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FACILITY INFRASTRUCTURE GAP. Introduction. Today - Current facility portfolio overview (Where we are today) Yesterday - Historical facility trends (How did we get here) Tomorrow - New directions (What can we do about it). Portfolio Dimensions.

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  2. Introduction Today - Current facility portfolio overview (Where we are today) Yesterday - Historical facility trends (How did we get here) Tomorrow - New directions (What can we do about it)

  3. Portfolio Dimensions Asset Replacement Value $1.1 billion Owned Assets 5.9 million sf (billable area) • Office space 1.3 million sf • Special use facilities 4.6 million sf Leased Assets 1.7 million sf (billable area) • Office space 1.4 million sf • Special use facilities 0.3 million sf (Archives warehouse, MDA warehouse, Aerospace Training Centre, Hanger T5)

  4. Operating Budget Operating Budget Salaries & Benefits $15.7 m Expenditures other than salaries $32.7 m TOTAL $48.4 m Operating unit cost/ yr. $8.20/sf/yr of owned

  5. Current Financial State of Infrastructure Maintenance • No specific capital budget provision for ongoing infrastructure maintenance • Maintenance GAP is estimated at $380.0 million over 10 years or $38.0 million per year (3.5 % of 1.1 billion asset value) • Industry standard = 2% to 5% of asset value • Current maintenance capital approximately $12 million (2003/04 Capital) for building component upgrades • $12.0 million per year = 1.1% of 1.1 billion asset value

  6. Facility Infrastructure Gap Components

  7. Owned Infrastructure Conditions • 2% New • 57% Ailing: In need of life cycle upgrades to protect sustainability and cost effectiveness. • 28% Dire : Life cycle concerns and obsolescence now precipitating, all flexibility to defer exhausted. • 13% Unoccupied : 12% surplus space for disposal plus 1% vacant space

  8. Aging Portfolio • Most facilities have reached or exceeded their useful lifetime of 25-35 years • Electrical, Mechanical, and Structural systems are in dire need of refurbishment and upgrading.

  9. Aging Portfolio (cont’)

  10. Major Construction Booms • 21-40 Age Range - Provincial Office Buildings and Community Colleges - Facility infrastructure component life cycle renewals • 81-100 Age Range - Traditional “heritage” type buildings such as the Legislative Building, Mental Health Institutions, Courthouses, Land Titles Offices, etc. - High degree of functional obsolescence associated with these buildings - Approximately 1/3 of these buildings have undergone major renovations, re-construction, and additions

  11. Infrastructure Deterioration - Why? • Public opinion focused government expenditure on Health & Education program delivery costs • Neglect of the non-visible nature of infrastructure renewals • Traditionally infrastructure viewed independent from government program deliveries • Funds historically expended to alleviate outstanding life/health issues only Not Options for change • Increased Budgets • Business as Usual

  12. Planning/Evaluation Horizonfor Infrastructure Renewal, Replacement, or Disposal • Infrastructure investments require long-term planning -Requires program & facility infrastructure assessments in an overall government program lifecycle • Reality is a short-term cycle due to continuous restructuring • Short-term horizons impede sustainable development decisions

  13. SolutionOptions 1. Do not add to the owned portfolio(and thereby increasing future problems) - Alternative methods of government program delivery with less reliance on owned space (preference to leases and avoidance of tenant occupancy/maintenance risks) 2. Innovation and Technology(use less physical space) - Privatization of the program delivery of some government services - On-line web services - Non-traditional offices (working from home)

  14. SolutionOptions (con’t) 3. New Funding Sources - Charge back systems to client tenants within specialized facilities - Establishing a sinking reserve maintenance fund - P3 4. Sustainable Infrastructure Capitalization - Funding of energy enhancement programs from future avoidance of energy savings (hydro funding) 5. Shed Mandate Components - Retain core facilities - Disposal of surplus and under utilized buildings - Transferring ownership of general purpose office buildings to institutional investors

  15. Key Points • View infrastructure in relation to program delivery within an overall government context • Look to market availability to reduce infrastructure ownership • Life cycle planning - Integrate infrastructure renewals in conjunction with program business cycles and re-organization • Appropriate information resources to support infrastructure decisions whether to renew, replace, or dispose

  16. Facility Infrastructure Gap Presented by: Stephen Kupfer ADM,Accommodation Development Transportation & Government ServicesAddress 2-1700 Portage Ave. Winnipeg, MB R3J 0E1 Phone (204) 945-7552Fax (204) 945-0908E-mail SKupfer@gov.mb.ca

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