Infrastructure Asset Management: Business Principles to Maximize Government Revenue Returns

This post is an excerpt from an article we published in the June 2017 issue of Borough News magazine entitled “Strategic Asset Management: Optimizing Your Borough’s Dollars.”

We hear a lot these days about the virtues of running government like a business, but what does that mean?

Any profitable business owner can tell you that success doesn’t happen by accident. Managers spend a good bit of time and money studying the environment in which they operate, identifying opportunities and threats, and planning the best ways to maximize growth while minimizing risk.

Though these efforts cost money, prudent managers know it is an investment in the company that will pay higher dividends over the long-term.

Part of a businessman’s overall strategic planning effort involves cataloguing his assets and maximizing their value. Assets can be wide-ranging: from people to trucks to buildings. The goal of asset management is to optimize the way you spend your budget dollars in order to make sure they are providing the biggest return: reducing the life cycle costs while maximizing the service each asset provides.

Who needs to optimize the way they spend their budget dollars more than cash-strapped municipalities under pressure to keep taxes low while obligations increase?

Most municipalities are grappling with aging infrastructure. Take water systems, for example: The American Society of Civil Engineers estimates that the cost to keep our water and wastewater system functioning over the long term is more than $1 trillion. While there is plenty of work to be done, there is simply not enough funding for communities to do it all at once. Therefore, ASCE recommends assessing the condition of every pipe and valve to determine the risks of failure and properly allocate funds where they are needed most. Asset management and capital improvement planning can help you target your limited budget dollars most effectively in all types of infrastructure: roadways, bridges, stormwater management systems and more.

For example, new technology is making it possible for municipalities to extend the life of their roadways through roadway management systems. Cameras and laser-scanning technology can be mounted to trucks that record the conditions of a municipality’s entire roadway system: noting cracks, pot holes, wheel rutting, and more. Doing this work manually would’ve been too labor-intensive and cost-prohibitive for communities in the past, but now, thanks to technological advancements, municipalities can collect better data at a lower cost without road closures or detours!

Once the data is collected, the municipality can work with an engineer to analyze it and prioritize a list of maintenance, repairs and reconstruction needs. A roadway management program like this emphasizes cost-effective, preventative maintenance activities to prolong the life of a roadway in good condition. By making well-timed, proactive investments, the municipality can enjoy better service from the roadway at a lower lifetime cost.

Silver Spring Township Roadway Management Program

HRG has designed a roadway management program for Silver Spring Township that is helping them save money and better position themselves for grant funding. Learn more

The same asset management and capital improvement principles can be applied to bridges, as well. Typically, this is done at the county level since they own more bridges than municipalities, but the process is similar. When Dauphin County first embarked on its bridge management program, 1/3 of its bridges were structurally deficient. They carefully catalogued the condition of each bridge and prioritized repairs and replacement contracts. Today, they have successfully eliminated all load-posted, structurally-deficient bridges in the county. The program has been so successful it’s generated a surplus of liquid fuels funding, and the county has been able to funnel that into a subsidized loan program for its municipalities to address their own infrastructure needs.

Duke Street Ribbon Cutting

Thanks to careful planning and a wise use of funds, Dauphin County recently completed the replacement of its last load-posted, structurally deficient bridge. Now they can use their Liquid Fuels money for an innovative infrastructure bank that is helping municipalities and the private sector improve local communities. Learn more

Asset management programs can be very important to municipalities looking to meet their MS4 stormwater obligations, as well – particularly if they are considering the implementation of a stormwater fee. Aging infrastructure and growing MS4 permit obligations are compelling municipalities to upgrade their stormwater systems. Though legislation allows them to charge a stormwater fee, they must be able to justify it, which means they must conduct a thorough inventory of their facilities and document the work that must be done to keep it functioning (along with cost estimates for that work). These are crucial facets of an asset management system.

Mobile GIS Development for MS4 Inspections

Municipalities will need a thorough inventory of their stormwater facilities and their condition in order to keep up with the increasing burden of MS4 permitting. Learn about a GIS application HRG created for Hampden Township to help them meet MS4 inspection and reporting requirements.

 

What is asset management?

Asset management is a systematic approach to minimizing the cost of owning, operating, and maintaining your infrastructure at acceptable levels of service.

It is not a computer system or GIS, though these are often valuable tools employed in an asset management program for record-keeping and data analysis.

A proper asset management and capital improvement program will help a municipality identify areas where money is not being spent wisely and reallocate those funds where they can be most beneficial.

It will also help you recognize and evaluate options for keeping your assets functioning for a longer period of time, so that you don’t need to invest in expensive upgrades or replacements as frequently.

It is a circular process that never ends.

Circular Nature of Asset Management

Many things change over time: the condition of your assets, regulations and the business climate you operate in, the number of users you serve, etc.  A good asset management and capital improvement program helps you plan for these changes in advance and respond proactively before they become threats to your bottom line.

 

What are the benefits of infrastructure asset management?

As we’ve already stated, an asset management and capital improvement program helps you identify exactly what maintenance and repair work is necessary without guesswork. This approach has multiple benefits:

Minimizing Risk
Knowing which infrastructure is most likely to fail (and correcting deficiencies before it does) can save you major expenses later. Knowing which failures would be the most catastrophic helps you target money toward their prevention as a first priority.

Maximizing Returns
Asset management and capital improvement planning is all about proactively investing in measures to extend the life of your infrastructure.  These small investments can extend the life of an asset by several years.

Optimizing Service and Satisfaction
Proactively maintaining your assets ensures they function at peak performance for a longer period of time and are replaced before they fail. This means your constituents receive top quality service without disruption and are happier for it. In addition, many asset management solutions include optional customer service applications that make it easier for residents and business owners to submit service requests and track them to completion.

Justifying Your Tax Rates or Fees
Rate increases are never popular, but they are easier for people to accept when they are backed up with clear data showing exactly what improvements are needed and why.

Accessing grants and loans
Competition for funding is fierce, and government agencies are under pressure to make sure the money they invest is used wisely. As a result, they’re more likely to award funds to municipalities who have clear documentation of the project need, its benefits, and a plan for getting it built, operating it, and maintaining it at optimum levels over time.

Improving your worth
Many municipalities have been considering the option of leasing or selling their assets as a response to growing financial obligations in the public sector. A comprehensive asset management system provides documentation of the value of your assets, so you can ensure you are in a position to negotiate the best possible deal for you and your constituents.  Potential investors will be more comfortable making a significant investment if they fully understand the value and the risks they’re assuming.

But asset management can benefit your financial picture even if leasing or selling is not on the horizon.

Under GASB standards, governments can either subtract a standard portion of their infrastructure’s value each year to account for depreciation (the traditional approach), or they can regularly assess the condition of the infrastructure, invest in maintenance to keep it in good condition, and then report the amount of money they have invested in maintenance (the modified approach, which is similar in scope to a typical asset management program).  Using the modified approach, the assets don’t have to depreciate in value like they would in the traditional approach.

A recent article in Governing magazine showed how investors appear to prefer trading bonds from governments that use the modified approach:

“Governments that use the modified method trade at much narrower price ranges compared to bonds from governments that depreciate. In other words, when a government uses the modified approach, investors are much more likely to agree on how to price its bonds. For governments, this can ultimately translate into lower bond interest rates.”

(excerpted from “Selling Your Sewer’s Story – Financial statements can make the best case for public works investors”)

 

The truth is, you’re going to have to invest in maintenance and repair anyway. If you invest in an asset management program, you can take a proactive approach to determining what maintenance is needed and then plan and budget for it in advance. This means you can target your maintenance dollars where they’re needed most and make sure you have the funds available to do the work before infrastructure failure brings even greater costs to bear on your budget.

Publicly-traded companies are held accountable to their shareholders. They must demonstrate that they are making good decisions for the future health of the company and maximizing the value of the shareholders’ investments. Taxpayers are coming to demand the same sort of accountability from their government, wanting proof that their tax dollars are providing a good return, as well. Municipal managers that can prove the value of their decisions will enjoy broad support of their constituents while improving the long-term financial stability of their community.


Adrienne M. VicariAdrienne Vicari, P.E., is the financial services practice area leader at Herbert, Rowland & Grubic, Inc., a civil engineering firm that serves local governments and authorities in Pennsylvania, Ohio, and West Virginia. Ms. Vicari has assisted numerous municipalities and water and sewer authorities with the creation of asset management programs that have created increased value and lowered costs for her clients.

 

Carlisle Borough Uses Infiltration/Inflow Data to Devise Long-Term Plan for Infrastructure Repair and Replacement

Like many municipalities, Carlisle Borough is grappling with the challenge of aging infrastructure. Its sewer system features infrastructure that is more than 100 years old.  Since replacing it all at once is not possible from a financial perspective, borough officials needed to a way to narrow down exactly where investment should occur.  Which projects would provide the most value to Carlisle residents and business owners?  Infiltration and inflow data provided the answer.

Why infiltration and inflow data?

In the words of Carlisle Borough staff, “Inflow and infiltration is really just a symptom of failing infrastructure.” By figuring out where extraneous flow is entering the system, we get a hint as to where cracks or defects in the infrastructure may be located.

Josh Fox recently authored an article in the April/May/June issue of Keystone Water Quality Manager magazine on this project with the borough’s director of public works Mark Malarich, P.E.

The article discusses how HRG’s engineers evaluated infiltration and inflow data to determine what infrastructure needed repairs or replacement the most. First, the borough implemented a 16-week metering program to identify dry weather flow for comparison to wet weather data for the borough’s 21 sewer basins.

We then used the data to calculate peaking factor and total infiltration volume for each of the basins and ranked the basins accordingly. After analyzing the data, we determined that some basins had high peaking factors but infiltration dropped off quickly once the wet weather dissipated (like Area 1C in the figure below).  Other basins saw high infiltration volumes for several days after a wet weather event (like area 4 in the figure below).  This suggested that a high groundwater table was contributing a sustained flow via defects in the manholes, sewer mains and sewer laterals.  Therefore, total infiltration volume provided the best data for assessing the overall condition of the infrastructure.

 

Infiltration-Inflow-Data-from-Two-Basins

Taking our analysis one step further, we prioritized the basins with the highest total infiltration volume for further investigation and compared the total volume of infiltration/inflow in a basin to its size. By calculating the total infiltration per foot of pipe, we were able to more accurately estimate the severity of damage in each basin.  (For instance, two basins may have had similarly high total infiltration volumes, but one was significantly smaller than the other.  This suggests a higher severity of defects in the smaller basin for that much water to infiltrate in a smaller space, during the same time period, after the same wet weather event.)

Prioritized Basins by each factor

Using this data as a guide, HRG worked with the borough to devise a 20-year capital improvement plan for addressing the highest priority needs in the system.  HRG also helped the borough create a financial strategy for addressing these needs.

Rehabilitation of the highest priority basin is being completed in the spring of 2017 and is expected to come in almost $1 million under budget.

Read more about this project in the April/May/June 2017 issue of Keystone Water Quality Manager magazine.

HRG has written a great deal of advice on asset management and long-term infrastructure planning for water and wastewater systems. Read similar articles below:

 

 


Josh Fox, P.E.Josh Fox, is the regional manager of water and wastewater system services in HRG’s Harrisburg office.  He has extensive experience in the planning and design of wastewater collection and conveyance facilities, water supply and distribution systems, and stormwater facilities.

 

GUIDE: How to Obtain Act 89 Funding For Your Municipality

Cover of HRG's Guide to Obtaining Act 89 Transportation FundingIn 2013, Pennsylvania enacted Act 89 to increase funding for roadway, bridge and traffic projects.  This legislation increases transportation funding by uncapping the oil company franchise tax, increasing fees for driver services like vehicle registration and license plates, and increasing fines for traffic violations.

Thanks to this legislation, local governments are already benefitting from an increase in their Liquid Fuels disbursements, but millions of additional dollars are available to municipalities who know how to access them. Act 89 funding is not distributed through one umbrella program. It is actually disbursed through several different initiatives:

  •  The Multi-Modal Fund
  •  The Green Light Go program
  •  Low Volume Road/Dirt & Gravel Road Funding
  •  A bridge bundling initiative

In order to obtain the money for which your community is eligible, you’ll need to understand the different programs and the application requirements of each. In order to meet these requirements, you’ll need to implement a long-term strategic planning approach like asset management and capital improvement planning.

This guide can help you do that. In it, we will tell you:

  • What types of projects are eligible for act 89 funding
  • What information grant agencies are looking for
  • Ways to position your projects for grant success

Download our guide and learn how to obtain act 89 funding for your municipality!

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Could infrastructure asset management improve your municipal bond performance?

Financial Reports

If you’re a frequent reader of our newsletter and postings, you know we believe strongly in the benefits of infrastructure asset management. (This is a sampling of our prior articles about infrastructure asset management.) By regularly assessing the condition of your infrastructure and proactively planning its maintenance and replacement, you can reap many benefits. Most importantly, you will increase the useful life of your infrastructure for a lower long-term cost than the typical reactive approach many governments and authorities take.

A recent article in Governing magazine gives another good reason why investing in asset management can be beneficial: it just might lower your cost of borrowing through bonds. In this article, Justin Marlowe discusses the benefit of using the modified approach for calculating the value of infrastructure required in annual GASB reports.  Under GASB standards, governments can either subtract a standard portion of their infrastructure’s value each year to account for depreciation (the traditional approach), or they can regularly assess the condition of the infrastructure, invest in maintenance to keep it in good condition, and then report the amount of money they have invested in maintenance (the modified approach).  Using the modified approach, the assets don’t have to depreciate in value like they would in the traditional approach.

Marlowe cites research he’s conducted that shows investors appear to prefer trading bonds from governments that use the modified approach:

“Governments that use the modified method trade at much narrower price ranges compared to bonds from governments that depreciate. In other words, when a government uses the modified approach, investors are much more likely to agree on how to price its bonds. For governments, this can ultimately translate into lower bond interest rates.”

(excerpted from “Selling Your Sewer’s Story – Financial statements can make the best case for public works investors”)

 

He goes on to state that very few governments at the state and local level actually use the modified approach, so with a lower supply, the demand for such investments would likely be stronger yet.

The truth is, you’re going to have to invest in maintenance and repair anyway. At HRG, we believe that, if you invest in an asset management program, you can take a proactive approach to determining what maintenance is needed and then plan and budget for it in advance. This means you can target your maintenance dollars where they’re needed most and make sure you have the funds available to do the work before infrastructure failure brings even greater costs to bear on your budget.

Justin Marlowe’s study adds a bonus benefit to this type of approach: you can cite those proactive investments in your financial statements to make your government bonds a more attractive investment to traders.

Every client need is different, and HRG would be happy to discuss asset management planning, capital improvement planning, budgeting and/or rate making options to fit the unique needs of your community. Contact us to discuss your community’s infrastructure and financial goals today: (717) 564-1121!


Adrienne M. VicariAdrienne Vicari, P.E., is the financial services practice area leader at Herbert, Rowland & Grubic, Inc., a civil engineering firm that serves local governments and authorities in Pennsylvania, Ohio, and West Virginia. Ms. Vicari has assisted numerous municipalities and water and sewer authorities with the creation of asset management programs that have created increased value and lowered costs for her clients.

 

 

Benefits of Utility Asset Management

As our water systems continue to age past their useful life and utilities face increasing budget pressures, the terms asset management and capital improvement planning have become buzzwords in the industry. However, as utility managers struggle to squeeze as much out of their budgets as possible, it is hard for many of them to justify the additional expense associated with developing and implementing an asset management program. Just like with any other purchase, they want to be sure the benefits outweigh the cost.  So what are the benefits of asset management and capital improvement planning?

Target your money with asset management

Target budget dollars where they’re needed most and eliminate wasteful spending.

An asset management and capital improvement program helps you identify exactly what maintenance and repair work is necessary without guesswork. Why allocate money toward cleaning out pipes selected at random, when you could target that money to the pipes that need it most (and use the savings to accomplish other system goals)?  Why replace pipes simply because of age when they may be in perfectly good condition?  Many factors besides age can cause the deterioration of infrastructure.

Photo by TheeErin. Published via a Creative Commons license.
water main break sinkhole

Minimize Risk

Knowing which infrastructure is most likely to fail (and correcting deficiencies before it does) can save you major expenses later in the form of property claims, water loss, etc. Knowing which failures would be the most catastrophic helps you target money toward their prevention as a first priority. With the budget limitations of municipal utility management, you might not be able to prevent every system failure, so it’s important to know which ones have the potential to cause the most financial damage and impact the most customers.  This way, you can focus your efforts on preventing those first.  If a failure does occur, a good asset management plan will include a proactive response plan, allowing you to respond quicker and more efficiently (thereby reducing damage and disruption).

Increase ROI with asset management

Maximize Returns

Asset management and capital improvement planning is all about proactively investing in measures to extend the life of your infrastructure.  These small investments can extend the life of an asset by several years.  Over time, the money you save delaying replacement will far surpass the money you spent to maintain the asset, and your customers will have enjoyed better, more consistent service for this lower cost.

Water sustainability

Promote Sustainability

Finding and detecting failures in the system like leaks can prevent water loss and the wasted energy consumed to treat water that never makes it to a customer.

Rating Five Golden Stars on Blackboard

Optimize Customer Service and Satisfaction

Proactively maintaining your assets ensures they function at peak performance for a longer period of time and are replaced before they fail. This means your customers receive top quality service without disruption and are happier for it. In addition, many asset management solutions include optional customer service applications that make it easier for customers to submit service requests and track them to completion.

 

Justify your rates with asset management

Justify Your Rates

Rate increases are never popular with customers, but they are easier for them to accept when they are backed up with clear data showing exactly what improvements are needed and why.

Attract funding with asset management

Access grants and loans

Competition for funding is fierce, and government agencies are under pressure to make sure the money they invest is used wisely. As a result, they’re more likely to award funds to utilities who have clear documentation of the project need, its benefits, and a plan for getting it built, operating it, and maintaining it at optimum levels over time.

Know your worth with asset management

Know your worth

Many utilities have been considering the option of leasing or selling their assets as a response to growing financial obligations in the public sector. A comprehensive asset management system provides documentation of the value of your assets, so you can ensure you are in a position to negotiate the best possible deal for you and your customers.  Potential investors will be more comfortable making a significant investment if they fully understand the value and the risks they’re assuming. (For more Insight into the utility leasing trend, see our article on calculating fair annual rental value.)

Every manager must take careful stock of his revenue and his expenses, but not all expenses are created alike. There is a difference between a cost and an investment, and asset management is clearly an investment in your utility’s future.  In essence, it helps you provide better service at a lower cost with reduced risk and improved financing options. How many investments can you make that provide that kind of return?


Do you want to learn more about asset management and capital improvement planning? Read our other Insights on the topic:

What is utility asset management?

Many utilities struggle to respond to aging infrastructure and increasing regulation. This article explains how asset management works and presents it as an important solution to both of these problems.

Better Roads for Less Money with Asset Management

Graphical proof that municipalities that invest in asset management save money and get better infrastructure results.

Position Yourself for Infrastructure Funding with an Asset Management/Capital Improvement Plan

4 reasons why municipality’s with asset management/capital improvement plans are more likely to be awarded grants and low-interest loans.

Asset Management: What Does It Mean to You?

An introduction to infrastructure asset management and what you need to consider when picking a solution/getting started.


 

Asset management can also be a valuable tool for municipalities managing a stormwater system. As MS4 permit requirements continue to grow, municipalities need to know more and more about the location and condition of their stormwater infrastructure. HRG has extensive experience creating asset management systems for stormwater systems, and we offer a wealth of advice about meeting MS4 permit requirements and funding stormwater program needs through user fees. Check out these Insights for additional information:

Tips for Preparing Your 2018 MS4 Permit Application
Learn more about: the specific deadlines associated with the 2018 MS4 permit application, how to apply for a waiver from the new Pollution Reduction Plan requirements, what details must be added to the 2018 mapping, and how municipalities can collaborate with others to improve the effectiveness (and reduce the cost) of their MS4 program.


Paperwork

Stormwater Utility Guide
Get answers to frequently asked questions about stormwater user fees and advice on how to build public support for a fee in your community. This guide provides an overview of a user fee’s benefits and an outline of the steps one must take to decide if a user fee is right for their municipality.

Stormwater Utility Guide

Also check out these examples of our project experience with asset management for water, wastewater, and stormwater systems:

Capital Region Water, Harrisburg, Dauphin County, PA
Herbert, Rowland & Grubic, Inc. (HRG) is developing/customizing a Geographic Information System (GIS) database for Capital Region Water (CRW) potable water, storm sewer and public sanitary sewer infrastructure networks.

CRW Logo


HodderHoward Hodder, GISP, is the manager of HRG’s Geomatics Service Group. As such, he oversees the delivery of surveying and geographic information system services to all of our clients firm-wide. He has extensive experience in asset management for municipal clients, particularly in the areas of sanitary and storm sewer systems. Contact Howard with your questions about asset management and GIS.

Join Howard at the 2016 Pennsylvania Utility Management Summit, being jointly presented by the PA American Water Works Association, PA Water Environment Association, and Pennsylvania Municipal Authorities Association! He will be presenting a workshop entitled “GIS and Asset Management: Putting a World of Information at Your Fingertips.”

Duke Street Illustrates an Infrastructure Funding Solution


  • Dauphin County has eliminated all of its load-posted, structurally deficient bridges with an ambitious approach to infrastructure funding.
  • Now the county is using the money it’s saved to fund a new infrastructure program benefiting its municipalities and private sector.
  • The program has already funded 10 projects worth $11 million with just a $1 million investment from the county.
  • Read on to learn more about Dauphin County’s innovative infrastructure funding solution.

Duke Street Bridge Under Construction

We begin this story in its final chapter, celebrating the construction of the Duke Street Bridge in Hummelstown Borough and South Hanover Township.

It’s a story that plays out all over America every day: a local government struggling to address aging, deteriorating infrastructure.

But Dauphin County’s story is different. With HRG’s help, they’ve found a solution to the infrastructure funding problem and are turning the page to a new, brighter future: a future they have the freedom to author themselves.

How did they get here? Asset management and capital improvement planning.

Ambitious Capital Improvement Program Eliminates Structurally Deficient Bridges

In 1984, 1/3 of Dauphin County’s bridges were structurally deficient. It’s the kind of problem many local governments – under tight budget constraints – might find insurmountable.  But Dauphin County knew that solving big problems is not done in one swift motion; it’s accomplished piece-by-piece.

Accordingly, HRG designed a long-term asset management and capital improvement planning program for them. It has several components:

  • Inspecting and assessing the condition of each county-owned bridge every two years.
  • Identifying the appropriate type and timing of maintenance, restoration or replacement measures.
  • Creating (and updating) a Bridge Improvement Plan that prioritizes these measures over a 10-year period. (Projects are ranked not just on the bridge’s structural condition but also its importance to the local transportation network [as determined by the amount of traffic it carries, whether it’s located on EMS or school bus routes, etc.])
  • Using this data to seek funding.
  • Leveraging this funding to complete projects over time, addressing the most urgent needs first and steadily whittling that list of structural deficiencies down to nothing.
Roadway Conditions Over Time Graph


 Our article on Better Roads for Less Money illustrates how proactive maintenance can maximize the usefulness of infrastructure at a lower cost than the typical reactive approach.

By taking a proactive approach like this (vs a reactive approach that addresses bridges only after they’ve failed), Dauphin County extends the life of its bridges, maximizing their usefulness while minimizing their life cycle cost.

They also position themselves well for outside funding. A good capital improvement plan includes plenty of data about how many people rely on a piece of infrastructure and how they would be impacted if it were to fail or be taken out of service.  This information is very persuasive to funding agencies, who want to make sure their investment provides the biggest possible benefit to the community.

But agencies also want to be sure the money they invest will produce results: that the project will successfully transition from concept to construction. A well-designed capital improvement plan does just that. It shows you have identified exactly what is required to get a project built (including the timelines for permits and approvals) and that you know the full scope and cost of what you want to accomplish.  It also shows you have allocated money in advance to get the job done.

This level of detail reassures funding agencies that the money they invest will be used wisely and the project will be completed successfully. (See our article on Positioning Yourself for Grant Funding for more detail.)

In fact, funding agencies are increasingly requiring data like this in their application process, so a capital improvement plan is quickly transforming from a nice-to-have item into a necessary part of your infrastructure approach. (Our article on successfully applying for Pennsylvania Act 89 transportation funding explains this in more detail.)

Many pages have been written about Dauphin County’s success with this strategy over the years. (It has been featured in Pennsylvania County News and Road and Bridges magazine among others.)  In addition, the county has won several awards for projects accomplished using this approach: two Road and Bridge Safety Awards, a National Timber Bridge Award, and a historic preservation award from the PHMC.

But the successful completion of Duke Street in 2017 is not just an ending; it’s the beginning of a whole new story for Dauphin County. With no more load-posted, structurally deficient bridges to address, their program transitions its focus from replacement to maintenance.  This has enabled the county to create a new program for funding infrastructure, using a portion of the Liquid Fuels funds it used to need for bridge replacements.

Savings Are Used to Encourage Economic Growth With a New Infrastructure Funding Program for Municipalities and the Private Sector

The Dauphin County Infrastructure Bank combines this Liquid Fuels funding with additional money from PennDOT’s Pennsylvania Infrastructure Bank to offer loans to county municipalities, businesses, and non-profits at unbeatably low interest rates (as low as 0.5%) for the construction of roads and bridges under their jurisdiction. Over the past three years, the county has turned a $1 million investment into 10 projects worth $11 million.

DCIB has funded 10 projects worth $11 million

Again, Dauphin County has its eye on the long view, using its funds to promote economic development throughout its municipalities.

As their example illustrates, the solution to funding our infrastructure is not a short story; it’s a novel with many chapters and a carefully planned arc. In fact, it’s a story that never ends – with the construction of Duke Street serving as the beginning of a new chapter: the Dauphin County Infrastructure Bank.  This program will, in turn, fund many new stories with new characters: municipalities and private developers rewriting the future of their communities one roadway or bridge at a time.

Are you ready to become the author of your  community’s future?

 

UPDATE: Dauphin County celebrated a ribbon-cutting for the completed bridge in the spring of 2017.  Learn more about the bridge in the video below

 


Do you want to make your community safer and encourage economic growth by investing in infrastructure? Download our guide:

Infrastructure Funding SolutionsCounty Infrastructure Banks:
Overcoming the Obstacles That Prevent Local Governments From Fixing Their Roads, Bridges, and Water Systems

It explains
• the benefits of a county infrastructure bank program
• how the program works (i.e. where the money comes from, how projects are selected, and how the projects are delivered)

Local governments want to improve their infrastructure but often don’t know where to come up with the money or even how to manage projects of that size and complexity. A county infrastructure bank program solves both of these problems, making infrastructure repair a feasible reality.

Learn how to fix your infrastructure


Brian Emberg, P.E.Brian Emberg, P.E., has more than 30 years of experience and has designed hundreds of infrastructure projects. His understanding of project management and keen sense of business practices has lead him to his current position as Senior Vice President and Chief Technical Officer at HRG. He is responsible for the management and oversight of the firm’s technical service groups, sales and marketing, client management, and the maintenance and execution of quality management plans.

GUIDE: Are Stormwater Fees Right For Your Municipality?

Stormwater Utility Guide Stormwater costs are on the rise due to increased regulation, aging infrastructure, and the increasing frequency of heavy storms. But existing tax revenue is already spread thin by other priorities. You need more revenue to address your stormwater needs, and a utility could be the answer.

Stormwater utilities provide a dedicated stream of funding that ensures you always have the money on hand to manage stormwater issues – without competing with other budgetary needs. They also allow you to collect money from everyone who uses the service: even tax-exempt properties like churches, hospitals, and universities.  And they are a more equitable source of funding than property taxes because you charge users according to their contribution to runoff and can offer credits to people who reduce their runoff with approved techniques.

Find out it a stormwater utility could be right for your community with our guide. In it, you’ll learn

    • The many advantages of forming a stormwater utility.
    • Answers to frequently asked questions about stormwater utilities.
    • How a dedicated revenue stream can make your grant applications more attractive to selection committees.
    • How to structure the ownership and responsibility for facilities between the municipality and an authority to ensure your interests are well-protected.
    • Tips on how to build public support for a stormwater fee.
    • The first steps in implementing a stormwater utility.

 


Find out if stormwater fees are right for your community.

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Effective Utility Management Starts With These Strategic Planning Tips

Strategic Planning Whiteboard

This article was originally published in the June 2016 issue of  Keystone Water Quality Manager. It is reprinted here with their permission.

We’re all familiar with the phrase “If you don’t know where you’re going, any road will get you there.” This is paraphrased from an exchange between Alice and Cheshire Cat in Lewis Carroll’s Alice in Wonderland. Like Alice, you know you need to get “somewhere” because changing regulations, increasing costs, aging infrastructure and customer growth affect the way you provide your service. Each year as operators, managers, and board members, you’re forced to establish budgets, adopt rates and policies, and make recommendations that have long-lasting effects. You may use the best information available at the time but can’t be sure that you’re adequately prepared for what’s just around the corner.

Strategic planning is a tool that helps to identify where you need to go and the best road to get there by exploring the fundamental values and principles that support your utility’s policy and operating decisions. Properly done, it looks at all aspects of the utility’s operations in order to see if they reflect the needs of your customers, ensure regulatory compliance, and generate sufficient financial resources to be sustainable. This is not just a financial plan focused on replacing existing facilities or acquiring new ones, but a comprehensive look at the factors that will drive both short and long-term events and an identification of strategies to address them.

There are five basic elements in a strategic plan:

  1.  Vision
  2. Mission Statement
  3. Critical Success Factors
  4. Strategies and Actions to Meet Objectives
  5. Prioritization and Implementation Schedule

However, there can be as many additional elements as the utility feels is necessary to properly address the needs of all its stakeholders: its users, employees, and the community at large. Some of these elements may take a long time to complete, while others can be accomplished relatively quickly. For some, a good deal of data will be needed, while others will simply reflect widely accepted industry practices and preferences. The plan could take a month or a year to complete, depending on the level of detail believed to be required. However, one of the benefits of the planning process will be simply identifying the stakeholders and discussing the elements of the plan with them. The ability to identify areas of consensus and concern is a hugely important and valuable outcome of the plan.

Getting Ready for Strategic Planning

Before you can begin the process, there are some preparatory activities that should be completed:

Authorization
The first task in strategic planning is obtaining the authorization to move forward with the process at all. It is important to involve all of the decision-makers in the strategic planning process, and discussing the scope of the plan and its benefits is one of the best ways to achieve “buy-in” for the entire process. Without buy-in, it will be difficult to fully implement the resulting plan.

Identification of Stakeholders
Another important step is to make sure the process considers all relevant points of view. This may seem easy, but, when you actually begin to list them, the number of people and organizations relying on your utility to be well-managed and provide affordable, high quality service is probably greater than you think. While some seem obvious, consider the following examples:
• Current users
• Employees
• Regulatory agencies, including PA DEP and US EPA
• Municipal government, conservation districts and planning agencies
• The Chamber of Commerce or local economic development agency
• Future users, including land owners and developers

This is not intended to be a complete list, only a guide, and not every group will require the same level of involvement in the strategic planning process, but understanding how each group might be impacted is important.

Planning Your TimetableDetermination of the Plan’s Time Frame
Strategic plans are generally long-term, usually five years, but a different time horizon may be more useful if you are aware of some specific event likely to occur just beyond the five-year planning period. If a significant expansion of the utility appears likely, five years may not be long enough.

Organization
How will the strategic plan be organized? Who will guide the process? Is it to be done by an outside professional or internal staff? What is the schedule? What will the final plan look like, and how will it be disseminated? Does it need some type of formal adoption or approval? If so, by whom?

Determining the “Vision”

In essence, visioning asks the question: What will the organization look like in the future? Visioning will supply the context for the other elements of the strategic plan. For a wastewater utility, the visioning process may actually be one of the most involved elements of the plan since this is where you try to get a peek at what’s around the corner. Unlike some businesses where visioning is a projection of some blend of marketing prowess, economic predictions and industry trends, each utility is unique because the factors that drive future events will impact it differently.

The task is made a bit easier if you divide visioning into an external scan and an internal scan. Although they may be related in many ways, the external scan looks at:Financial Reports

  • potential changes in the regulatory environment,
  • community growth and development,
  • changes in demographics,
  • future interest rates,
  • future construction costs,
  • the overall level of economic activity.

(Increased economic activity in nearby communities should also be considered since it may impact your service area.)

The internal scan will focus more on:

  • the needs of existing users and employees,
  • service improvements,
  • transparency,
  • facilities,
  • finances,
  • rates,
  • operating policies,
  • organizational structure.

These are but a few of the areas that need to be considered in some detail.

The visioning process is almost as diverse as the elements themselves. Clearly, information from outside the utility is necessary. This may include individual interviews with consultants, suppliers and community leaders. Telephone calls, questionnaires, online surveys, and specific messages printed on bill inserts can also solicit feedback from targeted stakeholders. Regardless of how it’s done, the result should be a clear and concise statement that reflects the major trends that are likely to drive the future direction of your utility. But, before you can get too specific, you should develop the broad organizational goals. This is best done with a mission statement.

Drafting a Mission StatementDrafting Your “Mission Statement”

I know the idea that you can somehow cram the entire essence of an organization into a couple of tightly worded sentences seems impossible. Some mission statements will run on for several paragraphs, but do they really provide more information about the philosophy or principles that govern the utility’s operations? Usually not. Instead, the discipline of packing an organization’s values into a few words may actually provide a better understanding of its goals. Here is an illustration of a short but insightful mission statement for a wastewater utility, courtesy of the Lancaster Area Sewer Authority:

“To provide quality service and apply technology to process wastewater so as to protect and enhance the environment and health and well-being of the community at a reasonable cost.”

The mission statement should not simply be a collection of carefully chosen words that project an image that isn’t consistent with the utility’s values; rather, creating the mission statement should foster a deeper understanding and commitment to those values. This, in turn, provides the benchmarks that measure success.

business-servicesIdentifying “Critical Success Factors”

The visioning process should identify the broad goals and major initiatives that need to be incorporated into the strategic plan. It is not important to determine their feasibility at this point; detailed examination of alternatives will be done later. Simply decide if they are consistent with the mission statement and are not mutually exclusive. Some likely success factors might include:

  • Achieving greater transparency.
  • Building up operating and capital reserve accounts.
  • Having all professional employees become certified in their specialty.
  • Exploring alternative billing and payment procedures.
  • Creating or reviewing emergency response procedures.
  • Reviewing or increasing use of technology to achieve greater efficiency.
  • Expanding facilities to accommodate expected population increases.
  • Developing an action plan should demographic changes result in reduced flows.

These are only illustrations; the vision and mission statements will help dictate the critical success factors that should be included in your plan. The key here is to keep the success factors general in nature but focused on specific identifiable outcomes. Another important consideration is quantifying what it means to be successful and the metrics for measurement.

From the above illustration, achieving greater transparency is a success factor, but what exactly does that mean? What is it that should be more transparent, and what are the limits of what is made publically available? Can it measured by the number of visits to your website, or does it mean the creation of a website? Is it measured by a fewer number of requests for specific information or telephone inquiries? How about the development of a newsletter? Is that something that most customers believe would be useful based on data collected during the visioning process?

Some critical success factors may not be determined directly. In the example above, data may not have been collected on customer’s preferences during the visioning process. In that case, the success factor of achieving greater transparency will need to be defined by some other precedent activity to measure the benefits of transparency, or it may be determined that transparency is simply a virtue for its own sake whose benefits may not be immediately measurable. In that instance, the precedent activity may be to look at industry practice and see how your current practices can be improved.

If you are getting the idea that developing the critical success factors is a time-consuming process that requires a lot of effort in order to be done correctly, you’re right. This is often the work of several individuals and should involve a team approach at least to direct the work. Care should be taken to assign responsibility for completing an assignment to someone who is involved in the overall planning effort. If not, they may not understand the actual goal and may simply complete a task.

Developing critical success factors, defining them, and providing metrics for measurement is at the very heart of the strategic planning effort. While strategies and actions will provide the “to-do list” and ultimately become the basis for the final report, they will be driven first by the critical success factors you’ve defined.

Developing “Strategies and Actions”

This step is where the plan is actually created. Critical success factors identify the areas where some action seems warranted; they take our broad goals and further define the “somewhere” we want to go. The next step is determining how to get there.

negotiating_at_the_deskAgain, using the transparency example, probably everyone will agree that organizational transparency is desirable, but someone might disagree with the type of information that is made available or with the level of training that may be necessary to organize and screen information. Cost is always a consideration when implementing changes.

Because there are generally many facets to each critical success factor, it is important to have several individuals involved in formulating the strategy for evaluation and implementation. This is often accomplished by group meetings, where each critical success factor is discussed. Questions will likely arise that cannot be answered without some further investigation, so tasks must be delegated to a smaller group or an individual for follow-up. In fact, most of the early efforts will be directed to developing the process to obtain the necessary information and assigning someone to gather and analyze it. The analysis is essential so that the success factor can be implemented in a way that achieves its intended purpose. It also provides documentation for any critical success factors that cannot be implemented.

Once the strategy for implementation is determined, specific detailed actions for implementation should be prepared. One of the most important decisions in this stage of the process is timing. You want to think about the best time to launch a new initiative or modify or eliminate an existing one.

Another important task is to identify someone to champion the implementation. Maybe there is one lead person or several depending on the type and number of tasks. If achieving the critical success factor requires technology changes, someone involved with maintaining that technology should be involved in the implementation. This may seem obvious, but sometimes third parties are retained for implementation, resulting in a loss of buy-in from those who will be responsible for making it all work.
schedule

Prioritizing Tasks and Designing an Implementation Schedule

Even though this article opened with a reference to a fairy tale, there should be no fantasy about implementation. It’s just as much work as each of the other elements — maybe more, since there are now clear ideas on how each goal is to be achieved and, of course, the devil is always in the details. Regardless of how thorough the analysis was, complications can be expected. Another frustration usually is that it takes longer to accomplish than originally believed.

In order to avoid this, one of the first steps to implementation is to determine the schedule. Unless there are very few and straightforward critical success factors, some effort needs to be expended in prioritizing each success factor for each of the broad goals identified in the vision. Often, once the strategic plan is formalized, a sense of urgency to implement its objectives is inevitable. This is understandable since the reason for the plan is generally to improve the utility’s operations, so why would you want to delay?

For one thing, it’s important to remember that the plan itself looks at a five-year time period, so that not all benefits will be immediately available. Also, events are constantly changing, so some of the fundamental assumptions that went into the plan may change. This may not affect the plan, but the implementation schedule should allow time for monitoring external changes nonetheless.

Another important consideration is the time staff has available to implement the plan. While the plan is being implemented, all other work must continue. Even if some of the heavy lifting is assigned to others, the utility’s staff needs to be involved at each step if they are expected to achieve the plan’s goals and provide necessary feedback.

microphoneCommunicating the Plan with Your Stakeholders

Okay: you have the vision, you’ve determined the critical success factors, you’ve developed strategies for implementation, and you’ve created the implementation schedule. You have assigned staff to implement the various strategies in order to monitor progress and make sure that each strategy achieves its desired goal. One question remains: What does the final plan look like? Is it a printed document, a slide presentation published on your website, or an internal spreadsheet that serves as a checklist for monitoring implementation?

Like all the other aspects of the plan, the process that rolls out the plan is determined by the goals of the strategic plan itself. If the plan is centered on internal improvements, then employee meetings with handouts may be the most effective means of communicating the plan’s objectives and the strategies designed to implement them. If there are elements of the plan that are service-related – that impact your customers or the community at large – more formal printed materials may need to be prepared. Meetings with important relevant stakeholders may also be useful, especially if there are some financial impacts associated with the plan that they are expected to share.

The only thing that’s constant is change. Absent a crystal ball, tarot cards, or an Ouija board, a well-thought-out strategic plan is the best means of seeing the future. Even if it misses the mark, knowing why it missed and what parts of the utility may be affected is an important benefit that makes the exercise worthwhile. At the very least, developing the plan will require policy-makers, managers and staff to consider each other’s points of view and understand how the customers and community view your utility.


Russ McIntoshRuss McIntosh is a vice president of HRG and a leading expert on municipal and municipal authority finance. His broad-ranging experience includes project financing, grant administration and compliance, financial consulting, military master planning, utility and corporate accounting, and business management/ownership.

PA Considering New Stormwater Fee Legislation

Photo by Ruhrfisch.  Published via a Creative Commons license.

PA State Capitol

There’s no reason to wait for legislation about stormwater fees currently circulating through the PA Capitol.  The work you would do to implement an authority will still be required even if the legislation passes.

 

Stormwater funding is in the news again these days, thanks to three separate bills currently circulating through the Pennsylvania House and Senate:

These bills are designed to allow municipalities to charge a fee for stormwater management services without having to use a municipal authority. (They all contain essentially the same language but are separated into three bills as amendments to separate codes applying to Second Class Townships [1325], Boroughs [1394], and First Class Townships [1661].)

Some of our clients have asked whether they should hold off on developing and implementing their stormwater management program until we know whether these bills will become law or not, and the answer to that question is no. If you want to explore your options regarding a stormwater fee, now is the time to get started. 

The steps you take to implement a stormwater fee will be the same whether you use an authority or are approved by this potential legislation to do it yourself.

The draft language of the legislation states that the fees “may not exceed the amount necessary to meet the minimum requirements of the Federal Water Pollution Control Act … for the construction, maintenance, and operation of stormwater management facilities and systems.”

Enacting a stormwater fee via the proposed legislation will not be as simple as picking a round number and passing an ordinance. You will need to carefully consider how much it will cost to meet regulatory requirements and provide the desired level of service to your customers.  This means you will still have to conduct an inventory of your facilities, their condition, and the costs associated with their maintenance and operation – just as a stormwater authority is required to do.  You will also need to identify any future costs related to upgrades and repairs and consider varying levels of service provided to property owners throughout the community – additional steps a stormwater authority is required to do.

Regardless of whether the fee comes under the municipality’s name or that of a municipal authority, public outreach will still be necessary to gain support for the stormwater management program and associated fee – just as it would be warranted with the implementation of an authority.

Thus, there is no reason to delay these steps while you wait for these bills to make it through the legislature. All of the work you do in the coming months to inventory your facilities, calculate costs, and gain public consensus will still be useful if the legislation passes.

The legislative process is long. Waiting till this process is complete will take months or even years. In the meantime, stormwater management costs will continue to rise, as MS4 permit requirements become more stringent in 2018 and communities continue to struggle with aging infrastructure, increasing development, and heavier storms.

A qualified financial consultant with expertise in public works and utilities can help you evaluate all of your funding options and determine the best course of action. In order to do so, he or she will have to conduct the steps outlined in this article – regardless of what option will ultimately be selected.

Don’t let the flood of stormwater management costs continue to rise in your community while this legislation works its way through the halls of state government. Investigate your options now.


Do you want to learn more about how a stormwater utility could fund your stormwater program? Download our guide:

Determining If a Stormwater Utility Is Right for Your Community

Stormwater Utility GuideIt includes
• Answers to common questions about stormwater utilities
• Advice for how to build public consensus for stormwater fees
• An outline of the early steps you should take when investigating the feasibility of a stormwater utility

Download the guide at

www.hrg-inc.com/stormwater-utility-guide


VicariAdrienne Vicari, P.E., is the financial services practice area leader at HRG. In this role, she has helped the firm provide strategic financial planning and grant administration services to numerous municipal and municipal authority clients. She is also serving as project manager for several projects involving the creation of stormwater authorities or the addition of stormwater to the charter of existing authorities throughout Pennsylvania.