Guidelines for Funding Maintenance of Assets Received Through Partnerships
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Background & Purpose
As a result of a 2009 report from the Auditor General, City Council directed the Toronto Office of Partnerships to develop corporate “guidelines on the creation of endowment, or similar funds, to offset future maintenance and repair costs for new facilities” that result from partnerships (e.g. newly donated or sponsored physical assets). Often, community and corporate groups express an interest in providing new or enhanced assets to the City or undertaking a fundraising campaign for their development (e.g. a new or rebuilt neighbourhood playground). While divisions are usually keen to welcome such generosity, there are times when the cost of maintaining the new asset is overlooked or underestimated. As a result, an additional budget pressure is created. The purpose of the proceeding guidelines is to help divisions identify and address this issue before formally accepting the proposed offer or authorizing any forthcoming campaign.
The City has had little success to date establishing partnerships to cover ongoing operating costs. Partly this is because donors are more likely to fund new, higher profile improvements than ongoing maintenance and operations. But third-party funding is needed to mitigate against the on-going maintenance costs of donated assets. The objectives of such funding include:
- To ensure that properties and their associated services are kept in a safe condition;
- To protect the physical integrity of properties and to ensure that they remain serviceable and fit for use;
- To ensure that the condition of properties align with all statutory requirements;
- To assist in retaining the economic value of properties;
- To maintain the quality and appearance of properties.
- The proceeding guidelines represent recommended practices. Unlike policies or protocols that are compulsory, these guidelines are to be used at the discretion of City staff. They are interpretive statements that offer direction and that serve as a reference when no applicable standard is in place.
- The guidelines are directed towards the City’s divisions and do not apply to properties received by the City’s agencies, boards, commissions and corporations. These entities are governed by their own internal directives and practices.
- The guidelines do not supplant any existing in-force corporate or divisional guidelines or protocols surrounding donated assets.
- The guidelines are limited to properties that are transferred to the City by way of a partnership (e.g. donation, sponsorship, etc.) from third parties including transfers from the City’s agencies, boards, commissions and corporations.
- The guidelines only apply to new properties that add to a division’s capital inventory. External requests for maintenance funding are not required when the donation constitutes a replacement of a similar existing property.
Maintenance: A combination of any action carried out to retain a property in, or restore it to, an acceptable condition.
Properties: Hard assets including, but not limited to, facilities, real property and physical features (e.g. playgrounds, courts, etc.).
State of Good Repair (SOGR): A state wherein an asset is kept in or restored to a sound condition so that all of its life cycle needs (maintenance, rehabilitation, etc.) have been addressed.
Reserves and Reserve Funds: The City distinguishes between Reserves and Reserve Funds. A Reserve is funded by contributions from the operating budget at the discretion of Council, after provision for known expenditures. It has no reference to any specific asset and does not require the physical segregation of money or assets. Reserve Funds, on the other hand, are segregated and are restricted to meet a specified purpose. Furthermore, while earnings from Reserves flow to the operating budget as investment revenue, earnings from the investment of Reserve Funds must be allocated to and form part of the Reserve Fund. Accordingly, the City typically establishes Reserves for donations and Reserve Funds for maintenance purposes.
Current City Practices
These guidelines are informed by external best practices as well as approaches currently utilized within the City. The fact is a number of City divisions and programs already consider the maintenance impact of newly donated assets to the City. For instance:
Public Art Program (Culture Division)
Council adopted a policy outlining a process to be followed when an individual or organization offers to donate to the City a gift of public art. The Public Art Program (PAP) procedure involves a written submission and an inter-divisional staff review of the gift. Given the responsibility of preserving hundreds of existing works across the City, the Division generally does not accept gifts of art which present an unreasonable maintenance burden. Accordingly, the staff committee evaluates the gift against a number of criteria including “the ease of maintenance and repair” as well as a “provision by the donor for ongoing maintenance of the work and cost of relocation and removal”. This provision equates to 5% – 10% of the art’s value, depending on the type of work, and is held in the City’s Public Art Reserve Fund. These funds help ensure that the maintenance requirements for that specific work are met in perpetuity. Incidental maintenance that is part of the City’s operating budget, including graffiti and site clean-up, are not funded from this account.
Commemorative Trees & Bench Program (Parks, Forestry and Recreation Division)
The Commemorative Tree & Bench Program (CTBP) allows the public to pay tribute to a person(s) or occasion by purchasing a park bench ($2,200) or tree ($642) for installation in a public park. The program operates on a full cost recovery basis. All fees are deposited into a dedicated CTPB operating account and a portion of these funds (20%) is set aside for maintenance and replacement purposes. Accordingly, the program replaces damaged trees, at no cost to the applicant, within 5 years of the original planting date (or a subsequent replanting date). Commemorative benches and associated plaques will be maintained by the City for a maximum of 10 years and 2 years respectively, again at no cost to the applicant. Bench repair or replacement after 10 years is at the City’s discretion. Plaque repair/replacement after 2 years are be charged to the applicant.
Plaques and Markers Program (Heritage Toronto)
Heritage Toronto’s Plaques and Markers Program (PMP) has, for almost 40 years, officially remembered key people, places and events which have shaped the City. Costs range from $550 – $5500, depending on the type and size of plaque, and are fully born by the applicant. The smallest of the Heritage Toronto plaques become the responsibility of the property owner, while the others remain property of Heritage Toronto. Plaque fees cover, among other expenses, the cost of research, plaque production and installation and, since 2005, contributions to a maintenance fund for those plaques which remain the property of Heritage Toronto. Generally, 10% of the fee is allocated to this “Plaque Maintenance Fund”, which the agency holds and administers. As a result, damaged or stolen plaques completed from January 2005 onward, and that belong to Heritage Toronto, are repaired or replaced by the agency at no charge to the applicant. Conversely, damaged or stolen plaques completed and installed prior to 2005 are only repaired and replaced according to the availability of time and finances since these plaques precede the establishment of the Fund.
Guidelines & Principles
- The City encourages members of the public to supplement the development and enhancement of City infrastructure through financial and in-kind contributions.
- As per section s.3.4 of the City’s Donations Policy, donated properties are only accepted where the receiving division has the financial and resource capacity to attend to its operating impacts, including maintaining the asset.
- The City has an interest in ensuring that, where advisable, the donor covers the full cost of the purchase, installation and maintenance during the expected life-cycle of the donated item.
- Consequently, the City will assess, prior to the transfer, a charge to cover anticipated on-going maintenance of donated assets during their life expectancy.
- The City also has an interest in ensuring that the donation’s on-going maintenance costs do not negatively impact the resources available for maintenance of other City properties and does not unduly interfere with staff’s regular maintenance work.
- The long-term care and maintenance of donated properties is important to both the donor and City. The receiving division will therefore inform the donor of the level of maintenance required for the donated property based upon the type of care needed to keep the property in a SOGR and in compliance with divisional standards.
- Unless alternative arrangements are made, gifts are accepted with the full understanding that they become the property of the City and, therefore, will be maintained by the appropriate City division.
- It is the responsibility of the receiving division to perform routine maintenance and upgrades to the donated property. Unless otherwise specified, division staff will maintain and repair donated properties on a best-efforts basis. However, donated items will not be given priority treatment.
- The City has a duty to maintain the donation only for the expected life cycle of the donation, barring any acts of nature or other circumstances which might affect the life span of the donation.
- It is expected that the division, if it wishes to replace the asset at the end of its useful life, will be solely responsible for this cost (subject to capital budget availability).
- In cases where the donor offers to make an in-kind donation rather than a cash donation, staff may require the donor, as is the current practice of the Public Realm section in Transportation Services, to maintain the property, regardless of its value or scale.
- Alternatively, the receiving division should estimate the capital cost of the improvements and request a cash donation to cover future maintenance costs.
- It is advisable that the amount contributed for maintenance be negotiated and documented in writing.
- The establishment and administration of reserve funds is governed by the City’s Reserve Fund Policy. City Council may, via bylaw, create a reserve fund to receive and hold funds that are to be applied towards the maintenance of donated properties. Upon conferring with the City’s Corporate Finance Division, the receiving division may request Council to create a general maintenance reserve fund to cover all donated property or, where applicable, separate reserve funds for each donated item.
- It is evident from current City practices that the level of funding required for future maintenance requirements vary depending on the nature of the project. There is no standard rule of thumb (the CBTP reserves 20% for maintenance and upkeep while for the PAP, it is 5-10%). In general, in assessing future maintenance needs, divisions need to consider a number of factors including, but not limited to:
i. Age – Donation of a new asset will likely require less maintenance in the short-term than property that is closer to its life-cycle expiration.
ii.Weather – Exposure to the elements has a material impact on the amount of maintenance required.
iii. Location – Maintenance costs may significantly be affected by the location of the asset. Property situated in a flood plain, for instance, or in other areas that are subject to environmental stresses will likely require greater than normal upkeep and repair. Likewise, certain sites may experience a higher incidence of vandalism than others.
iv. Design & Construction – Defects in design or faulty workmanship will produce higher maintenance costs. For purposes of quality control, it is therefore preferable for divisions, where feasible, to receive a cash donation and ensure construction of the asset to City standards rather than accept a finished product as an in-kind donation.
v. Usage – The greater the property’s usage, the greater the wear and tear. Likewise, misuse of the property will also contribute to higher maintenance costs.
vi. Material Quality – High quality and durable materials will help extend the expected lifespan of the asset and keep it in a state of good repair. Conversely, assets constructed with cheaper or sub-standard materials often require more frequent maintenance and may contribute to the asset having a shorter working life.
vii. Uniqueness – Assets that incorporate unique attributes (design, materials, features, amenities, etc.) will typically incur higher maintenance and replacement costs.
viii. Maintenance Standards – Maintenance costs will be informed by the level of maintenance performed. For example, due to resource limitations, if staff are limited to undertaking corrective maintenance (i.e. only fixing the asset when it breaks down or operates improperly) instead of preventative or planned maintenance, which attempts to keep the asset in a state of good repair throughout its useful life, maintenance costs will likely be higher.
- Where feasible, once the donated asset has reached the end of its expected life cycle or, if the need arises, prior to that time (e.g. the reserve fund is exhausted) it is advisable to notify the donor and offer them the opportunity to provide additional funding that will expedite the maintenance or replacement of the asset. If the donor declines or cannot be located, the property remains a part of the City’s asset inventory and as such is included in its normal schedule of care and maintenance.
- For ongoing donation programs, like the PMP, the fee schedule which covers maintenance, repair and other costs should be adjusted periodically to keep pace with inflation and other factors.