volume 1 - Halifax Regional Municipality

Halifax Water Integrated Resource Plan
Appendices
This analysis was carried out for each year of the 30-year planning period from 2013 to
2043. The 30-year NPV for each asset was then calculated accounting for every renewal
in every time step. This provided a year-by-year asset renewal program cost, which was
incorporated into the overall financial model. For the first four-year period, which had a
number of specific asset renewal projects identified through the Five-Year Capital Plan,
the results of the asset renewal model were compared with the sum of proposed
specific expenditures for each asset. If the modeled asset renewal program cost
exceeded the sum of specific projects the cost difference was added to the financial
model for that time step. If the sum of the specific project costs were equal to or greater
than the modeled program cost, the sum of the projects was included as is into the
financial model such that asset renewal projects were not double counted. The
individual asset renewal NPVs were then accumulated for each system and each
variation.
Major model inputs were an estimate of the starting age distribution of the assets and
the estimated project replacement cost for each asset.
The major assumptions associated with the asset renewal modeling were as follows:
• The asset service life estimates were based on best industry practice. For complex
assets like pump stations and treatment facilities separate service life estimates
were made for various system components. Civil (structural) elements had a 50-year
life, mechanical-electrical (M&E) components had a 20-year life and instrumentation
and control (IC) had a 10-year life. A fraction of the total asset value was assigned to
each component e.g. structural represents 60% of total asset value. The asset life
data and fractional values are contained in the costing procedures technical
memorandum, which is presented in Volume 3 Appendix C of the IRP final report.
• For purposes of the asset renewal modelling the civil-structural components of
complex assets such as pump stations and treatment plants were considered to be
presently in new condition. Considering the 50-year life of the components they did
not figure in the asset renewal requirements over the 30-year IRP planning period.
Halifax Water staff reviewed the status of the M&E and IC systems of major water
and wastewater treatment facilities and provided specific estimates of current asset
age. These were used as the starting point for the modelling of these assets.
• A discount rate of 3% was applied to all asset renewal capital expenditures. The
discount rates were calculated as the difference between the current municipal
borrowing rate of 5% and an inflation rate of 2% for capital projects estimated from
an analysis of ENRCCI 6 index changes for municipal construction projects.
6 Construction Cost Index History, Engineering News Record, July 2012
Revision: 2012-10-29 Integrated Resource Plan –Appendices F-8
October 31 2012 Page 187 of 272