 33 20 37 20 41 20 45 20 49 20 53 20 57 20 61 20 65 20 69 20 73 20 77 20 81 20 85 20 89 20 93 20 97 21 01 21 05 21 09 21 13 21 17 21 21
$0
Borrowing Costs for Capital (w/ Growth)
Cumulative Debt
Sustainable Capital Funding
Figure 2.10: Housing Sustainable Capital Funding Model (Debt-Financed)
2.4.8.3 Total Cost of Service (TCS) The SotI report analyzes capital requirements only. However, the full cost of any service should be considered in terms of fully explaining and understanding the true cost to the community of providing a specific service. Since detailed budgets were made available for Housing, the Total Cost of Service (TCS) could be calculated and is presented in Figure 2.11 (assuming that the current budget is adequate). Figure 2.11 illustrates the sustainable current and capital funding requirements for Housing, for the PAYG scenario.
2.20
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
$7M
Maintenance
$42M
Operations
$29M
Capital
($30M)
Revenues
Total Net Budget $48M $15M
Shortfall
$22M/year
Net Cost (PAYG) Interest
Focus of Ratepayer and Council
Total Net Budget $63M Net Cost w/ Debt
Figure 2.11: 2009 Sustainable Total Cost of Service (PAYG)
The $22 million per year shortfall is based on the difference between the sustainable capital funding requirements and the present capital budget of $7 million. To sustain the current level of service, the total net budget requirement would be $48 million in 2009 using the PAYG model, or $63 million using Debt-Financing. 2.4.9
How do we reach sustainable funding?
There is a current shortfall of approximately $22 million and it is recommended that the gap be closed within the next five to ten years. The current capital requirement for sustainability is over $29 million, while the present capital budget is approximately $7 million. 2.4.10 How do we maintain sustainability? The City should continue lobbying the provincial and federal governments for funding to improve the quality and to expand the supply of housing. Progress could be measured by revisiting the State of the Infrastructure Report every five years to review funding levels, debt levels and levels of service. 2.4.11 Do we still need it? This was not included within this analysis; however, we recommend that an asset review committee be formed and that appropriate asset disposal policies be developed based on need and/or economic life of the asset. This kind of thinking has already been implemented on a small scale when City Housing Hamilton was granted permission by the Province to sell 90 single and semi-detached units. The revenue from the sale of these homes will be reinvested through a strategy being put forward to the Housing Board in 2009. It may very well make good sense to sell more of these older homes and reinvest the revenues in new, higher density units or refurbished apartment units purchased from private owners.
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2.21
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.5
KEY PERFORMANCE INDICATORS
Strategic:
Maintain acceptable quality of life
Mixed-ownership/income neighbourhoods (60% owned, 40% social housing)
Provide adequate/good access to public transit (distance to public transit access point)
Tactical (Functional):
Over-all report card rating (e.g. target of B-)
Maintenance/rehabilitation relative to capital replacement value (e.g. around 60%)
Mix of unit type (low-rise, high-rise, row house, semi-detached house, single family house)
Cost per capita for supplying service
Housing units per capita
Operational KPI:
Response times to service requests
Number/type of service requests
Time of applicants on wait-list
Number of applicants on wait-list
Repair and maintenance costs per square metre
Energy and utility costs per square metre
Water costs per square metre
CO2 emissions in tonnes of carbon dioxide per square metre for operational property
2.6
IMPROVEMENT PROGRAM
2.6.1
Asset Management Process Improvements
Asset management processes are defined as the processes, analyses and evaluation techniques needed to support Life-Cycle asset management. These include the following asset management functions:
Knowledge of assets
Levels of service
Condition assessments
2.22
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
Asset accounting - valuation, revaluation, depreciation
Life-Cycle planning
Asset operations and maintenance
Asset creation and disposal
Performance monitoring
Quality assurance and continuous improvement
Risk management
Design and project management
Reviews and audit processes
2.6.2
Asset Management Information System Improvements
Asset management information systems are defined as the systems that support asset management processes and manipulate the relevant data. These include the following asset management functions:
Asset registers
Financial system
Maintenance management system
Condition monitoring
Capital works programming
As constructed plans
Geographical information systems
Advanced applications such as deterioration modeling
Future demand analysis
Such systems may replicate or even automate asset management processes. The following specific actions would improve Housing’s asset management information system and hence the availability of data required to make decisions related to the ongoing management of the asset portfolio:
Continue use of ReCAPP or similar infrastructure management system and extend implementation to other asset groups
Perform regular facility condition assessments and adjust maintenance requirements and timelines based on most recent information
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2.23
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.6.3
Asset Management Data and Knowledge Improvements
Asset management data and knowledge is defined as appropriate, accessible and reliable data that can be used with information systems to enable enhanced asset management. This includes the following data on the following asset characteristics and topics.
Classification and identification
Physical attributes
Condition
Cost and maintenance histories
Benchmark data
Valuation
Life-Cycle cost evaluation
Data quality
Risk information
Recording of new assets
2.6.4
Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management
It is recommended that the Division begin the process of developing and implementing an O & M strategy for the various assets within the portfolio. The purpose of the strategy document is to:
Identify the strategies and actions used in the proactive maintenance of the assets.
Document the projected expenditures over a prescribed planning horizon which will typically be shorter than that used for the SotI report.
An important initial step in this process would be a review of the current O & M activities complete with costs; these activities should be categorized as either reactive or proactive. By completing this review it will be possible to begin defining changes that will be needed to adjust the balance of reactive vs. proactive activities. 2.6.5
Life-Cycle Analysis and Integration with Financial Tools
As the knowledge of the assets both in terms of the various attributes and condition increases it will be possible for Housing to begin the process of managing the assets using life-cycle concepts. It will be important to develop an understanding of the true costs associated with the management of the assets to assist in making better informed decisions in the future. Therefore, in order to ensure that the various costs associated with maintaining the assets are captured it will be essential to explore options for extending either the ReCAPP or Hansen systems to track work orders related to the facilities and their components. 2.24
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2.7
CITY ENERGY USE POLICY
The following sections outline some improvements that may be appropriate for implementation within the City’s housing stock to assist in achieving the goals for energy conservation set out in the City’s Energy Use Policy (Appendix F). This list is not intended to be exhaustive and is provided for illustrative purposes: 2.7.1
Mechanical & Structural
Depending on the actual configuration and age of this asset group some of the following may be applicable:
Investigate if the current Federal incentive programs for energy efficiency for detached and semi-detached homes would apply to City properties and initiate efficiency audits on the housing stock
Investigate the tightness and insulation of the building envelope in all properties and develop programs for improvement
Reduce solar gain through windows with awnings or other architectural features/landscaping etc
Improve mechanical systems by replacing old inefficient systems with new high efficiency systems; investigate if incentives for these improvements are available through the City’s natural gas utility
2.7.2
2.8
Electrical
Install occupancy sensors
Implement energy efficiency lighting using compact fluorescent light bulbs and install timers where appropriate to control outside lights
Install fully programmable thermostats within single or semi-detached houses and explore options for also using them in multi-unit buildings
Consider a power monitoring session which will show the peak demand which could lead to lower utility bills, reduced operating costs and more efficient use of utility power. RECOMMENDATIONS
It is recommended that the following asset Life-Cycle management goals be achieved within the next five to ten years. 1. Review operating and maintenance practices on a business-case basis, use Best Practices (where available) and other technical documents, and develop an associated tactical plan
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2.25
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Housing May 7, 2009
2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans 4. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. Use of traditional capital funding (and associated interest/debt payments) results in the community, paying considerably more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. See Appendix J for a more detailed review of this practice 5. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes 6. Develop a relationship between levels of service and cost 7. Develop public policy relating to levels of service and Total Cost of Service (TCS) 8. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay 9. Continue with efforts to establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models 10. Proceed with a condition assessment survey of Housing assets 11. Provide regular updates to the SotI Report Card 12. Develop budget management models that take into account the City’s growth (physical and population base and its associated impact on services and assets) on an annual basis, in order to conduct sustainable service delivery and asset management in the future 13. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis 14. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding 15. Develop better ways to determine O&M costs as a percentage (%) of replacement costs 16. Implement environmental sustainability and energy-saving improvements to support City goals and initiatives 17. Provide funding options and recommendations for the eventual replacement of buildings and major building components when they reach the end of their expected service life 18. Question the need for a particular facility before proceeding with rehabilitation or replacement, and formulate a suitable disposal program if required
2.26
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
3.0
Recreation
The Recreation Division of Community Services is tasked with maintaining the physical buildings and infrastructure that allow the City to provide their citizens with community services. These services are intended to facilitate social interaction within the community and to provide the community with open access to recreational space and a variety of recreation programs and services. Benefits include helping people to grow and be healthy, to build strong families and communities and to add to the quality of life in our neighbourhoods, to name a few. Figure 3.1 illustrates the nature of Recreation infrastructure and its components which are explained in detail within this document.
Recreation
High-Rise Apartments
Surface & Site Systems
Low-Rise Apartments
Row Houses
Vertical Movement
Electrical
SemiDetached Houses
Mechanical
SingleFamily Houses
Structural
Figure 3.1: Recreation Asset Types and Components
3.1
ASSET DESCRIPTION
3.1.1
Facilities
Community Recreation facilities are grouped into five distinct categories:
Arenas – publicly accessible skating facilities located throughout the City. Also used to host local sporting, entertainment events and public programming space.
Outdoor pools – publicly accessible outdoor swimming facilities located throughout the City.
Sports facilities and community halls – gatherings places for social, sporting activities and program space; also includes Ivor Wynne Stadium.
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3.1
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Recreation, community centres and pools – gathering places for social and recreational activities including public indoor recreation facilities that combine multiple types of recreation facilities and/or are predominantly used to provide a range of recreational, social and/or cultural programs.
Park Buildings – physical facilities that exist on park grounds that range from sheds to bleacher structures to picnic shelters, including buildings. Only buildings were included in this study.
3.1.2
Components
There are five component classifications currently set up by the City of Hamilton for the Community Recreation facilities, as illustrated in Figure 3.1:
Surface and Site Systems – components that are located on the same site as the facility, but are not typically attached to that facility, e.g. walkways, parking lots, etc.
Structural – physical parts that make up the building, e.g. foundations, walls, doors, windows, roofs
Electrical – all parts of a facility that use or conduct electricity, e.g. wiring, lighting, electric heaters, and fire alarm systems
Mechanical – parts of the facility that convey and utilize all non-electrical utilities within a facility, e.g. gas pipes, furnaces, boilers, plumbing, ventilation, and fire extinguishing systems
Vertical movement – components used for moving people between floors of buildings, e.g. elevators, wheelchair and stair lifts.
Of the five component categories, site components are unique in that their replacement and refurbishment is not directly dependent on the facility with which they are associated. For example, walkways on the property likely wouldn’t need to be replaced as part of the replacement of the facility on that property. Rather, site components are scheduled for replacement based on their own useful lives and their replacement schedule is left independent of the facility. Unlike site components, structural, mechanical, electrical, and vertical movement components are directly incorporated into the facility itself, and would need to be replaced as part of the replacement of the facility. 3.2
SERVICES PROVIDED/PURPOSE OF ASSETS
The Recreation facilities provide the City of Hamilton residents with access to sporting, recreational and social venues, including publicly-accessed pools, park buildings, arenas, and community centres.
3.2
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
3.3
INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS
The following assumptions were included in the analysis of Recreation facilities.
Sports fields, park grounds, corporate facilities, and Hamilton Entertainment and Convention Facilities Inc. (HECFI) managed facilities were not included in the analysis.
Indoor pools and seniors’ Centres are included in the Recreation and Community Centres category.
The property value of the land was not included in the analysis, since property is considered to be a completely separate asset category. Moreover, the land itself is not replaced when the facility or asset is replaced.
Site components on the land, such as walkways, are included as separate entities in the analysis since these components are replaced based on their respective expected service lives and not necessarily based on the expected service life of the facility or asset being replaced.
Minimum, maximum and expected facility replacement costs are based on National Asset Management Steering Group (NAMS), RS Means data and Stantec industry experience. The NAMS Group is a non-profit industry organization established to promote asset management through the development of best practice guidelines and training and an excerpt from the NAMS Property Manual (New-Zealand) can be found in Appendix C. RS Means cost estimates were derived from the 2006 RSMeans Square Foot Costs 27th Annual Edition Residential, Commercial, Industrial, Institutional.
Component costs (HVAC, electrical, roof, plumbing, etc.) are based on ReCAPP data. Note that ReCAPP data for Recreation costs are soft. The low and high ranges for component replacement costs are derived from an analysis of NAMS and RS Means costing data as well as Stantec industry experience.
ReCAPP data does not capture amenities or service features such as snack bars, counters, reception areas or washroom facilities, etc. Therefore, these costs were not able to be planned for.
Status quo analysis assumes no increase in gross service provision, thereby resulting in decreased Level of Service (LOS) as demand/population increases.
Demand-based analysis assumes maintaining LOS relative to projected demand/population growth.
Facility design enhancements and trends based on client needs and expectations have not been factored into the analysis.
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3.3
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
3.4
LIFE-CYCLE ANALYSIS
3.4.1
Introduction and List of 9 Questions
Analysis on a Life-Cycle basis means asking a series of simple questions. The first seven are generally accepted within the industry: 1. What do we have? 2. What is it worth? 3. What condition is it in? 4. What do we need to do to it? 5. When do we need to do it? 6. How much money do we need? 7. How do we reach sustainable funding? The City of Hamilton has added two very important questions, which are: 8. How do we maintain sustainability? 9. Do we still need it? 3.4.2
What do we have? - Assets (Groups, Types, Components, Hierarchy)
The Recreation facilities were grouped into five categories. A total of 320 facilities were included in the analysis as illustrated in Figure 3.2. 3.4.3
What is it worth?
The Recreation portfolio used for this analysis totals approximately $396 million, as illustrated in Figure 3.2 in 2008 dollars.
3.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Recreation Facilities Total 320 Facilities 20 Arenas 11 Outdoor Pools 31 Sports Facilities & Community Halls 33 Recreation, Community Centres & Pools 225 Park Buildings 2008 Replacement Value: $396M Annual Cost Per Capita: $21 Debt-Financed Cost Per Capita: $33
Figure 3.2: Recreation Assets (Capital Costs Only) 3.4.4
What Condition is it in? - Age and Condition Profiles
The following criteria were used for the analysis.
Arenas were analyzed with a 55-year expected life and will all be in need of reconstruction over the next 41 years.
Outdoor pools were analyzed with a 55-year expected life and will all be in need of reconstruction within the next 51 years.
Sports facilities and community halls were analyzed with a 75-year expected life and will all be in need of reconstruction within the next 71 years.
Recreation, community facilities and pools were analyzed with a 75-year expected life and will all be in need of reconstruction within the next 68 years.
Park Buildings were analyzed with a 75-year expected life and will all be in need of reconstruction within the next 66 years.
During interviews with key City staff, worksheets were completed in order to obtain estimates of the present condition and expected future condition of the Recreation facilities. Table 3.1 lists the results of the interviews and includes ratings for each facility type on a component-bycomponent level.
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3.5
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Table 3.1: Condition Assessment Worksheet: Recreation
Community Centres
Asset Component
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
Surface & Site Sytems
2
25 – 30 3
Time
Architectural & Structural Condition
1
25 – 30
2 3 Time
Vertical Movement
1 Condition
2
20 – 25 3
Time
Mechanical
1 Condition
2
<= 30 3
Time
Electrical Condition
1
10 – 20
2 3 Time
3.6
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D D F D D D B C D D D D D D D
DD C D D
Overall would rate as poor based on the age of many of the facilities.
Due to the age of the facilities as well as both minor and major foundation repairs are required.
Many facilities do not have elevating devices but the few that do are relatively new and in adequate condition.
Major problems within this asset component across all facilities.
Currently encountering major issues and expenditures for this asset component.
Age of the facilities and code changes are driving this area.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Arenas
Asset Component Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2
20 – 25 3
Time
Architectural & Structural Condition
1
25 – 30
2 3 Time
Vertical Movement
1 Condition
2
15 – 20 3
Time
Mechanical
1 Condition
2
20 – 30 3
Time
Electrical Condition
1
30 – 40
2 3 Time
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D D F C C F C C D D D F D D F
DD+ CDD-
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Many of the arena parking lots are in need of major resurfacing work: new catch basins, lines etc.
Work has been ongoing in regard to foundation and structural repairs through retrofits to many of the arenas.
Only a few arenas have elevating devices which have been only recently added. They are in relatively good condition.
Lots of work is being undertaken due the age of the plants and new legislation.
Many of the arenas require upgrading to current electrical systems.
Work is ongoing.
Many times funding is the concern.
3.7
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Indoor Pools
Asset Component
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
Surface & Site Systems
2
20 – 25 3
Time
Architectural & Structural Condition
1
25 – 30
2 3 Time
Vertical Movement
1 Condition
2 3
5 – 25
1 Condition
2
15 – 25 3
Electrical Condition
1
15 – 30
2 3
3.8
Condition & Performance Functional Adequacy Funding vs. Need
Time
Time
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
Time
Mechanical
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need
D D D D D F
D D-
C C D
C-
D D F D D F
DD-
The four indoor pool facilities are older facilities.
Parking lots in various states of repair. One has just recently been resurfaced; the other three are in need of work.
All four pools are older facilities
One facility has an elevator to get to viewing area. All pools have a manual pool lift for getting patrons in and out of the pool. None of the stand alone pools in this category have a ramp or beach entry to the pools. They are older facilities and need to be modernized.
Overall the pool mechanical systems are in need of repair. Different components have been replaced and or repaired over time but overall the asset components are rated low due in most part to the age of the facilities.
Repairs undertaken as needed but overall electrical at a fair ranking.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Outdoor Pools
Asset Component Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2
25 – 30 3
Time
Architectual & Structural Condition
1
20 – 25
2 3 Time
Vertical Movement
1 Condition
2 3 Time
Mechanical
1 Condition
2
25 – 30 3
Time
Electrical Condition
1
25 – 30
2 3 Time
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D D F D D F D D F D D F D D F
DDDDD-
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Parking lots are shared with arenas and/or parking lot is non-paved or there is no parking lot.
For those that have parking lots, they would be rated fair to poor.
Outdoor Pools, with the exception of Walker, have experienced very little repairs.
No vertical lifts.
Only Walker is accessible (ramp into pool) all other pools do not have pool lifts.
No work has been done on the pools other than Walker which is a new facility.
No work has been done on the pools other than Walker which is a new facility.
3.9
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Wading Pools
Asset Component Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2
25 – 30 3
Time
Architectual & Structural Condition
1
Time
Vertical Movement
20 – 25
2 3 3
1 Condition
2 3 Time
Mechanical
1 Condition
2
25 – 30 3
Time
Electrical Condition
1
25 – 30
2 3 Time
3.10
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D D F F D F
D D F D D F
DF
DD-
There are no parking lots associated with the wading pools, only walkways and pool decking.
There has been very little preventive work undertaken, only emergency repairs.
N/A
Many of the systems are the original systems which have exceeded their life expectancy.
Many of the systems are the original systems which have exceeded their life expectancy.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Activity Centres/ Community Halls
Asset Component Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2 3
25 – 30
Condition
1 2
25 – 30 3
1 Condition
2 3 Time
Mechanical
1 Condition
2
25 – 30 3
Time
Electrical Condition
1
15 – 40
2 3 Time
Condition & Performance Functional Adequacy Funding vs. Need
Time
Vertical Movement
Condition & Performance Functional Adequacy Funding vs. Need
Time
Architectual & Structural
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D D F
D-
D D F D D F D D F D D F
DDDD-
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Only emergency work has been undertaken in regard to these asset components.
Ratings are at various levels but overall many of the components have exceeded or reached life expectancy.
Only emergency work has been undertaken in regard to these asset components.
Ratings are at various levels but overall many of the components have exceeded or reached life expectancy.
No vertical movement.
Accessibility is an issue for many of the halls.
Basically only do emergency repairs.
Preventative maintenance program is limited.
Basically only do emergency repairs.
Preventative maintenance program is limited.
3.11
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Seniors’ Centres
Asset Component Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2
25 – 30 3
Condition
1
Time
Vertical Movement
25 – 30
2 3 3
1 Condition
2 3 Time
Mechanical
1 Condition
2
25 – 30 3
Time
Electrical Condition
1
25 – 30
2 3 Time
3.12
Condition & Performance Functional Adequacy Funding vs. Need
Time
Architectual & Structural
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D C D C C D C C C D D F D D F
D+ CC DD-
Overall within this asset component work is undertaken to ensure the safety of the seniors but as the facilities age, more work is going to be required around each of the asset components beyond the parking lots, i.e. walkways, etc.
Many of the asset components are nearing life expectancy and we will be required to undertake the work, i.e. windows, roofs, etc.
Vertical movement is a non-issue as the centres are one-floor facilities.
Accessibility is key for this asset component.
Ranking based on the fact the facilities are aging and many of the components are reaching life expectancy.
Ranking based on the fact the facilities are aging and many of the components are reaching life expectancy.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Stadiums
Asset Component Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2
20 – 25 3
Time
Architectual & Structural Condition
1 2
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy
D D F
30 – 40
1 Condition
2 3 Time
Mechanical
1 Condition
2
25 – 30 3
Time
Electrical Condition
1
25 – 30
2 3 Time
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D-
D
Funding vs. Need
Vertical Movement
2020 Rating
D F
3 Time
Overall Rating
Comments
(A, B, C, D or F)
1 Condition
Asset Type
D D F D D F D D F
D-
Lack of parking is an issue for all facilities.
Currently on a program of stair replacement at Ivor Wynne.
All facilities are old and in need of repair
Currently doing load testing on the stands to assess the structural state of Ivor Wynne.
Emergency repairs only at the other stadiums.
Removed bleachers from Brian Timmis that were no longer safe.
Overall, stadiums are aging facilities that require upgrading.
Only Ivor Wynne has an elevating device which requires upgrading.
All facilities have exceeded life expectancy in regard to this asset component.
Undertake emergency repairs only.
All facilities have exceeded life expectancy in regard to this asset component.
Undertake emergency repairs only.
DDD-
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3.13
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Parks Buildings
Asset Component Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2 3 Time
Architectual & Structural Condition
1 2 3
Overall Rating
Recreation deals with buildings only within Parks and open space
D
Overall the quality of this asset component would be ranked low.
D
There are varying degrees of work required depending on the nature and age of the facility.
Difficult to capture due to the number and variety of facilities, further analysis is required.
N/A
Emergency repairs are undertaken as required.
Routine mechanical checks are undertaken at the start of the summer season.
Emergency repairs are undertaken as required.
Routine mechanical checks are undertaken at the start of the summer season.
Funding vs. Need
1 Condition
2 3 Time
Mechanical
1 Condition
2
25 – 30 3
Time
Electrical Condition
1 2
25 – 30 3
Time
3.14
Comments
F
25 – 30
Time
Vertical Movement
2020 Rating
(A, B, C, D or F)
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy
1 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
D-
D D F
D-
D D F
D-
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
3.4.5
When do we need to do it? - Asset Useful Lives
Each asset has an associated useful life value assigned to it. This useful life is the number of years that the asset is expected to last with regular usage and proper maintenance. Various factors can affect the useful lives of facilities. Factors such as weathering, heavy use, or misuse can shorten the life of a facility. Conversely, factors such as under-utilization or better-thanexpected construction practices and materials could extend the life of a facility. For this reason, a range of useful lives for each facility was considered in the analysis as listed in Table 3.2. These ranges were determined through analysis of NAMS, ReCAPP data, RSMeans and Stantec industry experience. Table 3.2: Range of Expected Lives of Recreation Facilities Facility
Minimum Expected Life
Expected Life
Maximum Expected Life*
Arenas
35
55
75
Outdoor pools
35
55
75
Sports facilities and community halls
50
75
100
Recreation, community centres and pools
50
75
100
Park Buildings
50
75
100
* assumes assets maintained over time These useful lives provide an indication of when significant capital expenditures will be required in order to maintain the Recreation facilities. For example, if an arena was originally constructed in 1966 and it has an expected life of 55 years, then it is assumed that in 2021 (55 years after 1966) a new arena will need to be constructed in order to replace the aging facility. It is expected that the new facility would be constructed in a similar fashion, and would therefore have the same expected life. In the example of the arena that would be reconstructed in 2021, that arena would then be replaced again 55 years later in 2076, and again in 2131, and so on. While the quality of the construction will be considered to be the same, the actual design and features of the facility may not be similar. The impact of replacing assets can be observed in two ways: 1. The number of assets that need to be replaced; and 2. The cost of replacing those assets. The remaining life distribution for each category of the Recreation facilities expressed in terms of the number of facilities and total replacement value is illustrated in Figure 3.3 and Figure 3.4, respectively.
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3.15
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Figure 3.3: Recreation Facilities Useful Life by Number of Facilities
Figure 3.4: Recreation Facilities Useful Life by Percent of Total Replacement Value
3.16
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
The size of the bubbles shown in Figure 3.3 represents the percentage of facilities that need to be replaced in each 20-year period, relative to the total number of facilities. As can be seen from the chart approximately half of all of the facilities will require replacement within the next 20 years with the exception of the recreation, community centres and pools. In Figure 3.4 the size of the bubbles represents the percentage of the total replacement value for all facilities that need to be replaced within the 20-year period. It is clear that sports facilities and community halls will require a large capital investment to replace the deteriorated facilities within the next 20 years; whereas park buildings will require capital investment of a similar scale to replace deteriorated facilities within the subsequent 20-year period (i.e., 21-40 years), based on the total replacement value for that category. When the percentage of the total replacement value is compared to the number of facilities for a facility type, the differences are significant. For example, 30% of park buildings have a remaining life from 21 to 40 years (Figure 3.3) whereas these comprise 74% of the total replacement value for Park Buildings, (Figure 3.4). Therefore, it is important to consider the combination of both the number of facilities that will need to be replaced as well as the replacement value of those facilities. A comparison of these two results is shown in Figure 3.5 for sports facilities and community halls. Remaining Life
0 – 20
By Number of Facilities
44%
69%
28%
18%
28%
13%
21 – 40
41 – 60
By % of Total Replacement Value
Figure 3.5: Comparison of Analysis of Number of Facilities versus Percent Total Replacement Value (Sports Facilities & Community Halls) Over the next 20 years, approximately 44% of sports facilities and community halls (or 13 facilities) will require replacement. However, the total cost associated with those replacements will represent nearly 70% of the total replacement cost, or approximately $35 million.
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3.17
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
3.4.6
What do we need to do to it? - Rehabilitation and Replacement
Within this report this question deals only with the capital investments associated with maintaining the facilities and it has been assumed that O & M costs are currently at the appropriate level even though the City is aware of the fact that the current maintenance plan is not adequately funded. Each facility consists of various components which have unique properties and typically have to be replaced or refurbished in order to ensure that the facility remains functional for the entirety of its expected life as illustrated in Figure 3.6.
Figure 3.6: Life-Cycle of a Facility and its Roof Component For example, an arena that has an expected useful life of 55 years has a roof that is installed as part of the arena’s construction. At the time of construction, the cost of that roof would be included in the total construction cost of the facility. Likewise when that facility would be reconstructed in 55 years, the cost of the roof would be included in the cost of reconstruction. However, a roof has an expected useful life of only 18 years, much less than the 55 years that the arena is expected to last. In year 19 of that facility’s life, the cost of a roof replacement would have to be accounted for as a unique capital cost. Likewise the cost would have to be accounted for again in year 37 of the arena’s life, and so on. The same method is used to account for all capital costs associated with maintaining and replacing components of a facility as part of maintaining the facility as a whole. Some examples of facility component expected lives are provided in Table 3.3. Table 3.3: Examples of Facility Component Life Expectancy Example Component
3.18
Life Expectancy
Switchgear
28 Years
Plumbing Fixtures
14 Years
Interior Doors
48 Years
Parking lot
27 Years
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
3.4.7
How much money do we need? - Capital Costs/Rehabilitation and Renewal
Each asset has an associated useful life value assigned to it. This useful life is the number of years that the asset is expected to last with regular usage and proper maintenance. The useful lives for each type of Recreation facility are listed in Table 3.2. The expected useful lives outlined in Section 3.4.4 and 3.4.5 are used to define the rehabilitation and reconstruction cycles used within the analysis. The cost of this reconstruction or rehabilitation is expected to be comparable to the initial cost of the facility and the new facility is assumed to have the same expected life. Similar to a facility’s expected useful life; its expected replacement value can vary depending on a number of factors. However, each facility has its own replacement cost provided in ReCAPP and is used as the basis or expected replacement cost for this analysis. The percentage of expected, minimum, and maximum replacement costs based on the expected replacement cost for each of the facilities are summarized in Table 3.4. Table 3.4: Facility Replacement Unit Costs Facility
Minimum Replacement Cost (%)
Expected Replacement Cost (%)
Maximum Replacement Cost (%)
Arenas
80%
100%
120%
Outdoor pools
80%
100%
120%
Sports facilities and community halls
80%
100%
120%
Recreation, community centres and pools
80%
100%
120%
Park Buildings
80%
100%
120%
3.4.7.1 Level of Service Two level-of-service (LOS) options for the City of Hamilton’s Recreation facilities were considered within this analysis: status quo and growth-based demand, as explained below. Changes in demographics and their needs have not been included in this report although factors such as aging population, accessibility, use of space or type of facility will lead the City to renovate the facility in order to meet the needs of the changing demographics. Status Quo The first LOS option assumes that the
Recreation Division would maintain the status quo for service, i.e. the number of facilities presently available would remain unchanged indefinitely; and
Facilities would be maintained and replaced as necessary, but facilities themselves would never be expanded and no new facilities would be added to the existing inventory.
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3.19
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
This scenario would be adequate to maintain the existing level of service as long as the population of the City was also static. However, if the City’s population were to grow as is expected, the result of the status quo maintenance of the Recreation inventory would result in a reduced level of service. This is because the number of facilities would remain the same while the population continued to grow (from 520,000 today to 1,500,000 in 2108). The same number of facilities would need to serve a greater number of people; therefore, it is reasonable to expect that accessibility to those facilities would decrease, hence, there would be a drop in the level of service.
Millions
Figure 3.7 illustrates the annual capital requirements and sustainable funding level for maintaining the status quo in Recreation facilities. It is important to understand that the sustainable funding level is constant from year to year, while population is growing. The result is that the per-capita cost for the service would decrease as population grows, as shown in Table 3.5, below.
$70
$60
$50
$40
2009 $11.1M
2042 $11.1M
2075 $11.1M
2108 $11.1M
$30
$20
$10
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
Total Capital Requirements
Sustainable Capital Funding
Figure 3.7: Sustainable Capital Funding Model (Status Quo)
3.20
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Table 3.5: Per-Capita Cost for Service (Status Quo) Year Cost/Capita
2009
2034
2059
2084
2108
$21
$16
$13
$10
$7
In fact, both cost per capita and level of service will decrease at the same rate if the City maintains the status quo in term of numbers of facilities. Each Hamilton resident pays less for the service from one year to the next; however, their opportunity to utilize that service also decreases year after year at the same rate. Growth-Based Demand The second LOS option assumes that:
Demand is a constant as a percentage of the population
Recreation facilities will grow at the same rate as population increases
Demand is directly proportional to growth in population
The average rate of population growth is approximately 1.07% per year based on the results of the “Use, Renovation and Replacement Study for Hamilton Recreation and Public-Use Facilities” (Appendix B)
Areas underserved without City recreation facilities are not captured in the capital funding model
As shown in Figure 3.8, the sustainable capital funding requirement is not constant. However, since sustainable capital funding grows at the same rate as population, the cost per capita remains constant. This approach reflects the increased costs of maintaining the existing level of service by growing the number of facilities as the City’s population grows. For example, the sustainable capital funding level in 2009 is $11.1 million and the population is approximately 520,000, resulting in a cost of $21 per capita. In 2042, it is expected that Hamilton’s population will have grown to 740,000. The sustainable capital funding in 2042 is expected to have grown to $15.8 million, resulting in a cost of $21 per-capita cost. Each Hamilton resident pays the same amount each year for the service, and the level of service is the same from year to year.
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3.21
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Millions
Recreation May 7, 2009
$140
$120
$100
$80
2009 $11.1M
2042 $15.8M
2075 $22.5M
2108 $32.0M
$60
$40
$20
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
Total Capital Requirements (w/ Growth)
Sustainable Capital Funding
Figure 3.8: Sustainable Capital Funding Model (Maintain LOS)
3.4.7.2 Factors Affecting Levels of Service: The factors affecting levels of service can be broken into three broad categories according to their key performance criteria.
Legislative Requirements - mandatory provisions or standards set by local, state, federal or international bodies that govern asset utilization, particularly in terms of various issues affecting the general public.
Strategic and Corporate Goals - broad framework-based management directives. These are expected to be consistent with goals and values stated in policies and strategies.
Customer Requirements - customer expectations of the services provided by the utilization of the asset which are, in turn, dependent upon the customers’ ability and willingness to pay.
Legislative Requirements The following is a list of some of the legislative requirements that the City of Hamilton follows: Please note that this list is not all inclusive and in no particular order.
3.22
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Refrigeration Plants – Arenas Any registered refrigeration plant is required by legislation to operate under the Technical Standards and Safety Act – Operating Engineers Regulation, Boilers and Pressure Vessels Regulation, CSA-51-97 Boiler, Pressure Vessel and Pressure Piping Code and the CSA-B52-99 Mechanical Refrigeration Code. The Operating Engineers regulation requires that owners/operators for any registered unattended refrigeration plant develop and implement a maintenance program. To ensure the safety of the public and staff, it is required that owners/users of these refrigeration plants clearly understand and comply with the requirements as prescribed by the Operating Engineers Regulation 219/01 and the CSA B52-99 Mechanical Refrigeration Code. Air Quality The Ontario Occupational Health and Safety Act sets out the employer’s responsibly to ensure the protection of workers. Regulations under this Act have been established to define standards related to protection from specific hazards. The Chemical Hazards Regulation covers requirements relating to the control of chemical hazards. The method used will depend on the conditions at the work site and may require more than one approach. Standards respecting the design and operation of ventilation systems are defined in the Ventilation Regulation. General Ontario Occupational Health and Safety Act
WSIB Regulation 1101 governs the provision of First Aid/Response in Ontario’s workplaces.
Ontario Building Code Act
Industrial Regulations of the Occupational Health and Safety Act
Canadian Standards Association Code B52-99, Mechanical Refrigeration Code, Boilers and Pressure Vessels Regulation
Operating Engineers Regulation 219/01(OER) and ‘Refrigeration Operator Class "B" Certification
CAN/CSA B149 1-05 Requirements for Operation of Appliances and Cylinders at Shows, Exhibitions, or Other Similar Events
Annex J of the CAN/CSA B149.1-05 Natural Gas and Propane Installation Code (excerpt)
Propane Storage and Handling Code
Employment Standards Act, Human Rights Code and Occupational Health and Safety Act
Other legislation that may affect Public Skating includes the Copyright Act of Canada, Liquor License Act, Retail Sales Tax Act, Goods and Services Tax Act and Trespass to Property Act
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3.23
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Ontario Human Rights Code
Health Protection and Promotion Act
Guide to the Accessibility Standards for Customer Service, Ontario Regulation 429/07
Occupational Health and Safety Act
Strategic and Corporate Goals The following is a list of the Recreation Division’s guiding principles and directions, taken directly from the “Use, Renovation and Replacement Study for Hamilton Recreation and PublicUse Facilities”1 included in Appendix B. 1. Promote the healthy development of children as well as persons of all ages in order to build healthy and creative communities. 2. Ensure appropriate service levels. 3. Invest strategically in the redevelopment or repurposing of public recreational facilities. 4. Meet the needs of our diverse community and ensure accessibility. 5. Exercise fiscal accountability. 6. Strengthen community identity – promote community pride and cultural awareness. 7. Promote environmental protection and stewardship. Customer Requirements Customer requirements that influence the City’s operations are listed below in Table 3.6. Table 3.6: Customer Requirements for Level of Service Requirement
Example (where applicable)
Reference(s)
Safety
Stability of asset
Customer surveys, complaints
Security
Security system, patrol
Customer surveys, complaints
Aesthetics
Elevation, landscape
Customer surveys, complaints
Condition
Physical condition
Customer surveys, feedback
Comfort, suitability
Air conditioning, carpets
Customer surveys, complaints
Accessibility
Ramps, disabled access
Customer surveys, feedback
Availability
Ease of availability
Customer surveys, complaints
Capacity
Accommodation size
Customer surveys, complaints
Functional Utility
Swimming pool
Customer surveys, complaints
Environmental, ecological
Non polluting
Customer surveys, complaints
1
Monteith Brown, et.al., “Use, Renovation and Replacement Study for Hamilton Recreation and PublicUse Facilities,” Phase 2 Report, July 2008, P.9-13
3.24
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Requirement
Example (where applicable)
Reference(s)
Reliability-performance
Continuous desired performance
Customer surveys, feedback
Maintainability
Regular maintenance
Customer surveys, complaints
Quantity
Number of facilities
Customer surveys, feedback
Quality
Condition of use, value for money
Customer surveys, complaints
Affordability
Cost for service
Customer surveys, feedback
Cleanliness
Hygiene
Customer surveys, complaints
Future adaptability
Withstand future growth
Statistical data, planning
3.4.8
Summary of the Financial Analysis Results
The SotI analysis attempts to predict capital costs up to 100 years into the future. Rather than consider the results to be definitive, they are considered to be guideline figures and can vary for any number of reasons. Within the following section expected results have been listed as well as high and low estimates of sustainable funding requirements. There are three key factors that can have a significant impact on the sustainable funding requirements:
Anticipated useful lives of assets,
Replacement costs of assets, and
Whether those costs are paid in cash or debt by the City.
Figure 3.9 demonstrates how these three factors can be graphically depicted as three physical dimensions, with replacement cost as the vertical y-axis, expected useful life as the horizontal xaxis, and amount of debt incurred as the z-axis. When all capital costs are paid in cash by the City, otherwise referred to as Pay-As-You-Go (PAYG) spending, a two-dimensional range of sustainable funding requirements is determined as illustrated in Figure 3.10. Figure 3.11 illustrates the expected sustainable capital funding requirements for 2009 for the range of expected life and replacement costs. The number in the centre of the square represents the midpoint of both dimensions and is considered to be the most likely outcome; that is, if the City funds all capital projects on a PAYG plan, then Recreation facilities would require $11.1 million, or $21 per capita, in capital funding in 2009.
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3.25
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Max
Max $9.1M
$18.9M
t
b De
$
$
l ta
pi
Fi
in nc a n
g
Ca
$21
YG PA
Min Max
Per capita per year
$11.1M
Min $5.9M Max
Min
Life
$12.3M
Figure 3.9: The Three Dimensions of Impact on Capital Requirements
Life
Min
Figure 3.10: 2009 Sustainable Capital Funding Requirements (PAYG)
3.4.8.1 PAYG versus Debt-Financing Figure 3.11 illustrates the analysis results for Recreation facilities including the third dimension, Debt-Financing. Debt Financing Interest = + $6.1M/year
$13.6M
$29.2M
Max
$ ng ci n $9.1M na Fi
bt $17.2MDe l ta pi a C
Per Capita Per Year $33 Debt
$19.1M
Min Max
Life
Min
Figure 3.11: 2009 Sustainable Capital Funding Requirements (Debt-Financing) When Debt-Financing is included, the sustainable capital funding levels increase significantly. For example, sustainable capital costs increase from $11.1 million for PAYG to $17.2 million for Debt-Financing. In other words, approximately $6.1 million per year is taken out of the community to pay for interest only. Costs per capita also increase from $21 to $33, thus illustrating the true cost of debt. 3.26
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Table 3.7: Sustainable Capital Funding Requirements (million) 2009 PAYG Debt
2034 PAYG Debt
Year 2059 PAYG Debt
2084 PAYG Debt
2108 PAYG Debt
Status Quo
$11.1
$17.2
$11.1
$17.2
$11.1
$17.2
$11.1
$17.2
$11.1
$17.2
Growth
$11.1
$17.2
$14.5
$22.5
$19.0
$29.3
$24.8
$38.2
$32.0
$49.4
3.4.8.2 Sustainable Funding Model
Millions
Figure 3.12 illustrates the results of the analysis for Recreation facilities using the PAYG model.
$200
$150
$100
$50
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
-$50
-$100
-$150 Total Capital Requirements (w/ Growth)
Sustainable Capital Funding
Cumulative Reserves
Figure 3.12: Recreation Sustainable Capital Funding Model (PAYG)
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3.27
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
The blue (vertical bar) columns represent the actual capital requirements for each of the subsequent 100 years
The orange line represents the average capital requirements weighted by population growth of 1.07%
The green line provides the amount of cumulative reserves that would be generated if the sustainable capital funding requirements (orange line) were adhered to
In years when the actual capital requirements are less than the sustainable capital funding level, the difference would be added to the capital reserves. In years where the capital requirements are greater than the sustainable capital funding level, money would be taken from reserves to cover the shortfall. This ensures that investments are the most timely and cost-effective, i.e. doing the right thing to the right asset at the right time, instead of trying to maintain capital spending at a fairly consistent level from year to year. These results illustrate a deficit in 2046 due to the current backlog, as well as the nonsustainable funding practices used in the past.
The blue (vertical bar) columns represent the actual capital requirements for each of the subsequent 100 years
The orange line represents the average capital requirements weighted by population growth of 1.07%
The brown line provides the amount of cumulative debt that would be generated if the sustainable capital funding requirements were adhered to
Figure 3.13 illustrates the analysis results assuming that all capital expenditures would be funded through Debt-Financing, using a 15-year borrowing period at 6%. The sustainable funding requirements would increase from $11.1 million (PAYG) to $17.2 million (DebtFinancing) in 2009. By 2108, the sustainable funding requirements would be $32.0 million (PAYG) compared to $49.4 million (Debt-Financing).
3.28
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Millions
Recreation May 7, 2009
$350
$300
$250
$200
$150
$100
$50
20 09 20 13 20 17 20 21 20 25 20 29 20 33 20 37 20 41 20 45 20 49 20 53 20 57 20 61 20 65 20 69 20 73 20 77 20 81 20 85 20 89 20 93 20 97 21 01 21 05 21 09 21 13 21 17 21 21
$0
Borrowing Costs for Capital (w/ Growth)
Cumulative Debt
Sustainable Capital Funding
Figure 3.13: Recreation Sustainable Capital Funding Model (Debt-Financed) 3.4.9
How do we reach sustainable funding?
There is a current shortfall of approximately $6 million and it is recommended that the gap be closed within the next five to ten years. The current capital requirement for sustainability is over $11 million, while the present capital budget is approximately $5 million. 3.4.10 How do we maintain sustainability? Implement a policy committed to maintaining a consistent per capita cost for services and revisit the State of Infrastructure Report every five years to review funding levels, debt levels and levels of service. 3.4.11 Do we still need it? This was not included within the analysis however we recommend that an asset review committee be formed and that appropriate asset disposal policies be developed based on need and/or economic life of the asset. With this in mind, the City has retained Monteith Brown Planning Consultants in association with Totten Sims Hubicki Associates, The JF Group and Tucker Reid and Associates to complete a city-wide assessment of public indoor
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3.29
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
community/recreation facilities. This Public-Use Facilities Study will look at the City as a whole to create a strategy for reaching an appropriate distribution and supply of facilities based on the current and future needs of each community within the City. 3.5
KEY PERFORMANCE INDICATORS
Strategic:
Provide quality leisure/community facilities to residents
promote healthy, active living
provide access to diverse range of activities
Provide a safe environment for users
Tactical (Functional):
Over-all report card rating (e.g. target of B-)
Maintenance/rehab relative to capital replacement value (e.g. 60%-ish)
Cost per capita for supplying service
Cost to user for service
Facilities of each type per capita
ability of facilities to meet demand (e.g. Ice pads open 18 hours per day)
Operational KPI:
response times to service requests
actual demand for facility (hours used, number of users)
repair and maintenance costs per square metre
energy and utility costs per square metre
water costs per square metre
CO2 emissions in tonnes of carbon dioxide per square metre for operational property
3.6
IMPROVEMENT PROGRAM
3.6.1
Asset Management Process Improvements
Asset management processes are defined as the processes, analyses and evaluation techniques needed to support Life-Cycle asset management. These include the following asset management functions:
3.30
Knowledge of assets
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
Levels of service
Condition assessments
Asset accounting - valuation, revaluation, depreciation
Life-Cycle planning
Asset operations and maintenance
Asset creation and disposal
Performance monitoring
Quality assurance and continuous improvement
Risk management
Design and project management
Reviews and audit processes
3.6.2
Asset Management Information System Improvements
Asset management information systems are defined as the systems that support asset management processes and manipulate the relevant data. These include the following asset management functions:
Asset registers
Financial system
Maintenance management system
Condition monitoring
Capital works programming
As constructed plans
Geographical information systems
Advanced applications such as deterioration modeling
Future demand analysis
Such systems may replicate or even automate asset management processes. The following specific actions would improve Recreation’s asset management information system and hence the availability of data required to make decisions related to the ongoing management of the asset portfolio:
Continue use of ReCAPP or similar infrastructure management system and extend implementation to other asset groups
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3.31
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
3.6.3
Perform regular facility condition assessments and adjust maintenance requirements and timelines based on most recent information Asset Management Data and Knowledge Improvements
Asset management data and knowledge is defined as appropriate, accessible and reliable data that can be used with information systems to enable enhanced asset management. This includes the following data on the following asset characteristics and topics
Classification and identification
Physical attributes
Condition
Cost and maintenance histories
Benchmark data
Valuation
Life-Cycle cost evaluation
Data quality
Risk information
Recording of new assets
3.6.4
Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management
It is recommended that the Division begin the process of developing and implementing an O & M strategy for the various assets within the portfolio. The purpose of the strategy document is to:
Identify the strategies and actions used in the proactive maintenance of the assets.
Document the projected expenditures over a prescribed planning horizon which will typically be shorter than that used for the SotI report.
An important initial step in this process would be a review of the current O & M activities complete with costs; these activities should be categorised as either reactive or proactive. By completing this review it will be possible to begin defining changes that will be needed to adjust the balance of reactive vs. proactive activities. 3.6.5
Life-Cycle Analysis and Integration with Financial Tools
As the knowledge of the assets both in terms of the various attributes and condition increases it will be possible for Recreation to begin the process of managing the assets using life-cycle
3.32
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
concepts. It will be important to develop an understanding of the true costs associated with the management of the assets to assist in making better informed decisions in the future. Therefore, in order to ensure that the various costs associated with maintaining the assets are captured it will be essential to explore options for extending the either the ReCAPP or Hansen systems to track work orders related to the facilities and their components. 3.7
CITY ENERGY USE POLICY
The following sections outline some improvements that may be appropriate for implementation within the City’s Recreation facilities to assist on achieving the goals for energy conservation set out in the Energy Use Policy (Appendix F). This list is not intended to be exhaustive and is provided for illustrative purposes. The development of an Energy Plan for Recreation Division is recommended with a focus on some of the areas listed below. 3.7.1
Mechanical
Improve mechanical systems by replacing old inefficient systems with new high efficiency systems
Improve the tightness and insulation of the building envelope
Consider the implementation of ventilation heat recovery systems which can provide approximately 90% recovery efficiency
Retrofit controls to provide better management of plant
Implement an Energy Management System
Consider alternative/renewable energy sources geo-thermal, wind, solar (electric and thermal)
Reduce solar gain through windows with awnings or other architectural features/landscaping etc
3.7.2
Electrical
Lighting control system or occupancy sensors
Installation of energy efficient lighting (compact fluorescent, linear fluorescent and LED)
Complete a poser monitoring session which will show the peak demand which could lead to lower utility bills, reduce operating cost and more efficient use of utility power
Installation of variable frequency drives on motors will control the amount of electricity going to the motor, resulting in energy savings by matching the motor speed to the load
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3.33
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
3.8
RECOMMENDATIONS
A high-level State of the Infrastructure (SotI) Report was produced for the Public Works Department in 2005 for a number of assets including Community Facilities. Very limited information was available at that time and contact was limited to within the Public Works Department which maintains the hard assets on behalf of the Community Services Department which offers the programs themselves. Community Facilities were again reviewed as part of Public Works in 2006, without the benefit of much improved data and again with contact limited to the Public Works Department. For reference purposes only, recommendations from the 2005 and 2006 SotI reports have been included in sections 3.8.2 and 3.8.3, respectively. Following a more detailed review in 2008, with a much improved database and significant input from the Community Services Department, it was possible to perform a greater and more detailed analysis of the assets used to deliver recreational programs and to offer community centres for public use. This allowed for the following recommendations for the 2008 SotI in terms of the Recreation Division of the Community Services Department, in terms of achieving overall sustainable asset management and program delivery practices over the next five to ten years. 3.8.1
2008 SotI
1. Review operating and maintenance practices on a business-case basis, using Best Practices (where available) and other technical documents, and develop an associated tactical plan 2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans 4. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. Use of traditional capital funding (and associated interest/debt payments) results in the community paying considerably more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. See Appendix J for a more detailed review of this practice 5. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes 6. Develop a relationship between levels of service and cost 7. Develop public policy relating to levels of service and Total Cost of Service (TCS) 8. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay 9. Establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models
3.34
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
10. Provide regular updates to the SotI Report Card 11. Develop budget management models that take into account the City’s growth (physical and population base and its associated impact on services and assets) on an annual basis, in order to conduct sustainable service delivery and asset management in the future 12. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis 13. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding 14. Develop better ways to determine O&M costs as a percentage (%) of replacement costs 15. Assign responsibility and provide planning for the maintenance of assets that directly support Community facilities 16. Develop a Recreation Energy Plan and implement environmental sustainability along with energy-saving improvements to support City goals and initiatives 17. Provide funding options and recommendations for the eventual replacement of buildings and major building components when they reach the end of their expected service life 18. Review the Use, Renovation and Replacement Study for Hamilton and Public-Use Facilities annually and formally every five years 19. Question the need for a particular facility before proceeding with rehabilitation or replacement, and formulate a suitable disposal program if required 3.8.2
2006 SotI
1. Review Facilities and Open Spaces in greater detail 2. Review operating and maintenance practices on a business-case basis, using Best Practices where available and other technical documents, and develop an associated tactical plan 3. Review associated funding levels in order to ensure that systems are maintained at the least Life-Cycle cost 4. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required asset management plans 5. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. When sustainable levels of funding and expenditure are achieved, use of traditional capital funding (and associated interest/debt payments) could result in the community paying on average approximately 30-35% more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. There may be a need to differentiate
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3.35
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
between the original building of a facility and its retrofitting/replacement. This is obviously a complex issue that merits more discussion and analysis 6. Develop a link between future SotI Reports and the City’s State of the Environment Report 7. Establish and monitor appropriate and measurable Levels of Service and Performance 8. Develop a relationship between levels of service and cost 9. Develop public policy relating to levels of service and life-cycle cost 10. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay 11. Perform a detailed analysis to determine more precisely actual deterioration models 12. Provide regular updates to the SotI Report Card 13. Develop budget management models that take into account the City’s growth (physical and population base and its associated impact on services and assets) on an annual basis, in order to conduct sustainable asset management in the future 14. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis 15. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding 16. Develop better ways to determine O&M costs as a percentage (%) of replacement costs 3.8.3
2005 SotI
1. Review Facilities and Open Spaces in greater detail, similar to the Water, Wastewater and Roads assets 2. Determine an appropriate percentage (%) of replacement cost to be used for optimum funding of operation and maintenance activities for specific assets. This will assist in developing more accurate SotI Reports in the future 3. Review operating and maintenance practices on a business-case basis, using the Best Practices published by InfraGuide and other technical documents, and develop an associated tactical plan 4. Review associated funding levels in order to ensure that systems are maintained at the least Life-Cycle cost 5. Review the use of retrofitting technologies (i.e. cost vs. impact on remaining useful life for specific assets) and maintenance programs on a business-case and return-oninvestment (ROI) basis. This could have a significant positive impact on overall costs to the community. This SotI Report Card, limited in scope, was generally based only on replacement costs, except for the sanitary wastewater system
3.36
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Recreation May 7, 2009
6. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required asset management plans 7. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. When sustainable levels of funding and expenditure are achieved, use of traditional capital funding (and associated interest/debt payments) could result in the community paying on average approximately 21% more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. There may be a need to differentiate between the original building of a facility and its retrofitting/replacement. This is obviously a complex issue that merits more discussion and analysis 8. Develop a link between future SotI Reports and the City’s State of the Environment Report 9. Establish and monitor appropriate and measurable Levels of Service and Performance 10. Develop a relationship between levels of service and cost 11. Develop public policy relating to levels of service and life-cycle cost 12. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay
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3.37
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
4.0
Culture
The Culture division was formed to promote the development of the arts, culture, and heritage throughout the City. This mandate is achieved through the use of several vehicles, including but not limited to seven museums, and numerous monuments, and plaques. Figure 4.1 illustrates the nature of Culture infrastructure asset types which are explained in detail within this document. Culture
Art in the Public Realm
Collections
Heritage Landscapes
Monuments
Plaques
Structures & Buildings
Figure 4.1: Culture Asset Types The principles used in completing this study were taken from various and extensive Best Practice publications from around the world, including the Venice Charter for Conservation and Restoration of Monuments and Sites, And Other Heritage Charters and Standards (Appendix D). 4.1
ASSET DESCRIPTION
For the purpose of this analysis, the Culture assets were grouped into six categories:
Art in the Public Realm — individual pieces of art that are on public display, but are not necessarily part of a specific art collection, e.g. Memorial Fountain in Gage Park
Collections — pieces of art or artifacts that are grouped together by a common theme, such as an artist or an era, e.g. cannons
Heritage Landscapes — nine historic sites and parks within the City, including Dundurn Park
Monuments — a number of cenotaphs, war memorials, and crosses displayed throughout the City
Plaques — an inventory of hundreds of commemorative, memorial, federal, provincial, recognition and other types of plaques displayed throughout the City
Structures and Buildings — museums, pavilions, and other historic buildings
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4.1
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.2
SERVICES PROVIDED/PURPOSE OF ASSETS
The Culture assets provide the City of Hamilton residents with a sense of pride and culture that showcases the City's historical development. These historic sites, museums, and/or pieces of art provide the residents with direct cultural services to be maintained for future generations as well as priceless historical value. 4.3
INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS
The Culture Division has recently started to catalog all their assets. It is understood by Stantec that the inventory has not yet been completed and that there are many challenges with performing this task. The City is not always aware of the ownership they have in certain historical pieces, specifically monuments and plaques, until it is brought to their attention, thus the magnitude of the collection is impossible to determine. As a result, some assets may have been omitted from this analysis. The following assumptions were included in the analysis of Culture assets.
Historic sites would not be replaced, they would only be preserved and conserved
Some construction dates were estimated where data were unavailable
Individual life spans were developed for each asset: Minimum, Expected, Maximum
Sherman-Dergis formula was used for facilities only (see Appendix I for information on this formula)
4.4
LIFE-CYCLE ANALYSIS
4.4.1
Introduction and list of 9 questions
Analysis on a Life-Cycle basis means asking a series of simple questions. The first seven are generally accepted within the industry: 1. What do we have? 2. What is it worth? 3. What condition is it in? 4. What do we need to do to it? 5. When do we need to do it? 6. How much money do we need? 7. How do we reach sustainable funding?
4.2
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
The City of Hamilton has added two very important questions, which are: 8. How do we maintain sustainability? 9. Do we still need it?
4.4.2
What do we have? - Assets (Groups, Types, Components, Hierarchy)
The Culture assets were grouped into six categories totaling 447 assets that were included in the analysis. The number of assets within each of the six Culture categories is illustrated in Figure 4.2.
Culture 447 Assets/Facilities 47 Art in the Public Realm 107 Buildings & Structures 9 Heritage Landscapes 25 Monuments 115 Collections 144 Plaques 2008 Replacement Value: $266M Annual Cost Per Capita: $9 Debt-Financed Cost Per Capita: $14
Figure 4.2: Culture Assets (Capital Costs Only)
4.4.3
What is it worth?
The Culture portfolio used for this analysis totals approximately $266M, as illustrated in Figure 4.2 in 2008 dollars. This number falls short of the actual portfolio value since there are assets that are currently owned by the City that have not been cataloged, to date.
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4.3
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.4.4
What condition is it in? - Age and Condition Profiles
Some of the Culture assets are irreplaceable and, within this analysis, they have been assigned extremely long useful lives well outside the bounds of the analysis period (typically 500 years). Though the 500-year useful life is an estimate and, to some degree, a generalization, it conveys the idea that these assets should not wear out, since their service to the community lies in their unique qualities and age. Therefore, it is important to perform adequate maintenance in order to preserve these assets. The long useful life values for these assets are also used directly to calculate the annual cost of asset maintenance through the Sherman-Dergis formula, since this formula has been designed to increase annual costs as an asset ages. However, other assets managed by the Culture Division are not culturally or historically significant in themselves. Rather, they may be facilities, e.g. a museum, that contains significant assets, or they may provide education to the public regarding significant assets, e.g. a plaque. These assets are vital to the provision of this service to the community but are analyzed using more traditional means. These assets have shorter useful lives, often less than the analysis period, and the capital investments required are much less substantial (though not to be ignored). During interviews with key staff, worksheets were completed in order to obtain estimates of the present condition and expected future condition of the Culture assets. Table 4.1 lists the results of the interviews and includes ratings for each asset group.
4.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
Table 4.1: Condition Assessment Worksheet: Culture Assets
Art in the Public Realm
Asset Component
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
2 3 Time
Collections Condition
1 2 3 Time
1 2
Condition
Heritage Landscapes
3 Time
Monuments
1 Condition
2 3 Time
Plaques 1 Condition
2 3 Time
1 Condition
Structures & Buildings
2 3 Time
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
Condition & Performance Capacity vs. Need
1 Condition
Asset Type
C N/A
Funding vs. Need
F
Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need Condition & Performance Capacity vs. Need Funding vs. Need
D D-
D D-
F C-D N/A
D
F C N/A
N/A
C-
D D N/A
C
D-
F
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Inventories not complete to date
No asset components identified
This refers to the heritage landscapes that are under the Culture Division Portfolio – see inventory
No asset components identified
Inventories not complete
Need full building condition reports completed for each building? Very little to no info available.
C-
D
4.5
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.4.5
When do we need to do it? - Asset Useful Lives
Each asset has an associated useful life value assigned to it. This useful life is the number of years that the asset is expected to last with regular usage and proper maintenance. The useful life of a Culture asset can range significantly depending on the type of asset that is being considered. The range of useful lives for each type of Culture asset, as well examples for these ranges, are listed in Table 4.2. It should be noted that some assets are expected to be maintained virtually indefinitely. Table 4.2: Range of Useful Lives for Culture Assets Facility Art in the Public Realm
20 – 500
Collections
150 – 500
Examples
James Street Mural @ 20 years
Birk’s Clock @ 500 years
Botanical/Zoological Specimens @ 150 years
Long Guns at Smith’s Knoll @ 500 years
Heritage Landscapes
500
Auchmar @ 500 years
Monuments
500
Peace Memorial Arch @ 500 years
Plaques
60
H.A.A.A. Grounds @ 60 years
Portables at Hamilton Museum of Steam and Technology @ 25 years
Dundurn Castle @ 500 years
Structures and Buildings
4.4.6
Useful Life
25 – 500
What do we need to do to it? - Rehabilitation and Replacement
Within this report this question deals with only the capital investments associated with maintaining the facilities and it has been assumed that O & M costs are currently at the right level. For capital expenditures related to operational and routine maintenance, the ShermanDergis formula was applied to facilities within the Culture assets. This formula generates expected maintenance costs for each year of the facility's expected life. 4.4.7
How much money do we need? - Capital Costs/Rehabilitation and Renewal
The replacement value of the Culture assets is expected to be similar to the initial cost of the asset. Furthermore, the new asset is assumed to have the same expected life as the asset that is being replaced. Similar to how an asset's expected useful life may vary, its expected replacement value can vary depending on a number of factors. The ranges of expected replacement costs for each asset group are summarized in Table 4.3.
4.6
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
Table 4.3: Range of Culture Asset Replacement Costs Facility
Replacement Value
Art in the Public Realm
$50,000 - $500,000
Collections
Heritage Landscapes Monuments Plaques
Structures and Buildings
$50,000 - $5,000,000
$1,000,000 - $5,000,000 $20,000 $500 - $3,000
$25,000 - $24,000,000
Example
Dancers @ $50,000
Gore Park Fountain @ $500,000
Autotrophic in Mayor’s Office @ $50,000
Dundurn National Historic Site @ $5,000,000
Fieldcote Memorial Park @ $1,000,000
Auchmar @ $5,000,000
Cenotaph in Dundas @ $20,000
Bolt-on Plaques @ $500
Free-Standing Plaques @ $3,000
Veever’s Garage @ $25,000
Dundurn Castle @ $24,000,000
4.4.7.1 Level of Service Two Level of Service (LOS) options for the City of Hamilton’s Culture facilities were considered within this analysis: status quo and growth-based demand, as explained below. Status Quo The first LOS option assumes that the
Culture department would maintain the status quo for service, i.e., the number of Culture assets presently available would remain unchanged indefinitely; and
Assets would be preserved and conserved as necessary, but assets themselves would never be expanded and no new assets would be added to the existing inventory.
This scenario would be adequate to maintain the existing level of service as long as the population of the City was also static. However, if the City’s population were to grow as is expected, the result of the status-quo maintenance of the Culture inventory would result in a reduced level of service. This is because the gross supply of service would remain the same (approximately 447 assets) while the population continued to grow (from 520,000 today to 1,500,000 in 2108), hence, reducing accessibility of Culture Facilities. Figure 4.3 illustrates the annual capital requirements and sustainable funding levels for maintaining the status quo for Culture assets. It is important to understand that the sustainable funding level is constant from year to year, while population is growing. The result is that the per-capita cost for the service would decrease as population grows as shown in Table 4.4. In fact, both cost per capita and level of service decrease at the same rate if the City maintains the status quo. Each Hamilton resident pays less for the service from one year to the next; however, their opportunity to utilize that service also decreases year after year at the same rate of decline.
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4.7
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Millions
Culture May 7, 2009
20
18
16
14
2009 $4.8M
12
2042 $4.8M
2075 $4.8M
2108 $4.8M
10
8
6
4
2
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
0
Total Capital Requirements (w/ Growth)
Sustainable Capital Funding
Figure 4.3: Sustainable Capital Funding Model (Status Quo) Table 4.4: Cost per Capita for Capital Funding for Culture – Status Quo Year Cost/Capita
2009
2034
2059
2084
2108
$9
$7
$5
$4
$3
Growth-based Demand The second LOS option assumes that:
Demand is a constant as a percentage of the population;
Culture assets will grow at the same rate as population increases;
The average rate of population growth is approximately 1.07% per year based on the results of the Monteith Brown Report; and
Additional Recreation facilities will be introduced as part of reconstruction of existing facilities.
In actuality, the growth of the Culture asset portfolio is driven mostly by societal values at any given time. For example, during the late 19th century and the early 20th century, society valued 4.8
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
the cultural significance of military sites and upper-class homes. This resulted in the abundance of battle plaques, forts, upper-class residences, etc. within the portfolio. Currently, emphasis is placed on industrial, immigration, and aboriginal historic sites and, as such, many newlyidentified cultural assets fall under these categories. Due to the difficulties in predicting the changing values of society, population growth was used to provide an estimate of the future portfolio growth in this analysis. Therefore, the sustainable capital funding requirements for the Culture group were estimated based on the average annual capital funding requirements with consideration of population growth. The sustainable capital funding requirement is not constant, as shown in Figure 4.4. However, since sustainable capital funding grows at the same rate as population, the cost per capita is actually constant. It reflects the increased cost of maintaining the existing level of service for Culture assets as the City’s population grows.
Millions
For example, in 2009 the sustainable capital funding level is $4.8 million and the population is approximately 520,000, resulting in a cost of $9 per capita. In 2042, it is expected that Hamilton’s population will have grown to 740,000, and the sustainable capital funding requirement will have grown to $6.8 million, resulting in a cost of $9 per-capita. Each Hamilton resident pays the same amount each year for the service, and the level of service is the same from year to year. 35
30
25
20
2009 $4.8M
2042 $6.8M
2075 $9.6M
2108 $13.7M
15
10
5
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
0
Total Capital Requirements (w/ Growth)
Sustainable Capital Funding
Figure 4.4: Sustainable Capital Funding Model (Maintain LOS)
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4.9
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.4.7.2 Factors Affecting Levels of Service The factors affecting levels of service can be broken into three broad categories according to their key performance criteria.
Legislative Requirements - those mandatory provisions or standards set by local, state, federal or international bodies that govern asset utilization, particularly in terms of various issues affecting the general public.
Strategic and Corporate Goals - the broad framework-based management directives. These are expected to be consistent with goals and values stated in policies and strategies.
Customer Requirements - customer expectations of the services provided by the utilization of the asset which are, in turn, dependent upon the customers’ ability and willingness to pay.
Legislative Requirements Many of the heritage buildings have either or both a provincial easement and/or National Heritage Site designation. The provincial easements are legal contracts with the province. Customer Requirements Customer requirements that influence the City’s operations are listed below in Table 4.5. Table 4.5: Customer Requirements for Level of Service Requirement
Example (where applicable)
Reference(s)
Safety
Stability of asset
Customer surveys, complaints
Security
Security system, patrol
Customer surveys, complaints
Aesthetics
Elevation, landscape
Customer surveys, complaints
Condition
Physical condition
Customer surveys, feedback
Comfort, suitability
Air conditioning, carpets
Customer surveys, complaints
Accessibility
Ramps, disabled access
Customer surveys, feedback
Availability
Ease of availability
Customer surveys, complaints
Capacity
Accommodation size
Customer surveys, complaints
Environmental, ecological
Non polluting
Customer surveys, complaints
Reliability-performance
Continuous desired performance
Customer surveys, feedback
Maintainability
Regular maintenance
Customer surveys, complaints
Quantity
Number of facilities
Customer surveys, feedback
Quality
Condition of use, value for money
Customer surveys, complaints
Affordability
Cost for service
Customer surveys, feedback
Cleanliness
Hygiene
Customer surveys, complaints
Future adaptability
Withstand future growth
Statistical data, planning
4.10
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.4.8
Summary of the Financial Analysis Results
The SotI analysis attempts to predict capital costs up to 100 years into the future. Rather than consider the results to be definitive, they are considered to be guideline figures and can vary for any number of reasons. Expected results have been listed as well as high and low estimates of sustainable funding requirements. There are three key factors that can have a significant impact on the sustainable funding requirements:
Expected useful lives of assets,
Replacement costs of assets, and
Whether those costs are paid in cash or debt by the City.
Figure 4.5 demonstrates how these three factors can be graphically depicted as three physical dimensions, with replacement cost as the vertical y-axis, expected useful life as the horizontal xaxis, and amount of debt incurred as the z-axis. When all capital costs are paid in cash by the City, referred to as Pay-As-You-Go (PAYG) spending, a two-dimensional range of sustainable funding requirements is determined, as illustrated in Figure 4.6.
Max
Max
$5.8M
$5.8M
t
b De
$ n Fi
Min Max
an
cin
g
p Ca
ita
$
l
$9
YG PA
Min $3.8M
Life
Per capita per year
$4.8M
Min
Figure 4.5: The Three Dimensions of Impact on Capital Requirements
Max
$3.8M
Life
Min
Figure 4.6: 2009 Sustainable Capital Funding Requirements (PAYG)
The figure above illustrates the expected sustainable capital funding requirements for 2009 for the range of expected life and replacement costs. The number in the centre of the square represents the midpoint of both dimensions and is considered to be the most likely outcome. In other words, if the City funds all capital projects on a PAYG plan, then Culture assets would require $4.8 million, or $9 per capita, in capital funding in 2009.
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4.11
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.4.8.1 PAYG versus Debt-Financing Figure 4.7 illustrates the analysis results for Culture assets including the third dimension, DebtFinancing. Debt Financing Interest = + $2.6M/year
$8.9M
$8.9M
Max
$ ng ci n $5.9M na Fi
bt $7.4M De l ita p Ca
Per Capita Per Year $14 Debt
$5.9M
Min Max
Life
Min
Figure 4.7: 2009 Sustainable Capital Funding Requirements (Debt-Financing) When Debt-Financing is included, the sustainable capital funding levels increase significantly. For example, sustainable capital costs increase from $4.8 million for PAYG to $7.4 million for Debt-Financing. In other words, some $2.6 million/year is required to pay for interest only. Costs per capita also increase from $9 to $14, thus illustrating the true cost of debt. Table 4.6: Sustainable Capital Funding Requirements ($million) 2009 PAYG Debt
2034 PAYG Debt
Year 2059 PAYG Debt
2084 PAYG Debt
2108 PAYG Debt
Status Quo
$4.8
$7.4
$4.8
$7.4
$4.8
$7.4
$4.8
$7.4
$4.8
$7.4
Growth
$4.8
$7.4
$6.2
$9.6
$8.1
$12.6
$10.6
$16.4
$13.7
$21.2
4.12
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.4.8.2 Sustainable Funding Model
Millions
Figure 4.8 illustrates the results of the analysis for Culture assets using the PAYG model. 60
50
40
30
20
10
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
0
Total Capital Requirements (w/ Growth)
Cumulative Reserves
Sustainable Capital Funding
Figure 4.8: Culture Sustainable Capital Funding Model (PAYG)
Blue columns represent the actual capital requirements for each of the subsequent 100 years
The orange line represents the average capital requirements weighted by population growth of 1.07%
The green line provides the amount of cumulative reserves that would be generated if the sustainable capital funding requirements (orange line) were adhered to
In years when the actual capital requirements are less than the sustainable capital funding level, the difference would be added to the capital reserves. In years where the capital requirements are greater than the sustainable capital funding level, money would be taken from reserves to cover the shortfall. In other words, use of reserves in this manner (instead of trying to maintain annual capital spending at a fairly consistent level from year to year) ensures that investments are the most timely and cost-effective, i.e. doing the right thing to the right asset at the right time.
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4.13
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
Due to the expected long service lives associated with many of the Culture assets, as well as the even distribution of capital intensive projects over time, reserves would be reasonably maintainable over the next 100 years if the sustainable capital funding model was adhered to.
Millions
Figure 4.9 illustrates the analysis results assuming that all capital expenditures would be funded through Debt-Financing, using a 15-year borrowing period at 6%. The sustainable funding requirements would increase from $4.8 million (PAYG) to $7.4 million (Debt-Financing) in 2009. By 2108, the sustainable funding requirements would be $13.7 million (PAYG) compared to $21.2 million (Debt-Financing). $120
$100
$80
$60
$40
$20
20 09 20 13 20 17 20 21 20 25 20 29 20 33 20 37 20 41 20 45 20 49 20 53 20 57 20 61 20 65 20 69 20 73 20 77 20 81 20 85 20 89 20 93 20 97 21 01 21 05 21 09 21 13 21 17 21 21
$0
Borrowing Costs for Capital (w/ Growth)
Cumulative Debt
Sustainable Funding Level
Figure 4.9: Culture Sustainable Capital Funding Model (Debt-Financed) 4.4.9
How do we reach sustainable funding?
There is a current shortfall of approximately $4.8 million and it is recommended that the gap be closed within the next five to ten years. The current capital requirement for sustainability is over $4.8 million, while there is presently no capital budget. 4.4.10 How do we maintain sustainability? Implement a policy committed to maintaining a consistent number of units per population and revisit the State of the Infrastructure Report every five years to review funding levels, debt levels and levels of service. 4.14
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
4.4.11 Do we still need it? This was not included within this analysis however we recommend that an asset review committee be formed and that appropriate asset disposal policies be developed based on need and/or economic life of the asset. 4.5
KEY PERFORMANCE INDICATORS
Strategic:
Promote education and understanding of historical and cultural factors relevant to the City of Hamilton
Provide access to art, museums, and other culturally significant facilities and artefacts
Provide a cultural context for the City and the community
Tactical (Functional):
Assess mitigation of threats to the facilities or assets
Number and variety of educational programs available and their effectiveness
Accessibility of artefacts and facilities
Cost per capita for supplying service
Cost to user for service
Operational KPI:
Number of users of educational programs and facilities
Completeness and accuracy of inventory
4.6
IMPROVEMENT PROGRAM
4.6.1
Asset Management Process Improvements
Asset management processes are defined as the processes, analyses and evaluation techniques needed to support Life-Cycle asset management. These include the following asset management functions:
Knowledge of assets
Levels of service
Condition assessments
Asset accounting - valuation, revaluation, depreciation
Life-Cycle planning
Asset operations and maintenance
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4.15
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
Asset creation and disposal
Performance monitoring
Quality assurance and continuous improvement
Risk management
Design and project management
Reviews and audit processes
4.6.2
Asset Management Information System Improvements
Asset management information systems are defined as the systems that support asset management processes and manipulate the relevant data. These include the following asset management functions:
Asset registers
Financial system
Maintenance management system
Condition monitoring
Capital works programming
As constructed plans
Geographical information systems
Advanced applications such as deterioration modeling
Future demand analysis
4.6.3
Asset Management Data and Knowledge Improvements
Asset management data and knowledge is defined as appropriate, accessible and reliable data that can be used with information systems to enable enhanced asset management. This includes the following data on the following asset characteristics and topics:
Classification and identification
Physical attributes
Condition
Cost and maintenance histories
Benchmark data
Valuation
Life-Cycle cost evaluation
4.16
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
Data quality
Risk information
Recording of new assets
4.6.4
Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management
It is recommended that the Division begin the process of developing and implementing an O & M strategy for the various assets within the portfolio. The purpose of the strategy document is to:
Identify the strategies and actions used in the proactive maintenance of the assets.
Document the projected expenditures over a prescribed planning horizon which will typically be shorter than that used for the SotI report.
An important initial step in this process would be a review of the current O & M activities complete with costs; these activities should be categorized as either reactive or proactive. By completing this review it will be possible to begin defining changes that will be needed to adjust the balance of reactive vs. proactive activities. 4.6.5
Life-Cycle Analysis and Integration with Financial Tools
As the knowledge of the assets both in terms of the various attributes and condition increases it will be possible for Culture to begin the process of managing the assets using life-cycle concepts. It will be important to develop an understanding of the true costs associated with the management of the assets to assist in making better informed decisions in the future. Therefore, in order to ensure that the various costs associated with maintaining the assets are captured it will be essential to explore options for extending either the ReCAPP or Hansen systems to track work orders related to the facilities and their components. 4.7
CITY ENERGY USE POLICY
The following sections provide recommendations based on the component categories analyzed for the Culture facilities as set out in the Energy Use Policy (Appendix F). 4.7.1
Mechanical
This Culture asset group cannot be considered in the same manner as the other three groups of assets analyzed within this document. It can be difficult to make significant changes to envelopes of historical buildings. However, it would be relatively straight forward to make improvements to internal components where alteration or damage to the facility would be minimized. Possible retrofits and alterations include:
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4.17
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
Improvements to mechanical systems
Solar heat gain reduction (awnings/landscaping)
Energy Management System upgrades/adjustments
4.7.2
Electrical
Lighting control system or occupancy sensors (depending on the size of the building)
Installation of energy-efficient lighting (compact fluorescent, linear fluorescent, possibly LED)
Complete a power monitoring session which will show the peak demand which could lead to lower utility bills, reduce operating cost and more efficient use of utility power.
4.8
RECOMMENDATIONS
It is recommended that the following asset Life-Cycle management goals be achieved within the next five to ten years. 1. Review operating and maintenance practices on a business-case basis, using Best Practices where available and other technical documents, and develop an associated tactical plan 2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans 4. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes 5. Develop a relationship between levels of service and cost 6. Develop public policy relating to levels of service and Total Cost of Service (TCS) 7. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay 8. Continue with efforts to develop a comprehensive database to inventory existing assets 9. Establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models 10. Provide regular updates to the SotI Report Card 11. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis 12. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is 4.18
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Culture May 7, 2009
(including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding 13. Develop better ways to determine O&M costs as a percentage (%) of replacement costs, where applicable 14. Assign responsibility and provide planning for the maintenance of assets that directly support Cultural facilities 15. Implement environmental sustainability and energy-saving improvements to support City goals and initiatives, where applicable 16. Provide funding options and recommendations for the refurbishment or replacement of buildings and major building components when they reach the end of their expected service life 17. Identify capital investment requirements for facility rehabilitation 18. Formulate a suitable disposal program, where applicable
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4.19
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
5.0
Long-Term Care Facilities
The City of Hamilton owns and operates two Long-Term Care facilities, Macassa Lodge and Wentworth Lodge. Wentworth Lodge recently underwent redevelopment (2008) for 108 of their 160 beds and it has one section (52 beds) that was built in 1988. Macassa Lodge, which has 270 beds, has multiple resident areas that were constructed at various times in the 1980's and the 1990's. Figure 5.1 illustrates the nature of Long-Term Care infrastructure and its components which are explained in detail within this document.
Long Term Care
Macassa Lodge
Surface & Site Systems
Vertical Movement
Electrical
Wentworth Lodge
Mechanical
Structural
Parks, Trails & Grounds ♦ Beds
Figure 5.1: Long-Term Care Assets and Component Types 5.1
ASSET DESCRIPTION
5.1.1
Facilities
The City of Hamilton owns and operates two Long-Term-Care facilities, Macassa Lodge and Wentworth Lodge. Both homes provide Long-Term Care to citizens who are unable to live on their own in the community. Wentworth Lodge recently underwent redevelopment (2008) for 108 of their 160 beds and there is one section (52 beds) that was built in 1988. Macassa Lodge which has 270 beds has multiple resident areas that were constructed at various times in the 1980's and 1990's. Macassa Lodge is a Clinical Teaching Unit affiliated with McMaster University and numerous other educational institutions that provide learning opportunities for several disciplines. 5.1.2
Components
This report considers six classifications for components contained by Long-Term Care facilities for analysis along with an additional component, specific to Long-Term Care Facilities, Beds:
Surface and Site Systems – components that are located on the same site as the facility, but are not typically attached to that facility, e.g. walkways
Structural – physical parts that make up the building, e.g. foundations, walls, doors, and windows
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5.1
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Electrical – all parts of a facility that use or conduct electricity, e.g. wiring, lighting, electric heaters, and fire alarm systems
Mechanical – parts of the facility that convey and utilize all non-electrical utilities within a facility, e.g. gas pipes, furnaces, boilers, plumbing, ventilation, and fire extinguishing systems
Vertical movement - components used for moving people between floors of buildings, e.g. elevators, wheelchair and stair lifts
Parks, Trails and Grounds – components include fields, fencing, courtyards, flower beds, etc. where applicable
Beds - components include the mattress and physical bed units
5.2
SERVICES PROVIDED/PURPOSE OF ASSETS
All Long-Term Care facilities are licensed by the Ontario Ministry of Health and Long-Term Care. Long-Term Care facilities provide numerous vital services and programs, including nursing and personal care on a 24-hour basis, administration of medication, complete meal services, and assistance with activities of daily living for the City’s senior citizens and other individuals who may not be able to take care of themselves. 5.3
INCLUSIONS, EXCLUSIONS AND ASSUMPTIONS
The following assumptions were included in the analysis of Long-Term Care facilities.
5.2
The property value of the land was not included in the analysis, since property is considered to be a completely separate asset category. Moreover, the land itself is not replaced when the facility or asset is replaced
Costs for Macassa Lodge are unknown. All cost projections for Macassa Lodge are based on proportion of beds relative to Wentworth Lodge (Wentworth Lodge has 270 beds and Macassa Lodge has 160 beds; therefore, 270 / 160 = 1.7 was used to project costs)
Facility replacement costs based on Wentworth Lodge costs for 2006
Component costs (HVAC, electrical, roof, plumbing, etc.) based on ReCAPP data
Ranges of costs based on NAMS, RS Means data and Stantec industry experience: Minimum, Expected, Maximum
Individual life spans were developed for each component: Minimum, Expected, Maximum
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
5.4
LIFE-CYCLE ANALYSIS
5.4.1
Introduction and List of 9 Questions
Analysis on a Life-Cycle basis means asking a series of simple questions. The first seven are generally accepted within the industry: 1. What do we have? 2. What is it worth? 3. What condition is it in? 4. What do we need to do to it? 5. When do we need to do it? 6. How much money do we need? 7. How do we reach sustainable funding? The City of Hamilton has added two very important questions, which are: 8. How do we maintain sustainability? 9. Do we still need it? 5.4.2
What do we have? - Assets (Groups, Types, Components, Hierarchy)
The analysis included two Long-Term Care facilities, totaling 430 beds, as illustrated in Figure 5.2. 5.4.3
What is it worth?
The Long-Term Care facilities portfolio used for this analysis has a total replacement value of approximately $54M, as illustrated in Figure 5.2 in 2008 dollars.
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5.3
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Long Term Care Facilities 2 Facilities: Macassa Lodge (270 Beds) Wentworth Lodge (160 Beds) 2008 Replacement Value: $54M Annual Cost Per Capita: $2 - $5 Debt-Financed Cost Per Capita: $4 - $7
Figure 5.2: Long-Term Care Facilities Assets (Capital Costs Only) 5.4.4
What condition is it in? - Age and Condition Profiles
The following criteria were used for the analysis.
The older section of the Wentworth Lodge was analyzed with a 75-year expected life and will be in need of reconstruction within 54 years
The newer section of the Wentworth Lodge was analyzed with a 75-year expected life and will be in need of reconstruction within 74 years
The Macassa Lodge A Wing was analyzed with a 75-year expected life and will be in need of reconstruction in 62 years
The Macassa Lodge D Wing was analyzed with a 75-year expected life and will be in need of reconstruction in 54 years
The Macassa Lodge C&E Wings were analyzed with a 75-year expected life and will be in need of reconstruction in 66 years
During interviews with key staff, worksheets were completed in order to obtain estimates of the present condition and expected future condition of the Long-Term Care facilities. Table 5.1 lists the results of the interviews and includes ratings of each category of facility on a component level.
5.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Table 5.1: Condition Assessment Worksheet: Long-Term Care Facilities Asset Component
LTC Facilities (Wentworth & Macassa)
Surface & Site Systems
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
1 2 3 Time
Architectural & Structural
5-40 1 Condition
LTC Facilities (Wentworth & Macassa
Condition & Performance Functional Adequacy Funding vs. Need
B
Condition & Performance
C
2
Functional Adequacy
3
C F
C
Time
Vertical Movement
LTC Facilities (Wentworth & Macassa
Mechanical
20-25 1 2
Condition
LTC Facilities (Wentworth & Macassa
Overall Rating
2020 Rating
3 Time
Funding vs. Need
F
Condition & Performance Functional Adequacy Funding vs. Need
C B F
C-
D
C-
2-30
1
Condition & Performance
Condition
2
Comments
(A, B, C, D or F)
5-10
Condition
Asset Type
Some parking lots exceed 10 years (including catch basins, walkways and lighting).
Insufficient parking for visitors and staff.
20% of buildings pre-1988; 15% of buildings 12 years old.
Insufficient storage and office space. Resident rooms too small in one area.
Building deterioration accelerated due to damage from resident equipment and mobility aides.
One kitchen service elevator pre-1980.
Two elevators have obsolete control electronics.
20% of HVAC units pre-1988 (includes two units that need to be replaced immediately at an estimated cost of $150,000).
20% of HVAC units pre-1996.
Issue of insufficient hot water (at peak demand times) needs to be addressed at one facility.
20% of buildings plumbing and fixtures are pre-1988.
20% of buildings fire protection systems are pre-1988.
C
3 Time
Functional Adequacy
Funding vs. Need
B
C-
F
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5.5
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
LTC Facilities (Wentworth & Macassa
Asset Component
Condition
Useful Life
Rating
(select point on deterioration curve)
(years)
(A, B, C, D or F)
Electrical 1 2 3 Time
5.6
Parks & Trails (landscaping)
15
1 Condition
LTC Facilities (Wentworth & Macassa
2 3 Time
Overall Rating
2020 Rating
Comments
(A, B, C, D or F)
15-35 Condition
Asset Type
Condition & Performance Functional Adequacy Funding vs. Need Condition & Performance Functional Adequacy Funding vs. Need
C B
C-
F C C F
D
25% of buildings electrical are pre-1988, including one emergency generator.
Additional energy efficiencies need to be addressed to meet City of Hamilton energy reduction strategy.
Landscaping contract doesn’t cover improvements i.e. Additional plantings, replacement, tree trimming/removal, etc.
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
5.4.5
When do we need to do it? - Asset Useful Lives
Each asset has an associated useful life value assigned to it. This useful life is the number of years that the asset is expected to last with regular usage and proper maintenance. The useful lives for each type of Long-Term Care facility are listed in Table 5.2. These values were determined by analyzing NAMS, ReCAPP data, RSMeans and Stantec industry experience. Table 5.2: Range of Expected Lives of Recreation Facilities Minimum Expected Life
Expected Life
Maximum Expected Life
Macassa Lodge
60
75
90
Wentworth Lodge
60
75
90
Facility
Various factors can affect the useful lives of facilities. Factors such as weathering, heavy use, or misuse can shorten the life of a facility. Conversely, factors such as under-utilization or betterthan-expected construction practices and materials could extend the life of a facility. For this reason, a range of useful lives for each facility was analyzed, as listed in Table 5.2. As with the expected lives, these ranges were determined through analysis of NAMS, ReCAPP data, RSMeans and Stantec industry experience. These useful lives provide an indication of when significant capital expenditures will be required in order to maintain the Long-Term Care facilities. For example, if a Long-Term Care facility was originally constructed in 1988 and it has an expected life of 75 years, then it is assumed that in 2063 (75 years after 1988) a new Long-Term Care facility will need to be constructed in order to replace the aging facility. It is expected that the new facility would be constructed in a similar fashion and would therefore have the same expected life. In the example of the Long-Term Care facility that would be reconstructed in 2063, that facility would then be replaced again 75 years later in 2138, and so on. 5.4.6
What do we need to do to it? - Rehabilitation and Replacement
Within this report this question deals with only the capital investments associated with maintaining the facilities and it has been assumed that O & M costs are currently at the right level. Each facility consists of various components. These components have unique properties and typically have to be replaced or refurbished in order to ensure that the facility remains functional for the entirety of its expected life as illustrated in Figure 5.3.
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5.7
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Figure 5.3: Life-Cycle of a Facility and its Roof Component
For example, a Long-Term Care facility that has an expected useful life of 75 years has a roof that is installed as part of the original construction of the facility. At the time of construction, the cost of that roof would be included in the total construction cost of the facility. Likewise, when that facility would be reconstructed in 75 years, the cost of the roof would be included in the cost of reconstruction. However, a roof has an expected useful life of only 25 years, much less than the 75 years that the Long-Term Care facility is expected to last. In year 25 of that facility’s life, the cost of a roof replacement would have to be accounted for as a unique capital cost. Likewise the cost would have to be accounted for again in year 50 of the facility’s life, and so on. The same method is used to account for all capital costs associated with maintaining and replacing components of a facility as part of maintaining the facility as a whole. Examples of life expectancy values used for asset components within this analysis are illustrated in Table 5.3. Table 5.3: Examples of Facility Component Life Expectancy Example Component
5.4.7
Life Expectancy
Plumbing Fixtures
19 Years
Interior Lighting
34 Years
Stucco Wall Finish
61 Years
Parking lot
34 Years
How much money do we need? - Capital Costs/Rehabilitation and Renewal
Each facility has an associated expected useful life. This expected useful life is the number of years between the construction of the facility and the time when that facility would have to be reconstructed or completely rehabilitated. The cost of this reconstruction or rehabilitation is expected to be similar to the initial cost of the facility, and the new facility is assumed to have the same expected life. Like a Facility’s expected useful life, its expected replacement value can vary depending on a number of factors. With consideration of this, a range of expected replacement costs was developed using NAMS, ReCAPP data, RSMeans and Stantec industry experience. The expected replacement cost ranges per square foot are summarized in Table 5.4. 5.8
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Table 5.4: Facility Replacement Unit Costs Minimum Replacement Cost (per ft2)
Expected Replacement Cost (per ft2)
Maximum Replacement Cost (per ft2)
Macassa Lodge
$99.58
$192.42
$285.26
Wentworth Lodge
$99.58
$192.42
$285.26
Facility
5.4.7.1 Level of Service: Three Level of Service (LOS) options for the City of Hamilton’s Long-Term Care facilities were considered within this analysis, status quo and growth-based demand, and demographic-based demand as explained below. Status Quo The first LOS option assumes that the
Long-Term Care Division would maintain the status quo for service, i.e., the number of Long-Term Care beds presently available would remain unchanged indefinitely; and
Long-Term Care facilities would be maintained and replaced as necessary, but facilities themselves would never be expanded and no new facilities would be added to the existing inventory.
This scenario would be adequate to maintain the existing level of service as long as the population of the City was also static. However, if the City’s population were to grow as is expected, the result of the status quo maintenance of the Long-Term Care inventory would result in a reduced level of service. This is because the gross supply of service would remain the same, approximately 430 beds. As can be seen in the following table the number of beds per 10,000 population will reduce from the current level of 8 to 3 over the course of this analysis. Table 5.5: Status Quo Beds per 1,000 Capita Year Beds per 1,000 Capita
2009
2034
2059
2084
2108
8
6
5
4
3
Figure 5.4 illustrates the annual capital requirements and sustainable funding level for maintaining the status quo in Long-Term Care facilities. It is important to understand that the sustainable funding level is constant from year to year, while population is growing.
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5.9
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Millions
Long-Term Care Facilities May 7, 2009
$30
$25
$20
$15
2009 $1.2M
2042 $1.2M
2075 $1.2M
2108 $1.2M
$10
$5
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
Total Capital Requirements
Sustainable Capital Funding (status Quo)
Figure 5.4: Sustainable Capital Funding Model (Status Quo) The result is that the per-capita cost for the service would decrease as population grows as shown in the following table. Table 5.6: Status Cost per Capita Year Cost/Capita
2009
2034
2059
2084
2108
$2.37
$1.82
$1.39
$1.07
$0.83
In fact, both cost per capita and level of service decrease at the same rate if the City maintains the status quo. Each Hamilton resident pays less for the service from one year to the next; however, their opportunity to utilize that service also decreases year after year at the same rate of decline. Therefore, if the demand for Long-Term Care Facilities continues at current levels based on a percentage of the population there will be an increasing shortfall in available beds, resulting in significantly longer wait times. Growth-Based Demand The second LOS option assumes that:
Demand is a constant as a percentage of the population;
Long-Term Care facilities will grow at the same rate as population increases; and
5.10
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
The average rate of population growth is approximately 1.07% per year based on the results of the Monteith Brown Report.
Millions
As shown in Figure 5.5, the sustainable capital funding requirement is not constant. However, since sustainable capital funding grows at the same rate as population, the cost per capita remains constant. It reflects the increased costs of maintaining the level of service relative to population for Long-Term Care facilities as the City’s population grows.
$60.00
$50.00
$40.00
$30.00
$20.00
2042 $1.8M
2009 $1.2M
2075 $2.5M
2108 $3.5M
$10.00
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0.00
Capital Requirements (growth-based demand)
Sustainable Capital Funding
Figure 5.5: Sustainable Capital Funding Model (Growth-Based LOS) For example, in 2009 the sustainable capital funding level is $1.2 million and the population is approximately 520,000, resulting in a cost of just over $2 per capita. In 2042, it is expected that Hamilton’s population will have grown to 740,000, and the sustainable capital funding requirement will have grown to $1.8 million. When this funding level is split between the 2042 population of Hamilton, the per-capita cost is the same at just more than $2. Each Hamilton resident pays the same amount each year for the service, and the level of service relative to total population is the same from year to year. Demographic-Based Demand Long-Term Care Facilities are unique among the facilities in this report in that they are generally utilized only by older age groups. With the availability of recent demographic projections from mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
5.11
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Statistics Canada, Stantec produced a third level-of-service (LOS) scenario for Long-Term Care which considers:
The aging of Canada’s population - people who require Long-Term Care services tend to be in older age groups
Demand for Long-Term Care services for the segment of the population above the age of 75 is growing faster than the general population.
Age demographics information available from Statistics Canada allowed Stantec to estimate demand for Long-Term Care services until 2061. Statistics Canada age forecasts were not available beyond this point in time; therefore, Stantec applied population-growth-based demand (1.07%) from 2062 to the end of the analysis period, 2108. Figure 5.6 illustrates the annual capital requirements and sustainable capital funding requirements for Long-Term Care Facilities.
Millions
Similar to the growth-based demand model the sustainable funding level increases as the demand increases for the demographic-based demand model. However, demand for LongTerm Care is expected to increase at a higher rate than population growth until 2061, and this is reflected in the model.
$120
$100
$80
$60
$40
2009 $1.2M
2042 $3.3M
2075 $4.3M
2108 $6.1M
$20
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
Total Capital Requirements (w/ Demand)
Sustainable Capital Funding
Figure 5.6: Sustainable Capital Funding Model (Demand-based LOS) 5.12
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Comparing Level of Service Scenarios Level of Service can be measured using different standards. It can be absolute in which the supply of the service is constant and completely independent of outside factors. For example, 430 beds are provided regardless of the demand, which is referred to as Status Quo. LOS can also be measured relative to the population where the number of beds per capita remains constant, called Growth-Based; for example, one bed per 1,000 residents. LOS can also be measured relative to the expected demand, or Demand-Based. In this case, the number of beds available would be based on the number of seniors (as opposed to number of residents) at any given time, such as one bed per 100 seniors. Deciding which metrics to use to determine the level of service is as important as determining the level of service to be maintained. The differences between the three LOS models is illustrated in Figure 5.7 where demand is represented by the number of Long-Term Care beds that would be required in a given year for each of the three demand scenarios under consideration:
Status Quo – the number of beds would not change from the current situation, ~430 beds
Growth-Based – the number of beds required would change based on growth of population
Demand-Based – the number of beds required would change based on the number of seniors. 2500
Number of Beds Required
2000
1500
Dem
and
1290 Beds
1000
th G ro w
860 Beds
500 430 Beds
Status Quo 0 2000
2020
2040
2060
2080
2100
2120
Year Expected Demand
Population Growth-Based Demand
Status Quo
Figure 5.7: Future Demand for Long-Term Care Facilities mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
5.13
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Comparing the Growth-Based curve to the Demand-Based curve illustrates how an aging population is expected to increase the requirements for Long-Term Care facilities much faster than population growth alone. Figure 5.8 illustrates the cost per capita for each of the LOS scenarios based on the costs per capita:
Status Quo - the cost per capita decreases over time since a larger portion of the population is paying for the same number of beds
Growth - the cost per capita remains constant over time as the number of beds increase at the same rate as the population
Demand – demand for beds increases for the first 30 years as the population ages and the demand for Long-Term Care beds increases faster than the population growth of the City. For the following 20 years, the population growth increases faster than the demand for Long-Term Care beds which explains the decrease in cost per capita. Beyond 2061, the cost per capita remains constant as it is assumed that the demand for Long-Term Care beds increases at the same rate as the population growth $5.00
$4.50
$4.00
Demand
Cost Per Capita
$3.50
$3.00
$2.50
Growth
$2.00
$1.50
Statu s Quo
$1.00
$0.50
$0.00 2000
2020
2040
2060
2080
2100
2120
Year Capital Cost per Capita (expected demand)
Capital Cost per Capita (growth-based demand)
Capital Cost per Capita (status quo)
Figure 5.8: Future Cost Per Capita for Long-Term Care Facilities
5.14
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
5.4.7.2 Factors Affecting Levels of Service The factors affecting levels of service can be broken into three broad categories according to their key performance criteria.
Legislative Requirements - those mandatory provisions or standards set by local, state, federal or international bodies that govern asset utilization, particularly in terms of various issues affecting the general public.
Strategic and Corporate Goals - broad framework-based management directives. These are expected to be consistent with goals and values stated in policies and strategies.
Customer Requirements - customer expectations of the services provided by the utilization of the asset which are, in turn, dependent upon the customers’ ability and willingness to pay.
Legislative Requirements Future emphasis for legislative changes governing operations are listed below.
Occupational health and safety for employees as well as for residents
Patient safety impacts standards and staffing levels to meet these standards
Expectation requirements for Health and Safety, especially infection control
Health and Safety regulations
Public health – pandemic requirements, includes supplies and training
Pandemic Plan – expectations to have a month’s supply of stock which can cost around $100K
A report submitted to the Ontario Health Coalition, Submission to the Facilitator, Shirlee Sharkey titled “Review of Staffing and Care Standards for Long-Term Care Homes”, in January 2008 focuses on the improvement of care standards and outcomes in Long-Term Care homes and is included as Appendix K. This report recommends adjusting staffing ratios and shifting from standards to more of a focus on a quality outcome where funding would be aligned to assessed care needs. Customer Requirements Requirements for more assistive devices are increasing since the age of residents entering the homes is increasing, which requires more capital. Therefore, the need for more assistive devices will grow as time goes on. Customer requirements that influence the City’s operations are listed below in Table 5.7.
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5.15
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Table 5.7: Customer Requirements for Level of Service Requirement
Example (where applicable)
Reference(s)
Safety
Stability of asset
Customer surveys, complaints
Security
Security system, patrol
Customer surveys, complaints
Aesthetics
Elevation, landscape
Customer surveys, complaints
Condition
Physical condition
Customer surveys, feedback
Comfort, suitability
Air conditioning, carpets
Customer surveys, complaints
Accessibility
Ramps, disabled access
Customer surveys, feedback
Availability
Ease of availability
Customer surveys, complaints
Capacity
Accommodation size
Customer surveys, complaints
Functional Utility
Swimming pool
Customer surveys, complaints
Environmental, ecological
Non polluting
Customer surveys, complaints
Reliability-performance
Continuous desired performance
Customer surveys, feedback
Maintainability
Regular maintenance
Customer surveys, complaints
Quantity
Number of facilities
Customer surveys, feedback
Quality
Condition of use, value for money
Customer surveys, complaints
Affordability
Cost for service
Customer surveys, feedback
Cleanliness
Hygiene
Customer surveys, complaints
Future adaptability
Withstand future growth
Statistical data, planning
5.4.8
Summary of the Financial Analysis Results
The SotI analysis attempts to predict capital costs up to 100 years into the future. Rather than consider the results to be definitive, they are considered to be guideline figures and can vary for any number of reasons. Within the following section expected results have been listed as well as high and low estimates of sustainable funding requirements. There are three key factors that can have a significant impact on the sustainable funding requirements:
Anticipated useful lives of assets,
Replacement costs of assets, and
Whether those costs are paid in cash or debt by the City.
Figure 5.9 demonstrates how these three factors can be graphically depicted as three physical dimensions, with replacement cost as the vertical y-axis, expected useful life as the horizontal xaxis, and amount of debt incurred as the z-axis. When all capital costs are paid in cash by the City, referred to as Pay-As-You-Go (PAYG) spending, a two-dimensional range of sustainable funding requirements is determined, as illustrated in Figure 5.10.
5.16
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Max
Max
$2.0M
$2.3M
t
b De
$ Fi
in nc a n
g
p Ca
ita
$
l
$2 - $5
YG PA
Min Max
Per capita per year
$1.2M
Min $0.8M Max
Min
Life
$1.0M
Figure 5.9: The Three Dimensions of Impact on Capital Requirements
Life
Min
Figure 5.10: 2009 Sustainable Capital Funding Requirements (PAYG)
The figure above illustrates the expected sustainable capital funding requirements for 2009 for the range of expected life and replacement costs. The number in the centre of the square represents the midpoint of both dimensions and is considered to be the most likely outcome. In other words, if the City funds all capital projects on a PAYG plan, then Long-Term Care facilities would require $1.2 million, or $2 - $5 per capita, in capital funding in 2009, using the DemandBased model. 5.4.8.1 PAYG versus Debt-Financing Figure 5.11 illustrates the analysis results for Long-Term Care facilities including the third dimension, Debt-Financing. Debt Financing Interest = + $0.7M/year
$3.1M
$3.6M
Max
$ ng ci n $1.2M na Fi
bt $1.9M De l ita p Ca
Per Capita Per Year $4 - $7 Debt
$1.5M
Min Max
Life
Min
Figure 5.11: 2009 Sustainable Capital Funding Requirements (Debt-Financing) mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
5.17
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
When Debt-Financing is included, the sustainable capital funding levels increase significantly. For example, sustainable costs increase from $1.2 million for PAYG to $1.9 million for DebtFinancing. In other words, some $1 million/year is taken out of the community to pay for interest only. Costs per capita also increase from $2 - $5 to $4 - $7, thus illustrating the true cost of debt (Demand-Based model). Table 5.8: Sustainable Capital Funding Requirements ($million) 2009 PAYG Debt
2034 PAYG Debt
Year 2059 PAYG Debt
2084 PAYG Debt
2108 PAYG Debt
Status Quo
$1.2
$1.9
$1.2
$1.9
$1.2
$1.9
$1.2
$1.9
$1.2
$1.9
Growth
$1.2
$1.9
$1.6
$2.5
$2.1
$3.3
$2.7
$4.2
$3.5
$5.4
Demand
$1.2
$1.9
$2.7
$4.2
$3.7
$5.7
$4.7
$7.3
$6.1
$9.4
5.4.8.2 Sustainable Funding Model
Millions
Figure 5.12 illustrates the results of the analysis for Long-Term Care facilities using the PAYG model.
$150
$100
$50
20 09 20 12 20 15 20 18 20 21 20 24 20 27 20 30 20 33 20 36 20 39 20 42 20 45 20 48 20 51 20 54 20 57 20 60 20 63 20 66 20 69 20 72 20 75 20 78 20 81 20 84 20 87 20 90 20 93 20 96 20 99 21 02 21 05 21 08
$0
-$50
-$100
-$150 Total Capital Requirements (w/ Demand)
Capital Reserves
Sustainable Capital Funding
Figure 5.12: Long Term Care Sustainable Capital Funding Model (PAYG) 5.18
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Blue columns represent the actual capital requirements for each of the subsequent 100 years
The orange line represents the average capital requirements weighted by population growth of 1.07%
The green line provides the amount of cumulative reserves that would be generated if the sustainable capital funding requirements (orange line) were adhered to
In years when the actual capital requirements are less than the sustainable capital funding level, the difference would be added to the capital reserves. In years where the capital requirements are greater than the sustainable capital funding level, money would be taken from reserves to cover the shortfall. In other words, use of reserves in this manner (instead of trying to maintain annual capital spending at a fairly consistent level from year to year) ensures that investments are the most timely and cost-effective, i.e. doing the right thing to the right asset at the right time. Since the two Long-Term Care facilities owned and operated by the City were both recently renovated, they are not expected to reach the end of their service life for another 54 to 74 years. However, since they were both renovated around the same time, they are expected to require reconstruction around the same time, thereby creating large capital investment in the future. While the green line in Figure 5.12 shows significant reserves in the first 30 years, these built up reserves are necessary to account for the anticipated future capital cost of reconstructing the two Long-Term Care facilities. Figure 5.13 illustrates the analysis results assuming that all capital expenditures would be funded through Debt-Financing, using a 15-year borrowing period at 6%. The sustainable funding requirements would increase from $1.2 million (Demand/PAYG) to $1.9 million (Demand/Debt-Financing) in 2009. By 2108, the sustainable funding requirements would be $6.1 million (Demand/PAYG) compared to $9.4 million (Demand/Debt-Financing). These values are also listed in Table 5.8 along with the Growth and Status Quo model analysis results. 5.4.8.3 Total Cost of Service (TCS) The SotI report analyzes capital requirements, however, the full cost of service for Long-Term Care facilities should also be considered. Assuming that the current budget is adequate, Figure 5.14 illustrates the sustainable current and capital funding requirements for Long-Term Care facilities. Currently, the LTC budget for Maintenance is $2 million and $30 million for Operations. The $1 million per year short-fall is based on the difference between the sustainable capital funding requirements and the present capital budget of $1 million (current capital budget is approximately $200,000 which was rounded upwards to the nearest million for analysis purposes). To sustain the current level of service, the total net budget requirement would be $9 million, using the PAYG model or $10 million using Debt-Financing.
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5.19
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Millions
Long-Term Care Facilities May 7, 2009
$160
$140
$120
$100
$80
$60
$40
$20
05
01
21
93
89
85
97
21
20
20
20
81
Cumulative Debt
20
73
77
20
20
69
Borrowing Costs for Capital (w/ Demand)
20
65
20
61
20
57
20
53
20
20
45
41
37
33
29
25
21
17
09
49 20
20
20
20
20
20
20
20
20
20
20
13
$0
Sustainable Capital Funding
Figure 5.13: Long Term Care Sustainable Capital Funding Model (Debt-Financed)
$2M
Maintenance
$30M
Operations
$1M
Capital
($24M)
Revenues
Total Net Budget $9M
Shortfall
$1M/year
Net Cost (PAYG)
$1M
Interest
$10M
Net Cost w/ Debt
Focus of Ratepayer and Council
Figure 5.14: 2009 Sustainable Total Cost of Service
5.20
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
5.4.9
How do we reach sustainable funding?
There is a current shortfall of approximately $1 million and it is recommended that the gap be closed within the next five years. The current capital requirement for sustainability is over $1 million. 5.4.10 How do we maintain sustainability? Implement a policy committed to maintaining a consistent number of units per population and revisit the State of Infrastructure Report every 5 years to review funding levels, debt levels and levels of service. 5.4.11 Do we still need it? This was not included within this analysis however we recommend that an asset review committee be formed and that appropriate asset disposal policies be developed based on need and/or economic life of the asset. 5.5
KEY PERFORMANCE INDICATORS
Strategic:
Maintain acceptable quality of life
Promote active, healthy living
Provide access to acceptable quality of care
Provide access to special services as required (e.g. Occupational therapy)
Compliant with all relevant regulations and standards
Tactical (Functional):
Over-all report card rating (e.g. target of B-)
Ratio of registered nurses to number of residents
Maintenance/rehab relative to capital replacement value (e.g. 60%)
Cost per capita for supplying service
Beds per capita
Maintain an adequate inventory of medical supplies and nursing equipment necessary for the care of residents
Mix of room type (private, semi-private, ward)
Operational KPI:
Response times to service requests
Number/type of service requests
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5.21
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Time of applicants on wait-list
Number of applicants on wait-list
repair and maintenance costs per square metre
energy and utility costs per square metre
water costs per square metre
CO2 emissions in tonnes of carbon dioxide per square metre for operational property
5.6
IMPROVEMENT PROGRAM
5.6.1
Asset Management Process Improvements
Asset management processes are defined as the processes, analyses and evaluation techniques needed to support Life-Cycle asset management. These include the following asset management functions:
Knowledge of assets
Levels of service
Condition assessments
Asset accounting - valuation, revaluation, depreciation
Life-Cycle planning
Asset operations and maintenance
Asset creation and disposal
Performance monitoring
Quality assurance and continuous improvement
Risk management
Design and project management
Reviews and audit processes
5.6.2
Asset Management Information System Improvements
Asset management information systems are defined as the systems that support asset management processes and manipulate the relevant data. These include the following asset management functions:
Asset registers
Financial system
5.22
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
Maintenance management system
Condition monitoring
Capital works programming
As constructed plans
Geographical information systems
Advanced applications such as deterioration modeling
Future demand analysis
There are a number of actions that could be taken in order to improve the City’s asset management information system.
Explore the options for using ReCAPP or similar infrastructure management system for tracking asset condition and replacement/rehabilitation costs
Perform regular facility condition assessments and adjust maintenance requirements and timelines based on most recent information
5.6.3
Asset Management Data and Knowledge Improvements
Asset management data and knowledge is defined as appropriate, accessible and reliable data that can be used with information systems to enable enhanced asset management. This includes the following data on the following asset characteristics and topics.
Classification and identification
Physical attributes
Condition
Cost and maintenance histories
Benchmark data
Valuation
Life-Cycle cost evaluation
Data quality
Risk information
Recording of new assets
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5.23
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
5.6.4
Develop and Implement an O&M Strategy for Life-Cycle Analysis and Management
It is recommended that the Division begin the process of developing and implementing an O & M strategy for the various assets within the portfolio. The purpose of the strategy document is to:
Identify the strategies and actions used in the proactive maintenance of the assets.
Document the projected expenditures over a prescribed planning horizon which will typically be shorter than that used for the SotI report.
An important initial step in this process would be a review of the current O & M activities complete with costs; these activities should be categorized as either reactive or proactive. By completing this review it will be possible to begin defining changes that will be needed to adjust the balance of reactive versus proactive activities. 5.6.5
Life-Cycle Analysis and Integration with Financial Tools
As the knowledge of the assets both in terms of the various attributes and condition increases it will be possible for Long-Term Care to begin the process of managing the assets using life-cycle concepts. It will be important to develop an understanding of the true costs associated with the management of the assets to assist in making better informed decisions in the future. Therefore, in order to ensure that the various costs associated with maintaining the assets are captured it will be essential to explore options for extending either the ReCAPP or Hansen systems to track work orders related to the facilities and their components. 5.7
CITY ENERGY USE POLICY
The following sections provide recommendations based on the component categories analyzed for the Long-Term Care facilities as set out in the Energy Use Policy (Appendix F). 5.7.1
Mechanical
Improve mechanical systems by replacing old inefficient systems with new high efficiency systems.
Improve tightness and insulation within the building envelope.
Consider the implementation of ventilation heat recovery
Implement an Energy Management System
Consider alternative/renewable energy sources such as geo-thermal, wind, solar (electric and thermal).
Reduce solar gain through windows with awnings or other architectural features/landscaping etc.
5.24
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
5.7.2
5.8
Electrical
Lighting control system or occupancy sensors.
Installation of energy efficient lighting (compact fluorescent, linear fluorescent possibly LED)
Complete a power monitoring session which will show the peak demand which could lead to lower utility bills, reduce operating cost and more efficient use of utility power.
Installing variable frequency drives on motors controls the amount of electricity going to the motor, so is saved by matching the motor speed to the load. RECOMMENDATIONS
It is recommended that the following asset Life-Cycle management goals be achieved within the next five to ten years. 1. Review operating and maintenance practices on a business-case basis, using Best Practices where available and other technical documents, and develop an associated tactical plan; 2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost; 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans; 4. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. Use of traditional capital funding (and associated interest/debt payments) results in the community paying considerably more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. See Appendix J for a more detailed review of this practice; 5. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes; 6. Develop a relationship between levels of service and cost; 7. Develop public policy relating to levels of service and Total Cost of Service (TCS); 8. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay; 9. Establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models; 10. Provide regular updates to the SotI Report Card; 11. Develop budget management models that take into account the City’s growth (physical and population base and its associated impact on services and assets) on an annual
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5.25
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Long-Term Care Facilities May 7, 2009
basis, in order to conduct sustainable service delivery and asset management in the future; 12. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis; 13. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding; 14. Develop better ways to determine O&M costs as a percentage (%) of replacement costs; 15. Assign responsibility and provide planning for the maintenance of assets that directly support Long-Term Care facilities; 16. Implement environmental sustainability and energy-saving improvements to support City goals and initiatives; 17. Provide funding options and recommendations for the eventual replacement of buildings and major building components when they reach the end of their expected service life; and 18. Question the need for a particular facility before proceeding with rehabilitation or replacement, and formulate a suitable disposal program if required.
5.26
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
6.0
Summary
6.1
SUMMARY OF ANALYSIS RESULTS
Figure 6.1 illustrates the summarized 2008 replacement values, and costs per capita based on the PAYG and Debt-Financing options. A complete listing of all assets included in this analysis can be found in Appendix L. Housing 2008 Replacement Value: $782M Annual Cost Per Capita: $56 Debt-Financed: $86
Culture 2008 Replacement Value: $266M Annual Cost Per Capita: $9 Debt Financed: $14
Long Term Care 2008 Replacement Value: $54M Annual Cost Per Capita: $2 - $5 Debt-Financed: $4 - $7
Recreation 2008 Replacement Value: $396M Annual Cost Per Capita: $21 Debt Financed: $33
Figure 6.1: Summary of Assets Table 6.1 provides a summary of the per-capita requirements for sustainable capital funding for each Division. To provide sustainable funding to the four Divisions considered in this study, a total capital cost of $88 to $91 per capita, per year would be required. If the city funded all capital expenditures through Debt-Financing, those costs would rise by over 50 percent to $137 to $140 per capita. Table 6.1: Summary of Costs Per Capita Group
PAYG
DEBT
Housing
$56
$86
Recreation
$21
$33
Culture
$9
$14
$2 - $5
$4 - $7
$88 - $91
$137 - $140
Long Term Care TOTAL
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6.1
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Summary May 7, 2009
The minor variations of approximately $3 account for the cost-per-capita variations in Long Term Care. These variations occur because demand is expected to exceed population growth in the next 50 years, resulting in a gradual increase in cost per capita. In 2009, these per-capita costs amount to a total sustainable capital funding requirement of $46.3 million if funded under Pay-As-You-Go principles. If capital expenditures are financed through debt, the sustainable capital funding requirement increases by $24.8 million to a total of $71.1 million in 2009. Table 6.2 details these results. Table 6.2: Summary of 2009 Sustainable Capital Funding Requirements ($Million) Group
PAYG
DEBT
Current Capital Budget
Housing
$29.2
$44.6
$7
Recreation
$11.1
$17.2
$5
Culture
$4.8
$7.4
$0
Long-Term Care
$1.2
$1.9
$0
TOTAL
$46.3
$71.1
$12
GAP
$34.3
$59.1
In order to provide sustainable capital funding to these departments, it must be understood that these figures are based on 2008 dollars without inflation or discount rates. Therefore, sustainable funding requirements should increase annually to reflect the growth in facilities required to meet the demands of a growing population. For example, The PAYG sustainable capital funding requirements in 2009 are $46.3 million (rounded to $46 million in Table 6.3). In 2010, the requirements increase to $46.8 million. By 2042, sustainable capital requirements exceed $67.3 million and at the end of the analysis period in 2108, $135.4 million, rounded to $136 million (as listed in Table 6.3). Table 6.3: Initial and Final Sustainable Capital Funding Requirements ($Million) PAYG 2009
DEBT 2009
PAYG 2108
DEBT 2108
Housing
$29
$45
$84
$128
Recreation
$11
$17
$32
$49
Culture
$5
$7
$14
$21
Long-Term Care
$1
$2
$6
$9
$46M
$71M
$136
$207
Group
TOTAL: 6.2
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Summary May 7, 2009
6.1.1
Summary Report Card
The following report card is a summary of the condition assessment worksheets that were completed by City staff in order to determine the current situation within each Division. The Housing Division has a grade of D and this grade is expected to drop by 2020. The Recreation Division and the Culture Division each receive a grade of D with the Long-Term Care Division earning a grade of C-. The grades for all Divisions are expected to fall by 2020. Community Services is currently considered to be at a D level but is moving towards the level “F”, as illustrated in the summary report card shown in Figure 6.2. Figure 6.3 provides a graphic representing the current situation for the Community Services Department.
City of Hamilton State of the Infrastructure Report Card 2008 Asset Group
2008 Rating
Comments
Housing
D
Significant deficit in capital funding. Detailed analysis using New Zealand Toolkit to better assess risk and liability.
Recreation
D
Analysis not done for all facilities. Strategic plan required by asset categories, as they are not all at the same level of deterioration and liability. Detailed analysis using New Zealand Toolkit.
Culture
D
Limited asset inventory data. No capital contribution in the budget. Significant deterioration of assets is ongoing.
Long-Term Care Facilities
C-
Projected 2020
Limited asset inventory data. No capital contribution in the budget. Lodges are in relatively new condition. Growth in the number of seniors will be a serious challenge.
Figure 6.2: Summary Report Card
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6.3
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Summary May 7, 2009
6.1.1.1 Report Card Ratings Based on the grades received for each of the Divisions, the Community Services Department is currently in a less-than-ideal position. While, typically, a grade of A is considered to be more expensive to maintain than is necessary, the City should consider targeting a grade between B and C in order to optimize the return on investment.
Report Card Ratings
Co mm un Se rvic ity es
Cost
F D
A
B
C
Most cost-effective
Exceptional
Good
Fair
Poor
Failed
Condition Figure 6.3: Current Situation
6.1.1.2 Remaining Useful Life The remaining useful life for all assets is illustrated with respect to the total number of facilities in Figure 6.4 . Approximately 75% of the City’s assets (754 assets) require replacement within the next twenty years and most of those are within the Housing portfolio.
6.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Summary May 7, 2009
600
500
Number of Facilities
400
300
200
100
0 0 - 10
10 - 20
20 - 30
30 - 40
40 - 50
50 - 60
60 - 70
Remaining Life (years)
Recreation
Housing
Culture
Long Term Care
Figure 6.4: Remaining Useful Life of All Facilities by Number of Facilities
mj s:\public works\capital planning & implementation\asset management\state of the infrastructure\community facilities soti\rpt_hamfacil_20090501_fin.doc
6.5
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
APPENDICES
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT
Appendix A: Summary of Recommendations
TOP RECOMMENDATIONS FOR 2009 – COMMUNITY SERVICES DEPARTMENT With this first SotI Report for the Community Services Department, there are enough issues on the table that this is an opportune time to start developing long-term policies and implementation plans in a rational and strategic way. This will require some tough decisions to be made, both at the service level and the asset level. However, the current situation is clearly unsustainable in the long term and if the funding is unsustainable, then the service is unsustainable. The first priority is to “Stop the Slide”; too often new assets are received by the municipality either at no cost (such as those from developers or built through development charges) or at a fraction of the actual construction cost (such as those subsidized by grants or cost-sharing programs). These assets are not free or cheap, but in fact are the gifts that keep on taking. There is a need to develop budget management models that take into account the City’s physical and population growth and its associated impact on services and assets on an annual basis. These new funds would go to increase operating and capital funding to reserves for future upgrading, rehabilitation and replacement of the asset. This policy also should apply to assets that have just been replaced, again to ensure that sustainable funding is in place for the future. With those introductory notes in mind, the following recommendations are being made as a whole to the Community Services Department for priority consideration in 2009: 1. Implement a policy of annual funding increases for new assets; 2. Proceed with a condition assessment survey of Housing assets as a priority; 3. Develop and implement an analytical model that incorporates alternatives, levels of service, risk management, project ranking, etc. to assist in the development of the tenyear Capital budget; 4. Develop options with respect to closing the gap in terms of capital budget financing for all Divisions over the next five to ten years, assess impact of further delays and present report to City Council for their approval; 5. Initiate internal discussion with respect to Debt-Financing of capital budgets, with a view to developing an appropriate public policy. See Appendix J for more details; 6. Consider the creation of an Asset Management Division for the Community Services Department, to guide the development of sustainable service and asset management practices; 7. Develop performance measures/Level of Service at the strategic, tactical and operational levels, and establish links between a service and the true life-cycle cost of delivering that service through appropriate assets; 8. Review existing budgetary documents and budget structure with a view to establishing the True Cost of Service (TCS) which include asset management, operations, capital and borrowing costs and can measure their progress towards sustainable funding;.
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A.1
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Appendix A: Summary of Recommendations May 7, 2009
9. Initiate internal discussions with respect to a revised budget structure along service delivery lines, so that program delivery managers can adequately know and be accountable for their services; 10. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay; and 11. Develop a Capital Project Ranking System, internal to the Community Services Department, based on Risk Assessment and Management. Housing Recommendations It is recommended that the following asset Life-Cycle management goals be achieved within the next five to ten years. 1. Review operating and maintenance practices on a business-case basis, using Best Practices where available and other technical documents, and develop an associated tactical plan; 2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost; 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans; 4. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. Use of traditional capital funding (and associated interest/debt payments) results in the community paying considerably more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. See Appendix J for a more detailed review of this practice; 5. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes; 6. Develop a relationship between levels of service and cost; 7. Develop public policy relating to levels of service and Total Cost of Service (TCS); 8. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay; 9. Continue with efforts to establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models; 10. Proceed with a condition assessment survey of Housing assets; 11. Provide regular updates to the SotI Report Card; 12. Develop budget management models that take into account the City’s growth (physical and population base and its associated impact on services and assets) on an annual basis, in order to conduct sustainable service delivery and asset management in the future;
A.2
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Appendix A: Summary of Recommendations May 7, 2009
13. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis; 14. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding; 15. Develop better ways to determine O&M costs as a percentage (%) of replacement costs; 16. Implement environmental sustainability and energy-saving improvements to support City goals and initiatives; 17. Provide funding options and recommendations for the eventual replacement of buildings and major building components when they reach the end of their expected service life; 18. Question the need for a particular facility before proceeding with rehabilitation or replacement, and formulate a suitable disposal program if required.
Recreation Recommendations A high-level State of the Infrastructure (SotI) Report was produced for the Public Works Department in 2005 for a number of assets including Community Facilities. Very limited information was available at that time and contact was limited to within the Public Works Department which maintains the hard assets on behalf of the Community Services Department which offers the programs themselves. The following recommendations for the 2008 SotI for the Recreation Division of the Community Services Department, in terms of achieving overall sustainable asset management and program delivery practices over the next five to ten years. 1. Review operating and maintenance practices on a business-case basis, using Best Practices where available and other technical documents, and develop an associated tactical plan; 2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost; 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans; 4. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. Use of traditional capital funding (and associated interest/debt payments) results in the community paying considerably more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. See Appendix J for a more detailed review of this practice; 5. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes;
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A.3
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Appendix A: Summary of Recommendations May 7, 2009
6. Develop a relationship between levels of service and cost; 7. Develop public policy relating to levels of service and Total Cost of Service (TCS); 8. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay; 9. Establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models; 10. Provide regular updates to the SotI Report Card; 11. Develop budget management models that take into account the City’s growth (physical and population base and its associated impact on services and assets) on an annual basis, in order to conduct sustainable service delivery and asset management in the future; 12. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis; 13. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding; 14. Develop better ways to determine O&M costs as a percentage (%) of replacement costs; 15. Assign responsibility and provide planning for the maintenance of assets that directly support Community facilities; 16. Implement environmental sustainability and energy-saving improvements to support City goals and initiatives; 17. Provide funding options and recommendations for the eventual replacement of buildings and major building components when they reach the end of their expected service life; 18. Review the Use, Renovation and Replacement Study for Hamilton and Public-Use Facilities annually and formally every five years; and 19. Question the need for a particular facility before proceeding with rehabilitation or replacement, and formulate a suitable disposal program if required.
A.4
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Appendix A: Summary of Recommendations May 7, 2009
Culture Recommendations It is recommended that the following asset Life-Cycle management goals be achieved within the next five to ten years. 1. Review operating and maintenance practices on a business-case basis, using Best Practices where available and other technical documents, and develop an associated tactical plan; 2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost; 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans; 4. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes; 5. Develop a relationship between levels of service and cost; 6. Develop public policy relating to levels of service and Total Cost of Service (TCS); 7. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay; 8. Continue with efforts to develop a comprehensive database to inventory existing assets; 9. Establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models; 10. Provide regular updates to the SotI Report Card; 11. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis; 12. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding; 13. Develop better ways to determine O&M costs as a percentage (%) of replacement costs, where applicable; 14. Assign responsibility and provide planning for the maintenance of assets that directly support Cultural facilities; 15. Implement environmental sustainability and energy-saving improvements to support City goals and initiatives, where applicable; 16. Provide funding options and recommendations for the refurbishment or replacement of buildings and major building components when they reach the end of their expected service life; 17. Identify capital investment requirements for facility rehabilitation; and 18. Formulate a suitable disposal program, where applicable.
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A.5
CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Appendix A: Summary of Recommendations May 7, 2009
Long-Term Care Facilities Recommendations It is recommended that the following asset Life-Cycle management goals be achieved within the next five to ten years. 1. Review operating and maintenance practices on a business-case basis, using Best Practices where available and other technical documents, and develop an associated tactical plan; 2. Review associated funding levels in order to ensure that systems are maintained at the optimal Life-Cycle cost; 3. When additional funding is identified, ensure that a portion of this funding is for additional staff to successfully develop and implement the required program delivery and asset management plans; 4. Review the traditional practice of using capital (debt) financing in the context of sustainable levels of funding. Use of traditional capital funding (and associated interest/debt payments) results in the community paying considerably more every year than it receives in actual value (i.e. the difference between the gross and the net expenditures) as a result of a permanent debt level. See Appendix J for a more detailed review of this practice; 5. Establish and monitor appropriate and measurable Levels of Service and Performance, and their related and desired outcomes; 6. Develop a relationship between levels of service and cost; 7. Develop public policy relating to levels of service and Total Cost of Service (TCS); 8. Engage the community in discussing the true cost of assets and services. Match service levels with public expectations and willingness/ability to pay; 9. Establish a more comprehensive database with respect to condition of assets in order to develop better deterioration models; 10. Provide regular updates to the SotI Report Card; 11. Develop budget management models that take into account the City’s growth (physical and population base and its associated impact on services and assets) on an annual basis, in order to conduct sustainable service delivery and asset management in the future; 12. Develop appropriate reporting measures to monitor actual costs and compare them to minimum Life-Cycle costs on a business-case basis; 13. Implement a comprehensive budget structure along service delivery lines, so that service managers can adequately know what the true total cost of their service is (including asset management, operations, capital and borrowing costs) and measure their progress towards sustainable funding; 14. Develop better ways to determine O&M costs as a percentage (%) of replacement costs; 15. Assign responsibility and provide planning for the maintenance of assets that directly support Long-Term Care facilities;
A.6
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CITY OF HAMILTON STATE OF THE INFRASTRUCTURE REPORT COMMUNITY SERVICES DEPARTMENT Appendix A: Summary of Recommendations May 7, 2009
16. Implement environmental sustainability and energy-saving improvements to support City goals and initiatives; 17. Provide funding options and recommendations for the eventual replacement of buildings and major building components when they reach the end of their expected service life; and 18. Question the need for a particular facility before proceeding with rehabilitation or replacement, and formulate a suitable disposal program if required.
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A.7
