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.
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.
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.
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.
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:
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.
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.”
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 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.
The American Land Title Association (ALTA) and the National Society of Professional Surveyors (NSPS) have recently released their final approved revisions to the ALTA Land Title Survey Standards. These standards will become effective on February 23, 2016.
How will the new 2016 ALTA Land Title Survey Standards impact your projects?
The impact is more evolutionary than revolutionary: minor tweaks to enhance the reassurance a land title survey provides a buyer or lender.
While the 2011 standards were a major rewrite of previous standards, the 2016 version is mainly just a series of clarifications that help real estate professionals and developers better understand the information the surveys provide (and don’t provide).
For example, the new standards clearly define the surveyor’s role in researching title, property records, easements, etc., and the role of the survey purchaser in providing that information. Similarly, the new standards require that a zoning letter or report be provided to the surveyor before they can address zoning issues like zoning classification, setback requirements, height and floor space area restrictions, and parking requirements.
More significantly, the new standards clarify what a surveyor can show regarding wetlands on a Land Title Survey. The presence of wetlands can have a major impact on the way a site is developed, so it is understandably a major interest to those purchasing a property. In the past, some have mistakenly believed that a survey which reported no observation of wetland markers indicated there were no wetlands present on the site. However, only a qualified biologist can certify that a site is free of wetlands; a surveyor merely reports the observation of wetland delineation markers.
Though this fact can be inferred from the 2011 standards, which included the location of wetlands “as delineated by appropriate authorities,” the 2016 revision is more clear-cut:
“If there has been a field delineation of wetlands conducted by a qualified specialist hired by the client, the surveyor shall locate any delineation markers observed in the process of conducting the fieldwork and show them on the face of the plat or map. If no markers were observed, the surveyor shall so state.”
Since this item is an optional item in Table A, anyone purchasing a property who is interested in the presence of wetlands on the site should hire a qualified specialist to investigate them and specifically negotiate this item into their survey contract. (Some firms, like HRG, have qualified environmental professionals on staff to provide these wetland investigations services as part of the survey.)
In some cases, the 2016 revisions ensure that the information provided in the survey documents is more accurate and complete. For example:
- Observed utility features are now mandatory, rather than an optional item in Table A.
- Surveyors will now merely indicate the observation of substantial areas of refuse at a site, rather than being asked to designate the site as a solid waste dump, sump or sanitary landfill. (Again, this is an optional item in Table A, so anyone requesting this information should negotiate it into their survey contract.)
When you purchase a land title survey, you are essentially purchasing peace of mind: that you clearly understand exactly what you will own and what ways you will be able to use the site once it’s purchased. The new 2016 ALTA Land Title Survey Standards enhance that peace of mind by making sure surveyors have the information they need to accurately characterize a site and that the information they provide in the final survey documents is clearly understood by the client. The revisions contained in these new standards tighten the language and remove any confusion buyers, lenders, and insurers might have had about what the survey documents show. They also ensure a uniform level of accuracy in the information the surveyors provide and the methodology they use to gather and report results. By doing so, they strengthen the reassurance these documents offer a buyer about the likelihood of regulatory burdens, liabilities, or potential claims to the property by another party.
If you have questions about the new 2016 ALTA Land Title Survey Standards, please contact Michael Kreiger by email at mKreiger@hrg-inc.com or by phone at (717) 564-1121.
Michael Kreiger, P.L.S., has 23 years of experience as a surveyor, including ample experience completing ALTA Land Title Surveys for commercial and industrial properties. Other survey experience includes topographic boundary surveys, construction stakeout, and aerial ground control.
HRG is a full service consulting firm with capabilities in surveying, environmental compliance (including wetland investigations), permitting, site design, and construction inspection and administration.
This article was first published on the Informed Infrastructure website and is published here with their permission.
The need for an asset management program is beginning to resonate with municipalities throughout the country. Many municipal employees are finding themselves responsible for researching and developing a solution that will meet the unique infrastructure needs for their communities now and in the future.
According to the American Association of State Highway and Transportation Officials, asset management broadly defined, refers to any system that monitors and maintains things of value to an entity or group. It may apply to both tangible assets such as buildings and to intangible concepts such as intellectual property and goodwill. Asset management is a systematic process of operating, maintaining, upgrading, and disposing of assets cost-effectively.
Alternative views of asset management in the engineering environment are:
the practice of managing assets to achieve the greatest return (particularly useful for productive assets such as plant and equipment),
the process of monitoring and maintaining facilities systems, with the objective of providing the best possible service to users (appropriate for public infrastructure assets).
Does your infrastructure make the grade?
The American Society of Civil Engineers (ASCE) has developed a report card for America’s aging infrastructure. And overall, the average grade received was a D+.
Using this information as a benchmark, it is crucial that municipalities make the time to determine whether a comprehensive rating of their own infrastructure features could be calculated or is even feasible. Beyond just calculating a score, other questions for consideration include:
- Is there a strategic plan to improve, maintain or replace assets in order to raise the rating?
- Can the plan be implemented and goals achieved in coordination with the available budget and timeframe? How can more be done with less?
- What about staff years of experience and turnover of those soon to retire?
- How can decisions/spending/communications be more transparent with the public/customers and/or the decision/budget makers?
Asset management is a complex topic spanning multiple disciplines and industries, each with their own unique definition. Municipalities have a lot to consider to best position themselves to implement a successful solution for their infrastructure assets.
For infrastructure asset management, there is a combination of financial, economic, engineering, and other management practices applied to physical assets with the objective of providing the required level of service in the most cost-effective manner. It includes a life cycle approach from planning, to data collection and analysis, design, construction, operations, maintenance/repair/replace of physical and infrastructure assets.
Comprehensive asset management systems enable local government officials to catalog essential data that helps to forecast, plan and budget for necessary infrastructure improvements. This data includes, but is not limited to accurate locations of all municipal owned/maintained assets such as manholes, valves, hydrants, inlets, pipes, headwalls, outfalls, and street lights; inventories and conditions of municipal owned roadways, bridges, signs, traffic lights, trees, etc.; dates when infrastructure was constructed, installed, inspected, and repaired; maintenance and rehabilitation planning and expenditures; and the value of your infrastructure (useful for the Government Accounting Standards Board (GASB) 34 required reporting for local governments).
Choosing an asset management solution
Once the value and reason for infrastructure asset management has been established, the next step involves the process of developing, selecting, and implementing an asset management solution. There are many solutions providers and possibilities, with varying functionalities, and large cost differences. However, there are a few simple factors that stand true across the board. The right approach is to plan first, collect and validate your data, and though the technologies and processes may change, the overall project will never end.
The need to plan first, and plan well, cannot be stressed enough — do the homework, perform due diligence, ask questions, and exhaust resources.
Planning is the most important step in any asset management solution development process. Spending the time, effort, and monies on this task will pay dividends down the line. Remember, planning helps to define the understanding of the project and will assist with the development and selection of the required building blocks necessary for implementation of a solution with both short- and long-term positive returns on your investment (ROI). The planning stage guides the decision-making and purchasing processes to maximize the ROI with factors associated with time and the reduction of re-work, and ultimately, finances and budget.
Planning is the stage where you get to ask questions. Not just questions of what solutions are available on the market and what they cost or how long it will take to install, but difficult organizational questions. Questions like: What data is currently available? What format(s) is that data in? What are the short- and long-term goals? Who and how will staff and/or even the public need or want to interact with the selected solution? What can really be afforded now versus what can be expanded later? Is there flexibility to start small and advance as the needs dictate and budget allows? Questions can go on and on, and depending on the answers to those initial questions; additional inquiries will be and should be completed.
Absolutely essential to the planning process is the involvement of all levels of staff. Do not just ask the boss who assigned the task to pick and implement a solution. It is essential to take the time and make the effort to query the potential end users of the proposed system. This will provide insight on what major functions the system needs to be able to perform, as well as what data is available for population/migration. Buy-in by municipal staff is crucial to solution implementation and its overall success. Change management is extremely important and critical, and it will directly correlate to the final success or failure for the selected solution.
During the planning stages, municipalities must consider many different factors such as asset inventory, existing and future planned programs (i.e. hydrant flushing or pavement management), roles and responsibilities of the “Who?” will be responsible for “What?”
Data is King
The most important component of any asset management system is the data. Of course, there are the hardware and software components, and the end users’ processes and expectations, but the most important, and often most costly element, is the data. Without the data, the other components are lifeless. And without quality data, analysis results and decisions made upon those results become incomplete and incorrect, and can potentially lead to other problems. Like the old saying goes, garbage in, garbage out.
When most think of technology solution implementation, they look at all the bells and whistles, and see all the great reports and analysis that can be provided back to the end user. These are certainly good, but without accurate, precise, and up-to-date information, the fancy tools, processes, and outputs are mostly useless. Running an analysis and getting a report using incorrect or outdated information does not only produce incorrect results for decision making, but more catastrophic ramifications could result depending upon the magnitude of that decision.
It can be agreed that the quality of data is important, so is it a surprise that data development, data collection, input and/or migration, along with data maintenance is the most expensive piece? The question that then needs to be answered is “What is good enough?” Many factors must be considered: what must be known; how accurate do the datasets need to be; what will be the current and future uses of this information; who should compile the information; what does the schedule look like; and what is the budget? Unfortunately, budget most often drives the final product outcome, which can cause end users to reduce data quality to meet quantity and time frames.
Taking on the task of developing, implementing, and utilizing an asset management solution is a continuous process. In order for it to be successful, municipalities must realize that the process should never end. As stated before, data is constantly changing, asset information is being updated/added/edited, and technology is continuously advancing.
An asset management solution can start small with a simple feature inventory and condition assessment, and then be cultivated over time with various additional integrated solutions, processes, and analytical capabilities, adding value and efficiencies as needed and budget dollars become available.
The infrastructure asset life cycle is recurring – new/updated projects require planning that leads to data collection for accurate analysis in order to design and construct the system that needs to be operated in order to fulfill a requirement. Through operations of the infrastructure system, other potential projects are required to maintain, replace, enhance, or impact/change the system as a whole. In other words, one project leads to the next.
It may take only a few months or years to complete a project from planning to construction, but the true cost/benefit of the project is seen in the operation/maintenance phase over decades.
Asset management is more than just a piece of software and/or hardware that can be purchased off the shelf. It is a complex combination of spatial inventories and work management processes, tracking, and analysis, with a long line of cause and effect outcomes. The use of a successful asset management solution over time (i.e. additional data input, updates, historical recording, etc.) will reduce, not eliminate, the requirements of reactive maintenance of infrastructure.
By focusing the abilities of data analysis and historic record, and increasing the abilities of forecasting project plans over multiple years, you can achieve more with less or at least be able to defend why monies need to be spent. The analysis adds transparency to the public and to elected officials. In other words, asset management can help reduce and/or decrease the surprises of potential catastrophic infrastructure failures and budget overruns, ultimately providing the best quality service to the citizens of the municipality and general public.
Sometime getting started is the most intimidating and difficult task to overcome. There is no time like the present to take action towards improving your municipality’s infrastructure grade.
Howard 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.