WHAT IS ASSET MANAGEMENT?

Transcription

1 Annual Collections Seminar September 6, 2012 Basic Essentials Plus THE ROMANS HAD PUBLIC UTILITIES HOW ASSET MANAGEMENT CAN PREVENT A FALL Richard P. Grant, PE Jeff Pugh, PE WHAT IS ASSET MANAGEMENT? maintaining a desired level of service for what you want your assets to provide at the lowest life-cycle cost. Source: 1

2 COLLECTION SYSTEMS STATUS 1999 ASCE Study Findings: 57.5% of assets years old 16.8% greater than 51 years old OLD UTILITIES In the U.S. Aren t we really just starting to learn about what is OLD? Out of sight, out of mind? Know condition of your assets!! Need for capital planning Good luck with that!! ASSET CAPITALIZATION Purchase Price + capital improvements Depreciation (wear & tear) Asset life = Years? Maintenance vs. Replacement 2

3 ASSET CAPITALIZATION Purchase Price + capital improvements Depreciation (wear & tear) Asset life = Years? Maintenance vs. Replacement COLLECTION SYSTEM VALUE WITH TIME $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $ Year Funding Half Depreciation Funding No Depreciation Total Investment 3

4 CASH & FACILITIES Cash Balance Facilities Condition Cash depletion & Facilities depreciation OK OK Disaster IT S ABOUT DOLLARS COMMUNITY INVESTMENT Take Ownership Sewer Enterprise Fund How did it get to be so low? Did someone try to save money? Not Spending IS NOT An Option 4

5 STEWARDSHIP OF PUBLIC ASSETS CMOM Asset Management GASB 34 Asset Management Principles & CMOM are aligned Both provide support for GASB 34 DYNAMIC APPROACH (CMOM) CAPACITY, MANAGEMENT, OPERATION, AND MAINTENANCE APPROACH Get the full use and benefit of your assets! Capital$ required to offset wear/tear rate O&M costs increase with asset age Plan for asset replacement Costs distributed over life of asset 5

6 GASB 34 MODIFIED APPROACH GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 34 Report the full historical cost of providing service Maintain system at specified preferred condition Preserve the life through asset management Condition assessment at least every 3 years Report the actual cost rather than estimated depreciation COMMON PITFALLS Pressure to keep rates low (short-term thinking) Emergency response to asset failures Are decision makers unaware of challenges? Competing priorities ( never enough money ) 6

7 A CATASTROPHE? REPLACEMENT & MAINTENANCE PLANNING Maximize planned work Planned = non-emergency Gain input from field staff (for predictive maintenance) Develop standard procedures (for preventive maintenance) 7

8 FINANCIAL PLANNING Realistic forecasts for required funding 5-10 year forecasts, updated annually Coordinate with budgeting cycle Used to develop User Charge adjustments 5- TO 10-YEAR PLAN Your Prioritized To Do list Year1 to Year5 Plan = Urgent Replacement Year6 to Year10 Plan = Planned Replacement + Expected Problems Use Predictive Maintenance & Replacement Hot Spots of odor/corrosion in the collection system Vibration analysis of moving machinery Infrared Evaluation of Equipment - electrical, controls, motors, Hx Infrared Evaluation of Facilities building/tank shells, roofs Constantly Changing, Updating Surprises are par for the course with older facilities 8

9 ESTIMATING DOLLARS NEEDED Cost estimate for each issue Inflation don t forget about it! Year-by-year projection of needs Programming of needs for Sewer Enterprise Fund INFLATION! A ROMAN CONCEPT 9

10 SEWER CHARGES $40.00 $35.00 $30.00 $25.00 SEWER FUND CONSUMED BY INFLATION Inflation Inflation (Dept. of Labor Bureau of Labor Statistics; CPI) $27.00 $27.00 $28.67 $27.00 $30.14 $27.90 $31.58 Historical Rate Adjustments $27.90 $33.23 $27.90 $35.05 $27.84 $36.85 $32.10 Proposed Gap $4.75 $ YEAR WHAT IS THE CONDITION OF THE FUND? Critical low balance = $ Preferred balance = $ Current balance. How did it get to be so low? Plan to counteract these issues Enough for the 5-10yr Plan? 10

11 ASSET MANAGEMENT STEPS Conduct an Asset Inventory Evaluate assets (condition assessment & rating system) Remaining useful life Redundancy Importance Develop a plan (rehab, repair, replace?) Implement the plan Periodically update the plan 11

12 ASSET INVENTORY & EVALUATION CAPITAL IMPROVEMENTS PLAN 12

13 CAPITAL IMPROVEMENTS PLAN CAPITAL IMPROVEMENTS PLAN 13

14 SUMMARY Know your system/stakeholder expectations Document asset condition Maximize predictive & preventive maintenance Plan for capital improvements Communicate with stakeholders 14

15 QUESTIONS? Contact: 15