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The why of municipal asset management

October 31, 2022

The why of municipal asset management

Synopsis
3 Minute Read

Taking a proactive approach to asset management helps municipalities avoid an array of negative outcomes, ranging from increased costs to safety hazards.

Senior Manager, Consulting Services – Energy and Utilities
Partner, Consulting Services

All municipalities have some form of asset management system that informs them of when their assets need to be monitored, repaired, or replaced. Some systems are more sophisticated than others, and some municipalities are more proactive than others.

Working in municipal government means facing immense pressure to use funds as efficiently as possible. The budgets of various departments and city services are publicly debated and visible online, and all residents directly associate municipal spending with their own taxes.

With these pressures in mind, it’s understandable that municipal infrastructure usually gets maintained as needed, based on priority or urgency. But engaging in proactive asset management and resisting the temptation to delay infrastructure maintenance until the last minute, is crucial.

The current asset management landscape

Canada has experienced large infrastructure and maintenance gaps, particularly in the past several years, due to a convergence of several factors. How did we get here?

Age

Municipalities that have rainy day funds are often finding that a lot of rainy days are striking all at once.

A large portion of the long-term infrastructure still in use today — electrical lines, bridges, wastewater facilities, etc. — was built in the 1970s and 1980s, and the average lifespan of those assets is roughly 30-40 years. That means many assets are reaching end-of-life in the same small window of time, making the task of repairing and replacing infrastructure more urgent, and expensive.

Demand

Assets such as roads, pipelines, and parks all exist to provide services to people. Many municipalities in Canada are facing increased demand for those services and infrastructure due to population growth. And on top of population growth, the per capita use of many utilities and services is increasing as well.

Some municipalities have struggled to adjust and keep pace with demand, leaving gaps in services due to aged and lacking assets.

External pressures

Finding enough money in the budget for proactive asset management requires diligent saving and planning; Unfortunately, this runs contrary to the pressures that municipal governments face to solve urgent problems now and leave long-term maintenance issues for a later date.

Not many constituents call the complaint line because they have not seen the most recent 40-year capital plan. They complain because snow needs removing, grass needs mowing, and potholes need fixing. It’s easy to look at infrastructure that still works but is nearing the end of its life and say: “We’ll worry about that next year.”

Also, some of the money which could be used for pre-emptive asset maintenance gets funnelled into programs which garner public support more easily. A ribbon-cutting ceremony on a new underground wastewater pipeline may not make news headlines in the same way a new park or recreation centre would.

Why asset management matters

Safety

The most obvious reason why municipalities should care about asset management is that the safety of residents could be at stake. In the most extreme circumstances, a lack of asset management could lead to events such as collapsed bridges, burst pipelines, and more. These types of catastrophes are rare, but not unheard of, in Canada.

More drastic situations aside, the negative health impacts of poor air quality or injuries from driving or biking on uneven roads or playing on unmaintained parks can happen at any time, in any municipality. Proactive asset management keeps these to a minimum.

Cost savings

Taking a reactive approach to asset management is not unlike neglecting to regularly change the oil in your car — you may feel like you’re saving money now until you need an expensive repair later. Maintaining or replacing your assets infrequently, only when they’re on the verge of failure, is usually more costly than incremental maintenance that helps extend the life of infrastructure and assets. While all assets need to be replaced eventually, by extending each asset’s useful life, you’re granting more time and flexibility to your municipality to save up funds for that big expense in the future.

Maintenance always costs money; it’s up to each municipality to assess whether they should pay now or later, and the risks and rewards of each. Understanding your services, the assets that support them, and the condition of those assets will lead to more efficient use of funds.

On top of maintenance costs, some provinces in Canada have the power to restrict municipalities’ access to gas tax revenue, if they’re not proactive in planning their asset management. Some provincial governments will want to know their municipalities are taking a thoughtful approach by developing an Asset Management Plan — What assets do you own and oversee? What condition are they in? What is your financial plan so you have enough money in the budget?

Asset management also involves taking stock of what assets you own and oversee, and this process can reveal unseen opportunities to manage costs and reduce waste. For example, your municipality could calculate the cost savings of leasing versus owning assets and choose the most efficient option. Or you may discover financial irregularities, such as paying insurance on assets you no longer own, and correct them.

How is your municipality performing?

Is your municipality taking steps to close the infrastructure gap for your residents? Is it taking a proactive approach to asset management, or does the process feel reactive? Thoughtful financial planning and budgeting, by understanding what you own, how old it is, and what condition it is in, can make all the difference in your asset management program.

Regardless of where you are on your asset management journey, MNP’s specialized team can meet you where you’re at and provide solutions that fit your municipality’s needs and budget.

Contact us

Matt Hamilton

Senior Manager, Consulting Services – Energy and Utilities

James Richardson MBA

Partner, Consulting Services

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