By: Sylene Argent, Local Journalism Initiative Reporter, Essex Free Press
A new financial strategy the Town of Essex Council adopted at the February 17 special meeting recommends baking a 2.1% increase to the annual tax levy over the next 20-years to support municipal capital assets. This will be something Council will deliberate on at budget time each year.
Administration, however, will look into identifying alternative revenue that can be used to offset the increase.
The need for this tax increase is to ensure sufficient funds are available for capital investments, to minimize further infrastructure backlogs, and to meet replacement needs as they arise.
The recommendation to Council was made through the new Asset Management Plan (AMP), which PSD Citywide prepared. The Town was provincially required to update its 2022 AMP, Erica Tilley, Assistant Manager of Capital Works & Asset Management, explained.
As part of the AMP, the proposed targeting of 50%, 75%, and 100% of ideal funding levels was examined. The town administration selected the 75% funding option as the preferred proposed level of service across all asset categories. The aim is to achieve a balance between long-term sustainability and high financial burden, the Report to Council details.
Each scenario has its pros and cons, Alexa Wylde, Senior Asset Management Advisor at PSD Citywide, said.
“Obviously, the more money you’re investing in capital, you are going to reduce your risk of future asset failures. You are taking more of that proactive approach, rather than a reactive one, which can typically cost less in the long-run. And, you have confidence in your system; whereas that does come with a very high, long-term financial burden, especially on residents and businesses.”
To achieve that 75% capital funding level, Essex has to allocate $21.2M annually to capital investments, which would slowly build up the amount the Town can allocate to capital investments. Essex is currently allocating an average of $6.9M in capital investment towards assets included in the AMP each year. This funding level stabilizes around the 40%-50% condition rating. That’s a shortfall of around $14M.
This scenario will also include an annual 1.3% increase to water rates and 2.8% to wastewater rates.
Another piece is to ensure lifecycle management strategies are incorporated to extend the life of assets with the smallest amount paid to maintain the asset, Wylde added.
She cautioned there is risk to chronic underinvestment in infrastructure, which can lead to service disruptions, significant future tax increases, forced level of service reductions, resident discontent, and lack of future investment.
The AMP update required documenting levels of service and inventory reporting of core assets the Town owns – such as roads and sidewalks, bridges and culverts, and the networks for water, sanitary sewer, and stormwater. Non-core assets also had to be included, such as buildings and facilities, parks and land improvements, vehicles and heavy equipment, and machinery and equipment.
A third phase was also required to include proposed levels of service, lifecycle management, and a financial strategy.
Wylde has been working with the Town of Essex for the past two-years on the latest versions of the AMP.
She explained Essex has a total replacement cost of all of its assets of $1.1B.
“That’s a lot for a town to own,” she said.
When it comes to roads, a graphic she shared indicated 69% of Essex’s assets are in fair or better conditio n.
“It is a pretty good proportion. You just don’t want to see that number creep up with more and more falling in the opposite category in that poor and very poorcondition,”Wylde said. Under ideal circumstances, such as everything getting done as scheduled, Essex would need to allocate around $28M a year to its capital program to keep up with the capital forecast.
Mayor Sherry Bondy wondered how the Town would work to identify asset conditions more accurately. She voiced concern that the new AMP highlighted most vehicles with Essex Fire & Rescue are in the later stage of life.
CAO Kate Giurissevich noted Council approved an Assistant Manager of Finance position, which will be in part dedicated to asset management.
Bondy also voiced concern the AMP notes library facilities are in poor condition.
Director of Community Services/Deputy CAO, Jake Morassut, noted that, through a facilities report the Town just had, they were rated at a “B.” He wondered if the Carnegie Library, which ECHRS leases, was included in this, which does have a lower rating. He needs to analyze that further.
Deputy Mayor Rob Shepley asked when 50% of facilities are in the poor rating, if that could mean perhaps the roof or HVAC just needs to be replaced, not the entire facility. To see that was concerning.
Director of Infrastructure, Kevin Girard, explained that buildings are difficult to report on because it is hard to determine how long they can be maintained. Rooves and such items are maintenance items that go through the Town’s capital programs. Condition Assessment reports are imperative to look at buildings.
Wylde added one thing that could be skewing data within the AMP is that a majority of the Town’s buildings were assessed over a decade ago. So, if there have been marked improvements since, they may not have been captured in inventory reporting. She added more municipalities are moving towards a componentized assessment, where building conditions are broken down by their components. That provides a better understanding of conditions.
Shepley also asked if alternative revenue strategies were factored into the modelling recommended, specifically if the analysis considered using the sale of E.L.K. funds as part of an investment strategy to generate annual revenue.
Giurissevich noted there are no investment funds from the sale of E.L.K. incorporated into AMP at this point. Director of Corporate Service, Kate Rowe, will present an investment strategy this term that would dedicate a portion of investment funds to offset this AMP burden to Council.
The AMP will be posted to the Town of Essex website, so residents can view it.
The AMP now needs to be updated once every five-years.