Life Cycle Costing Tool for Community Infrastructure Planning

Note to Readers:

The initial capital cost of infrastructure is about 20% of the life-cycle cost; the other 80% largely represents a future unfunded liability. Heightened awareness of “the 20/80 rule”, in particular the implications for financial sustainability, is a driver for a change in the way local governments plan, finance, implement and over time replace infrastructure. 

Asset managers now realize that they need to get involved in evaluating the life cycle costs of new planned developments. The time to shape future life cycle costs is at the infrastructure planning ‘front-end’. Accordingly, the story below connects the dots between a tool and an approach. The intent is to inform, educate and stimulate.

Measure the True Cost of Development

“There has been much debate in recent years about the costs of development, both in terms of the true costs of different development forms as well as how the costs of development are shared between the public, the private sector and the environment,” states Doug Pollard, Senior Researcher with Canada Mortgage & Housing Corporation.

“There is mounting evidence that more compact, mixed-use development is a more cost-efficient and environmentally sustainable form of development than low-density suburban development. However, there are very few readily available tools to demonstrate the degree to which this is true or to effectively compare different types of development.”

About CMHC: Canada Mortgage and Housing Corporation (CMHC)  is Canada’s national housing agency. Established as a government-owned corporation in 1946 to address Canada’s post-war housing shortage, the agency has grown into a major national institution. CMHC is Canada’s premier provider of mortgage loan insurance, mortgage-backed securities, housing policy and programs, and housing research.

About the Life Cycle Costing Tool

Developed in 2008 for CMHC, the Life Cycle Costing Tool for Community Infrastructure Planning (the Tool) was created to allow a user to estimate the major costs of community development, particularly those that change with different forms of development (for example, linear infrastructure), and to compare alternative development scenarios.

The Tool is an excel chart with a set of scenarios representing different housing densities that can be customized for local conditions. It is accompanied by a very useful users guide.

The Tool is geared towards estimating planning level costs and revenues associated with the residential component of a development, although financial impacts of commercial and other types of development can be incorporated provided that infrastructure requirements are specified correctly.

The Tool is well suited to assessing development projects ranging in size from a collection of houses to a block-by-block infill development to an entire subdivision. A good measure of the applicability of the Tool to a given project is whether or not alternatives can be conceived that would result in significantly different densities or infrastructure requirements, or make use of different green infrastructure alternatives.

Costing Variables

The Tool includes costing variables to allow the user to estimate costs for the following major categories:

  • Hard Infrastructure, including roads,
    sewers, stormwater facilities, schools and
    recreation centres;
  • Municipal Services, including transit
    services, school transit, fire services, police
    services and waste management services;
  • Private User Costs, including driving costs
    and home heating costs;
  • External Costs, including air pollution,
    climate change and motor vehicle collisions;
  • Green Infrastructure Alternatives.

Revenues from development charges, property taxes and user fees are also estimated. Users can easily estimate and compare costs and revenues among a variety of development scenarios. This tool allows users to consider the life cycle costs of development, which are calculated over a 75-year time horizon. Life cycle costs include initial capital, annual operating and replacement costs.

To Learn More:

Click on Life Cycle Costing Tool for Community Infrastructure Planning — User Guide — The User Guide provides guidance on all aspects of Tool operation from installation, to development of scenarios, to outputting results, to viewing internal calculations and conducting further analysis. The Guide can be read from cover to cover or can be referred to as specific questions arise.ser Guide provides guidance on all aspects of Tool operation from installation,

Click on Life Cycle Costing Tool for Community Infrastructure Planning to access and download the excel spreadsheet. — The tool provides long term cost estimates of major community developments at the earliest possible stage with minimal input. The excel spreadsheet contains macros. In order to use the Tool, download and save the file to your computer.

Click on The Infrastructure Deficit (Liability) – Time for a Change? to read a related article by Dr. Penny Burns, an internationally recognized economist. She is acknowledged as the first person to write about asset management (in Dr. penny burns (120p)1984) — “How many asset managers get involved in evaluating the life cycle costs of new planned developments? If they don’t get involved at this upfront stage, they have no opportunity to shape future life cycle costs”, says Penny Burns in an article that discusses the paradigm-shift associated with the Life Cycle Costing Tool for Community Infrastructure Planning.

Integrate Land Use Planning and Asset Management Planning

“Land use planning in British Columbia may be significantly improved when integrated with asset management planning in local governments,” writes Kim Fowler, Director of Kim fowler (120p) - city of victoriaSustainability for the City of Victoria (and a member of the Local Government Asset Management Working Group) in her paper titled “Local Government Land Use and Asset Management Planning in BC: Proposed Sustainable Service Improvements”.

Land Use Planning is the Key Determinant

“If the necessity, goal, and best practice of asset management is an integrated approach involving planning, finance, engineering and operations effectively managing existing and new infrastructure, then how should this occur?  How do local governments ensure the full service life is reached and have mechanisms to enable their replacement?  And why are planners the least knowledgeable of the local government professionals about asset management when land use planning is the key determinant for infrastructure demand and servicing?”

“The legislative requirements for integration of land use planning and asset management, including financial management, are already mandated. So why is this not commonly happening?”

Need for Local Governments to Be Nimble, Collaborative and Integrated

“The accelerating pace of change in our communities will continue, requiring local governments to become much more nimble, collaborative and integrated with a long-term focus.  Each local government may determine where to start based on its particular circumstances, whether that be an asset management policy or plan, corporate strategic plan or long-term financial plan but the longer these plans are delayed, the more drastic the following measures will be in order to survive financially:

  • Lowering of service levels;
  • Reduction or elimination of some assets;
  • Challenging risk acceptance limits;
  • More partnerships, particularly with private capital investment; and
  • More user pay charges.”

“The change is here, and it is accelerating.  Local governments have an opportunity to adapt and mitigate these changes and improve resiliency of our communities within existing legislative authority and current best practices,” concludes Kim Fowler.

To download a copy of the paper written by Kim Fowler, click on Local Government Land Use and Asset Management Planning in BC: Proposed Sustainable Service Improvements



Posted April 2011