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Asset management a needed infrastructure tool, say advocates

Richard Gilbert
Asset management a needed infrastructure tool, say advocates

The best practice for strategic infrastructure investment in Golden, B.C. and Edmonton, Alta. demonstrates the importance of embracing the process of asset management for municipal leaders across Canada, says one former municipal leader.

"I think political bodies need to recognize that leadership is needed in terms of asset management," said Christina Benty, former mayor, Town of Golden, B.C. "From the perspective of Golden, B.C., the reason we wanted to get involved in asset management is we were asset rich and cash poor, like many local governments. We had built a lot of infrastructure with a lax regulatory environment. We had aging infrastructure."

Benty made this statement last month at the Federation of Canadian Municipalities’ annual general meeting in Edmonton, during a workshop called Asset Management — What’s in it for my community?

Asset management is defined by the Canadian Network of Asset Managers as the coordinated activities of an organization to realize value from its assets in the achievement of its organizational objectives.

As the former mayor of Golden (2009-2014), Benty said city council’s main responsibilities are the assets that are used to provide services for citizens.

This includes water, sewer and road infrastructure, which represented more than 70 per cent of municipal assets worth about $60 million in 2014. She viewed the cost of delivery services and infrastructure maintenance as a problem that requires community engagement and a long-term solution.

"It is really important for it to be a team approach, which involves politicians, senior managers and the finance and engineering departments," said Benty. "We all have to work together and trust that your citizens are wise enough, when you give them that information, because they will have the same data and information that you do. They will understand the parameters of your decision making."

Golden city council adopted an Asset Management Policy in 2012. In addition, council dedicated a two per cent property tax increase entirely to capital asset renewal and a further two per cent of revenue from property tax to capital asset condition assessment.

The biggest challenge facing Edmonton’s city council and staff is also the need to find funding for upgrades to aging infrastructure and for growth-related new infrastructure.

"The first thing we needed to do was find out what our gap was with urban infrastructure," said Ben Henderson, Edmonton city councillor. "We actually knew things were in trouble, but we really didn’t have a sense of how big that was, where that was or what the mountain was we actually had to climb."

Edmonton city council produced an infrastructure strategy in March 2006, which estimated that the city’s infrastructure assets had a replacement value of $20 billion. This included roads, sewer lines, transit, emergency response vehicles, swimming pools, parks and information technology. A large share of Edmonton’s infrastructure assets were built either in the 1950s or ’70s. As a result, the average age of Edmonton’s infrastructure is more than 30 years and the average life expectancy of infrastructure assets is 50 years.

The 2006-2015 Long Range Financial Plan (LRFP) identifies total capital spending of $8.6 billion. Of that total, nearly 56 per cent or $4.8 billion is funded by revenue from taxes, grants and user fees.

The corresponding ‘unfunded’ portion of the LRFP, which is the value of the infrastructure gap, is approximately $3.8 billion.

"We got into this gap because in the absence of knowing how big the gap was and understanding what the problem was, the asset management policy was driven by a desire to keep taxes down," said Henderson. "The result was we went through most of the 1990’s in Edmonton keeping out taxes well below inflation and all we have done was pass this gap onto our infrastructure."

Of the $3.8 billion unfunded infrastructure gap, nearly $1.7 billion (44 per cent) is required to rehabilitate existing infrastructure, $2.1 billion (55 per cent) is required to fund growth projects, and the remaining $30 million (one per cent) for other projects.

City council and staff then decided to find out where the infrastructure gap was, how to develop priorities for addressing the problem and how to finance this work.

"We have a detailed process we go through to prioritize our growth projects, and we rank them on different criteria," said Bradley Leeman, Edmonton’s infrastructure and funding strategies director.

"Each growth project is scored and different criteria are weighed in a process where we talk to council before we begin."

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