Hamilton, a community of about 500,000 in southern Ontario, faced a serious problem in the late 1990s—one that now pervades the world of municipal governments.
“We did a rough review of the condition of our water system to see how much investment it would require over the next 50 years,” said Kevin Bainbridge, project manager for Hamilton's subsurface infrastructure program. “What we discovered was that we would be generating only half the revenue we needed.”
The city's progressive senior managers and elected officials in 2001 recognized the need to create a dedicated division called Asset Management. The group, a sub-group of the city's Capital Planning & Implementation Division, consisted of 17 individuals with engineering, operations, and financial backgrounds. Its sole responsibility was to manage the life cycle of the municipality's assets.
“We don't build, we don't maintain, and we don't worry about operations,” said Bainbridge. “Our job is to make sure that we put enough investment into the assets to sustain service levels over the long run.”Fortunate Foresight
The move proved to be forward-looking as the provincial government enacted the Sustainable Water and Sewage System Act in 2002. The legislation, known as Bill 175, requires municipalities to ascertain the full cost of providing a service and develop a financial plan to recover that cost. The bill's purpose is to ensure that municipalities fund infrastructure at sustainable levels, even if those levels are significantly higher than historic user fees.
Because such legislation is gaining popularity across North America, Hamilton's experience is instructive. In the United States—where state and local governments spend $140 billion to $150 billion annually in construction, improvement, and rehabilitation of public capital assets—the impetus comes from the Government Accounting Standards Board Statement 34 (GASB 34), issued in June 1999.
GASB 34 requires governmental agencies at all levels to develop a complete inventory of assets and liabilities, maintenance and operational costs, and revenues and expenditures. Experts have hailed GASB 34 as the most significant pronouncement in the history of financial reporting requirements for local government in the United States.
Concurrently, the American Planning Association developed the Growing Smarter Movement and the U.S. Department of Energy instituted its Sustainable Development Initiative. Both programs recognized the need to mainstream sustainable development within fiscally sound constraints.
Sustainable asset management offers a host of benefits, including:Enhancing appreciation of the value of capital assetsEstablishing standard processes for investment decision-makingReducing spending on assets that are obsolete or beyond repairTiming asset investments to produce the best returnsChoosing assets that are most likely to deliver the intended resultsProviding a focus that traditional criteria might overlook.
A sustainable asset management system helps optimize return on investment, service level, or increased life expectancy at minimal cost. Hamilton uses a Hanson Computerized Work Management System (CWMS) as its core software for implementing Asset Management solutions, supplemented by databases and analytical process that reside outside the CWMS. The combination allows the city to monitor current service levels by taking into account the concerns from residents and operational interruptions.
“In the past, we'd fix water mains when we were putting in roads,” said Bainbridge. “But those weren't necessarily the worst pipes. Now our database lets us focus on what's needed most as well as on coordination of other needs. That decreases our service failures and increases our service levels.”