Essex County Council to address asset management shortfalls in 2025 Budget

Essex County Council approved the County of Essex 2024 Asset Management Plan (AMP) – a process that provides for the operation, maintenance, upgrade, and ultimately disposal or replacement of physical infrastructure and assets - at its June 5 meeting. It also supported Administration incorporating findings from that plan into the 2025 Budget preparation process.

This will begin to address the shortfall in asset replacement costs, and is part of a legislative requirement started back in 2009. This file has been expanded from the one presented in 2022 to include all of the County’s infrastructure assets, from core roads, bridges, and culverts to include buildings and equipment.

The data provided in the AMP was up to December 31, 2022.The AMP highlights current asset inventory condition ratings and financial planning needs.

“This roadmap is crucial for maintaining service levels and supporting the County’s long-term planning and budget decisions,” Melissa Ryan, Director of Financial Services/Treasurer, told County Council during the June 5 regular meeting, when this file was presented.

Heidi McLeod, Deputy Treasurer, explained the core assets (roads, bridges, culverts, and stormwater networks) account for 75% of total replacement costs of all assets.

Non-core assets are grouped by the Operating Department, which includes Infrastructure & Planning, Sun Parlour Home, EMS, General Government, Essex County Library, and EWSWA. The County’s total replacement cost is just over $1.12B.As part of the AMP, each asset was assessed on its condition on a scale from very poor to very good.

Overall, 24.8% was rated as very good, 45.8% was rated as good, 23.2% was rated as fair, 4.4% was rated as poor, and 1.8% was rated as very poor.

The assets falling in the very good to good categories represents around $790M of the total $1.12B replacement costs. The assets in the poor and very poor categories represent just over $70M of the replacement costs, McLeod explained.

“The results of this report are similar to the last Asset Management Plan,” McLeod said. “Data quality continues to be a focal point during appropriation of the report.”

Assets in poor and very poor condition will continue to be included in future budget requests, so the County can stay on top of it, she added.

Within the Infrastructure & Planning Services Department, there are a number of pieces of equipment categorized as non-core assets that have been brought forward in past budgets for replacement. In an effort to present a fiscally-prudent budget, McLeod said Administration had to prioritize spending.

As a result, she added, the condition of some of the larger pieces of equipment – such as graders and loaders – have deteriorated to the point where they cannot be put off any longer.

Within EMS, assets rated in very poor condition relate to those that are older, with a lower risk rating, McLeod said, adding 95% of those have been replaced subsequent to the date of the report.

EMS assets in poor condition mostly reflect the backlog for ambulances ordered, but not received, in 2022. That has also been subsequently resolved, with purchasing pre-approval.

Library assets rated in very poor condition include one of the two cargo vans used to transport materials between branches, and two IT servers. These will be replaced as part of the approved 2024 Budget or will be proposed in the 2025 Budget.

McLeod noted lifecycle strategies vary for each asset. A number of steps are taken to maintain the assets and repair them, before resorting to a full asset replacement.

The annual requirement represents the amount of funding the County should be spending each year on the replacement of capital assets. For core assets, that includes the cost of lifecycle activities necessary to maintain current conditions and service levels.

For non-core assets, that includes the full asset replacement.

The 2024 AMP highlights the average annual requirement for all assets totaled $46 million. The current expenditure rate was 41% the report notes. That is calculated by actual annual expenditures divided by the annual requirement.

The current expenditure rate is around $18.9M, while the annual deficit rate is around $27.2M.

To close that gap, McLeod said the County needs to go from 41% to 100%.“I know that is not realistic, nor is it affordable,” she said.

Annual expenditures are calculated on a three-year average, from 2020-2022, and will partially reflect the procurement issues presented in 2022. The annual deficit represents the current funding gap McLeod said. That includes the backlog of assets due for replacement, but haven’t yet been replaced.

The Report to County Council notes the overall target reinvestment rate stands at 4.11%. However, as of 2022, the current annual capital expenditure level sits at approximately $18.9 million, resulting in an actual reinvestment rate of only 1.68%.

“If we don’t do anything, we will continue to fall behind as replacement costs will only continue to grow,” McLeod said. “In order to maintain current service levels, we will be looking to tip the scale a little bit...and increase our investment into the assets that are critical to providing these services.”

The biggest funding gaps exist in the stormwater network, Sun Parlour Home – an aging building that will require significant maintenance over the next 10-20-years, bridges and culverts, and in EMS, she told Council.

Looking at the stormwater network, the 2024 Budget included implementing CCTV inspections. Once that data is obtained, she anticipates the County will increase spending on capital repairs and maintenance.

In looking at roads, bridges, and culverts, McLeod said current budget levels provide for $19M, but the AMP has an annual requirement of $31M.When it comes to non-core assets, McLeod said 82% are in good to very good condition. This is the first-year this is being reported on.

County staff is currently reviewing proposals to obtain a consultant to provide assessments on County-owned buildings, she added.

Sylene Argent, Local Journalism Initiative Reporter, Essex Free Press