RC111 MarApr 2024 - Magazine - Page 18
ASSET MANAGEMENT
Financial planning and natural assets
Local governments across Canada have been making
e昀昀orts to recognize the value of their natural assets in
addition to their built assets. Too often, municipalities fail
to quantify and consider cost savings due to the presence
of natural assets. For instance, a municipality may bene昀椀t
from the drainage or recreational services that a river
provides. A community could choose to value a natural
asset by determining how much it would cost to provide a
similar service using built infrastructure.
In 2017, for example, a pilot study was initiated by
Credit Valley Conservation for the Region of Peel to test a
model to assess stormwater services provided by natural assets within Peel’s jurisdiction. The study tested the
water retention and 昀氀ow attenuation provided by the
southern Ontario region’s wetlands, forests, green spaces,
and watersheds.
The study concluded that building infrastructure to provide a similar stormwater service would cost $704 million
under current conditions and a signi昀椀cantly higher $764
million under climate change conditions. Thus, valuing
and maintaining natural assets can help a municipality
avoid additional infrastructure costs. Holistic long-term
昀椀nancial planning empowers councils to consider all costs
borne by municipalities for their natural and built infrastructure for the entire lifecycle.
Consideration of natural assets is increasingly becoming
a mandatory part of a community’s asset management
policy, such as in the County of Grande Prairie, Alta. Their
policy states that “natural assets and green infrastructure
must be accounted for and valued when making decisions
regarding infrastructure projects… The County recognizes
the value of natural assets in supporting service delivery
and reducing the need for engineered assets and will
strive to make advances in integrating natural assets into
asset management practices.”
These case studies demonstrate that 昀椀nancial planning
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RENEW CANADA – MARCH/APRIL 2024
may be the most e昀昀ective way for communities across
Canada to make progress in asset management.
As for Prince George, they wisely conducted a lifecycle
costing analysis on the destination park proposal.
Through consultation, the city found strong community
support for the project, though the report Council received
on July 25, 2022, noted not all upfront costs were known,
and further cost analysis would be needed to understand
the project’s full lifecycle cost, including operations,
maintenance, and eventual replacement. The report recommended that sta昀昀 return with a full lifecycle analysis
of the project’s 昀椀nancial implications, which the Council
accepted.
In December 2022, sta昀昀 presented a full lifecycle analysis.
Initial capital costs, estimated at $2.84 million by the Community Foundation, were potentially covered by donations.
However, additional costs not originally considered amounted to $10.5 million and $12.1 million for operating and maintenance over the asset’s life span, plus an extra $41.6 million
in capital renewal costs. In total, the community might be
responsible for more than $68.3 million. Put another way, the
estimated annual lifecycle cost that would need to be added
to the municipality’s budget was $1.4 million.
Ultimately this information led to a delay pending the
de昀椀nition of 2023 budget priorities. In the end, the park
project was a no-go. Asset management sta昀昀 are committed to ensuring that the Council has all the facts it needs.
They are not anxious to kill projects, but rather to ensure
that municipalities have the bene昀椀t of full information so
they can make the decisions that are best for their communities, now and in the future.
The creation and adoption of a community’s long-term
昀椀nancial vision actively shapes its future resilience and
adaptability. Through embracing some of the lessons identi昀椀ed from successful local governments, your community
can be poised to thrive while navigating evolving challenges.
RENEWCANADA.NET
GETTY IMAGES
From 2007 to 2019,
the District of Saanich,
B.C. gradually increased
infrastructure funding
to ensure long-term
infrastructure renewal
funding for future
generations.